Government Advertising in Market-Based Public Programs: Evidence from the Health Insurance Marketplace

This paper studies government and private marketing activities in the context of the Affordable Care Act health insurance marketplace. Using detailed TV advertising data, we present evidence that government and private advertising are targeted to different geographical areas and provide different messaging content. Then, we estimate the impacts of government and private advertising on consumer demand by exploiting discontinuities in advertising along the borders of local TV markets. We find that government advertising has a market-expansion effect and enhances welfare. We also find that private advertising is not more effective than government advertising in increasing total program enrollment. Although private advertising is still effective in increasing insurer’s own enrollment, it does not have positive spillovers to other insurers but has a modest business-stealing effect. We then develop and estimate an equilibrium model of marketplaces to illustrate mechanisms through which government advertising affects the market equilibrium. Our simulation suggests that government advertising can simultaneously increase total program enrollment and reduce excessive advertising spending among private insurers.