Group Health Insurance Versus ACA Marketplaces: Selection, Subsidies, and Welfare

Sebastián Fleitas; Caitlyn Fleming; Gautam Gowrisankaran; Anthony T. Lo Sasso

doi:10.3386/w33938

Group Health Insurance Versus ACA Marketplaces: Selection, Subsidies, and Welfare

Sebastián Fleitas, Caitlyn Fleming, Gautam Gowrisankaran & Anthony T. Lo Sasso

Working Paper 33938

DOI 10.3386/w33938

Issue Date June 2025

The Affordable Care Act (ACA) changed incentives for individual and employer-sponsored insurance. Using unique small group market (SGM) data with detailed claims and enrollment information, we analyze the welfare gains across households in the SGM from alternative formulations of ACA health insurance exchanges (HIXs). Accounting for observable heterogeneity increases estimated demand elasticities. Shutting down the SGM would reduce equilibrium adverse selection in HIX-type markets, increasing welfare for households moved to HIXs by $842 annually. The majority of households would obtain higher equilibrium welfare from HIXs, stemming from having more choices. Adding the 2014 ACA penalties only modestly decreases adverse selection.

We thank Leemore Dafny, Carol Propper, Nicholas Tilipman, and Frank Verboven for helpful comments, and Patricio Hernandez and Arundhati Tillu for excellent research assistance. Caitlyn Fleming coauthored this paper before joining Cornerstone Research. The views expressed herein are solely those of the author who is responsible for the content and do not necessarily represent the views of Cornerstone Research. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

Gautam Gowrisankaran
• I am a Senior Advisor to Cornerstone Research. As such, I have provided expert testimony and consulting services to a number of entities involved in the healthcare sector.

• These entities include the U.S. Department of Justice, healthcare systems, health insurers, and physician groups.

• The insurance company that we consider in this study provided us with the data for our work, but did not provide any financial support. They have not edited or in any way influenced the direction or conclusions of our research.

• I declare that I have no other relevant material or financial interests that relate to the research described in this paper.

Anthony T. Lo Sasso
• I am the PI of a research grant from the Agency for Healthcare Quality and Research (1R01HS024850-01) that evaluates narrow network plans, including in the small group health insurance market.

• The insurance company which we consider in this study provided us with the data for this study and has graciously responded to many questions from us regarding the data and their policies in this market. They have not provided us with any financial support.

• I declare that I have no other relevant material or financial interests that relate to the research described in this paper.
MARC RIS BibTeΧ

Group Health Insurance Versus ACA Marketplaces: Selection, Subsidies, and Welfare

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