Heterogeneity in crowd‐out by risk aversion: Assessing the effect of the ACA Medicaid expansion

TitleHeterogeneity in crowd‐out by risk aversion: Assessing the effect of the ACA Medicaid expansion
Publication TypeReport
Year of Publication2024
AuthorsOnal, SO
Series TitleRisk Management and Insurance Review
InstitutionAmerican Risk and Insurance Association
KeywordsMedicaid expansion, private health insurance, Risk Aversion

In this study, I estimate the heterogeneity in the crowd‐
out of private health insurance by risk aversion with
the Medicaid expansion under the Affordable Care Act.
Using data from the Health and Retirement Study, I
find that the Medicaid expansion led to a decrease in
private coverage among risk‐loving individuals by 5
percentage points. However, the expansion did not lead
to any meaningful change in private coverage for risk‐
averse individuals. This finding suggests that risk‐
averse individuals are willing to keep their private
coverage, even though they become eligible for
Medicaid. This potentially signals a sorting effect into
private insurance. Under the assumption that highly
risk‐averse individuals typically display superior health
conditions, this preferential behavior could signify a
form of advantageous selection into private insurance.
Furthermore, the expansion increased Medicaid coverage by 3.4 percentage points for risk‐loving individuals,
while not causing any discernible change in coverage
among risk‐averse individuals. Such differential
responses could potentially influence the risk composition of Medicaid coverage, and subsequently impact
the cumulative expenditure associated with it.

Citation Key13972