Behavioral response, plan sorting, and financial protection in health insurance markets
In both developed and developing countries, it is important to know about consumer behavior in the health insurance market. The first essay analyzes the behavioral response to income cutoffs of a subsidized health insurance program in the Massachusetts reform. Subsidies in the program are based on household income and have explicit income cutoffs. This feature creates nonlinear budget constraints for households' consumption, and potentially distorts their income and labor supply. I test the existence of income manipulation using the regression discontinuity approach on data from the American Community Survey. I find clear evidence of income discontinuity around the cutoffs of 150% and 300% of the Federal Poverty Level. I construct a structural model to estimate the elasticity of labor supply with respect to wage rates using the discontinuity evidence, suggest a methodology to calculate the welfare loss, and project the magnitude of behavioral response in the national health reform. The second essay analyzes consumer choice of health insurance plans after U.S. health reform. In the new state-run "Health Insurance Exchanges" created as part of the Affordable Care Act, plans with different benefit coverage of health care costs are provided in order to expand consumer choices and increase consumer welfare. According to the Act, premiums can differ based on enrollees' characteristics and plan revenues are risk-adjusted by regulators who transfer revenue from low to high risk plans. This essay examines how risk adjustment and premium discrimination affect consumers' choices of plans theoretically and empirically. I find that under plausible conditions risk adjustment and premium discrimination encourage consumers to enroll in plans with high benefit coverage. The third essay studies how a new Chinese rural health insurance program affects adverse selection and impacts enrollees' out-of-pocket costs. Using a national four-year panel dataset to address households' participating behavior and the impact of the plan, I show that adverse selection was not severe at household level, and the impact of the program on reducing out-of-pocket expense is greater for the rich than that for the poor, although on average was not statistically significant.