Exchange Design and Government Subsidy Spending

The health insurance exchanges are the primary conduit through which the Affordable Care Act administers financial subsidies to lower-income households purchasing health insurance.  The design of the exchange choice environment has the potential to affect consumer choices as well as federal subsidy spending, as the fixed subsidy is independent (and may exceed) the premium of the chosen plan.  If consumers choose a plan with a premium lower than the maximum possible subsidy, the government saves on subsidy spending. We use an online experiment to evaluate whether modifying the menu length (number of plans) and framing of premiums (absolute or relative) affects consumer choices and subsidy spending in the exchanges.