Health Insurance and Young Adults’ Avoidable Hospitalizations: Evidence from the Affordable Care Act Dependent Coverage Mandate

In 2010, the Patient Protection and Affordable Care Act was signed into law with the goal of achieving nearly universal health insurance coverage. One of the first provisions to take effect targeted young adults, whose eligibility for dependent coverage under their parents’ private insurance plans was extended until the age of 26. I derive a conceptual model of avoidable hospitalizations to decompose impacts from ACA dependent coverage into an access effect, efficiency effect, and ex ante moral hazard effect. Additionally, I use years 2002-2011 of the HCUP National Inpatient Sample (NIS) – a 20% sample of the universe of inpatient hospital discharges across the United States – to examine the impact of this policy change on avoidable hospitalizations for young adults. I use a difference-in-differences approach to estimate the impact on treated young adults aged 23-25 as compared to a slightly older age group (ages 27-29) that was not subject to the reform. My primary results show that this mandate increases avoidable hospitalizations, especially for those associated with chronic health conditions. This suggests that the access effect and the moral hazard effect dominate the efficiency effect from my conceptual model. In other words, the lower out-of-pocket prices of avoidable hospitalizations and the reduced costs of risky health behaviors outweigh any improvements in the quality of primary care. The effects are stronger for females, whites, and those living in middle income zip code quartiles.