Consumption Effects of Health Insurance Expansions: Evidence from Scanner Data

Improving financial outcomes is a stated policy motivation for recent health insurance expansions. I measure how young adults’ consumption changes in response to health insurance eligibility. My identification strategy employs the Affordable Care Act dependent coverage provision in 2010. I use the Nielsen Household Consumer Panel (2004-15), which contains self-reported purchases data from 60,000 households. I apply a quasi-natural experiment design, exploiting variation in the implementation of the dependent coverage provision across populations and over time. I use a household-fixed effects regression model to estimate the effects of insurance expansion on households’ monthly purchases of a comprehensive set of products. I measure both income effects of health insurance, by studying the expansions’ impacts on total consumer purchases, and substitution effects, by studying impacts on purchases of specific products. I find that expanded insurance eligibility led to increased total consumer spending, particularly in the categories of food, contraceptives, and over-the-counter medications. I provide evidence that increases in consumer purchasing power may be an important spillover effect of health insurance expansions.