How Do Low-Income Enrollees in the Affordable Care Act Exchanges Respond to Cost-Sharing?

The 2010 Affordable Care Act (ACA) provides subsidies for premiums and cost-sharing reductions (CSRs) to low-income consumers who purchase private health insurance on the ACA Marketplaces. CSRs are motivated in part by concern that cost-sharing might lead low-income consumers to forgo needed health care. This paper uses All-Payer Claims Data from Utah for 2013-2015, linked to administrative hospital discharge records from 2004-2013, to estimate how the healthcare utilization decisions of low-income consumers respond to cost-sharing reductions. Exploiting policy-driven variation in the value of CSRs across plans based on income cutoffs, we estimate the demand elasticity of total health care spending to be -0.13. We find larger responsiveness for emergency room care, lifestyle drugs, and low-value care. The results show that low-income consumers in the ACA Marketplaces, many of whom were previously uninsured, exhibit price responsiveness similar to that of higher-income populations examined in the previous literature. We estimate that eliminating CSRs would lead to a 29% reduction in healthcare utilization by low-income consumers, with substantial reductions across all categories of care.