The Early Impact of the Affordable Care Act, State by State

In this paper I examine the effects that state policy decisions have had on the early impact of the Affordable Care Act (ACA) using data through the first half of 2014. I focus on the individual health insurance market, which includes plans purchased through exchanges as well as plans purchased directly from insurers. In this market, at least 13.2 million people were covered in the second quarter of 2014, representing an increase of at least 4.2 million beyond pre-ACA state-level trends. I use data on coverage, premiums, and costs and a model developed by Martin Hackmann, Jonathan Kolstad, and myself (forthcoming) to calculate changes in selection and markups, which allow me to estimate the welfare impact of the ACA on participants in the individual health insurance market in each state. I then focus on comparisons across groups of states. The estimates from my model imply that market participants in the five "direct enforcement" states—those that ceded all enforcement of the ACA to the federal government—are experiencing welfare losses of approximately $245 per participant on an annualized basis, relative to participants in all other states. The estimates also imply that the impact of setting up a state exchange depends meaningfully on how well the exchange functions. Market participants in the six states that had severe exchange glitches are experiencing welfare losses of approximately $750 per participant on an annualized basis, relative to participants in other states with their own exchanges. Although the national impact of the ACA is likely to change over the course of 2014 as coverage, costs, and premiums evolve, I expect that the differential impacts that are observed across states will persist through the rest of 2014.