The Patient Protection and Affordable Care Act introduced several new policies in 2014, including subsidized private coverage. Individuals gain eligibility to substantial tax credits and cost-sharing reductions at 100 percent (138 percent in Medicaid expansion states) of the federal poverty level (FPL), lose eligibility for cost-sharing reductions at 250 percent FPL, and lose eligibility for the tax credits at 400 percent FPL. Using the Current Population Survey and a regression discontinuity design, this study exploits the exogenous differences in subsidy eligibility in 2014 at three cutoffs to identify the separate and combined effects of the tax credits and cost-sharing reductions on private insurance coverage. I estimate a 5.4 percentage point increase in private insurance coverage just above 138 percent FPL in Medicaid expansion states and a smaller effect above 100 percent FPL in non-expansion states attributable to the combined incentives. I calculate a price elasticity of demand for health insurance of -0.65, suggesting low-income individuals may be highly price responsive. Coverage increases do not appear to be driven by adverse selection, and there is no evidence of crowding out or income manipulation around the cutoffs. Tax credit and cost-sharing reduction levels would need to be raised at higher incomes to induce more participation.
The effectiveness of tax credits and cost-sharing subsidies in the affordable care act