Panel Paper:
The Impact of Health Insurance Benefit Mandates on Health Insurance Choice: Evidence from Veterans
Saturday, November 5, 2016
:
3:30 PM
Columbia 1 (Washington Hilton)
*Names in bold indicate Presenter
Understanding the interactions of private insurance and public insurance is essential to policy design. One well-studied phenomenon is crowd-out effect, which describes the effect of public health insurance expansions on private insurance coverage. However, the reverse relationship, or how regulations of private market affect public insurance coverage, is rarely studied. In this paper, we show that stricter regulation (for example, benefit mandates) in private market would reduce private insurance coverage and increase public insurance coverage.
The private market regulation we focus on is state mental health parity. Prior to the implementation of the parity laws, mental health benefits have been more limited than coverage for physical ailments. Mental health parity laws mandate that mental health service coverage be the same as coverage for physical health. These laws significantly increased both the quality and costs of private insurance. Summers (1989) and Feldman (1993) show that the increases in insurance costs can be passed on to employees through higher plan contributions and lower wages. Building on their works, we establish a framework for optimal health insurance choices. We show that if public insurance were available, insurance benefit mandates would shift the marginal individual from private insurance to public insurance, even if the latter has lower quality.
We empirically examine the effects of mental health parity using a sample of veterans, who have better access to public provided insurance compared to non-veterans. Namely, veterans are often eligible to enroll in the Veterans Affairs (VA) health care system. Through the VA, they can receive health care services free of charge. However, they are only able to receive care through VA facilities, which often have long wait time. In addition to the VA, veterans are also more likely to have work-preventing health conditions, which qualify them for Medicaid/Medicare through SSI/SSDI programs.
To identify the causal effects of meatal health parity laws, we exploit variation in the timing of its implementation in different states. The rollout of the parity laws is linked to information on veteran’s insurance coverage, which comes from the March supplements to the Current Population Survey, 2000-2010. We restrict analysis sample to male veterans of ages 22-64.
Our findings suggest that veterans respond to mental health parity laws by altering health insurance choices. We find that mental health parity laws reduced employer sponsored health insurance (EHI) coverage by 2.1 percentage points. The drop in EHI coverage reflects a combination of veterans opting out of employment and opting out of employer provided insurance. The reduction in EHI coverage was largely offset by increases in coverage under public health insurance programs. Importantly, for veterans of ages 22-54, mental health parity laws increased coverage through VA by 1.2 percentage points. For veterans of ages 55-64, mental health parity laws increased coverage through Medicaid/Medicare by 1.6 percentage points. Additionally, the effects of mental health parity laws are more pronounced among veterans without college education, veterans who are single and veterans who are employed at small firms.
The private market regulation we focus on is state mental health parity. Prior to the implementation of the parity laws, mental health benefits have been more limited than coverage for physical ailments. Mental health parity laws mandate that mental health service coverage be the same as coverage for physical health. These laws significantly increased both the quality and costs of private insurance. Summers (1989) and Feldman (1993) show that the increases in insurance costs can be passed on to employees through higher plan contributions and lower wages. Building on their works, we establish a framework for optimal health insurance choices. We show that if public insurance were available, insurance benefit mandates would shift the marginal individual from private insurance to public insurance, even if the latter has lower quality.
We empirically examine the effects of mental health parity using a sample of veterans, who have better access to public provided insurance compared to non-veterans. Namely, veterans are often eligible to enroll in the Veterans Affairs (VA) health care system. Through the VA, they can receive health care services free of charge. However, they are only able to receive care through VA facilities, which often have long wait time. In addition to the VA, veterans are also more likely to have work-preventing health conditions, which qualify them for Medicaid/Medicare through SSI/SSDI programs.
To identify the causal effects of meatal health parity laws, we exploit variation in the timing of its implementation in different states. The rollout of the parity laws is linked to information on veteran’s insurance coverage, which comes from the March supplements to the Current Population Survey, 2000-2010. We restrict analysis sample to male veterans of ages 22-64.
Our findings suggest that veterans respond to mental health parity laws by altering health insurance choices. We find that mental health parity laws reduced employer sponsored health insurance (EHI) coverage by 2.1 percentage points. The drop in EHI coverage reflects a combination of veterans opting out of employment and opting out of employer provided insurance. The reduction in EHI coverage was largely offset by increases in coverage under public health insurance programs. Importantly, for veterans of ages 22-54, mental health parity laws increased coverage through VA by 1.2 percentage points. For veterans of ages 55-64, mental health parity laws increased coverage through Medicaid/Medicare by 1.6 percentage points. Additionally, the effects of mental health parity laws are more pronounced among veterans without college education, veterans who are single and veterans who are employed at small firms.
