Association for Public Policy Analysis & Management

It is unknown whether and to what extent health insurance companies, health care providers, and pharmaceutical and medical device manufacturers have benefitted financially from the Affordable Care Act (ACA). This project focuses on the hospital industry and explores how the ACA’s 2014 health insurance mandate, combined with a regulated and subsidized marketplace for health insurance, has affected hospital finances. I compare operating profits from 2005-2016 for hospitals located in markets with high 2014-take-up rates for Marketplace coverage to hospitals in markets with lower 2014-take-up rates. The results show that hospitals located in markets where higher shares of the uninsured population enrolled on the Marketplaces had much faster growth in operating profits, starting in 2014, than hospitals in markets where fewer uninsured people enrolled in the Marketplaces. Operating margins also increased in these markets, suggesting that higher reimbursement rates explain some of the increases in total operating profits. The results are particularly pronounced for hospitals in states that did not expand Medicaid eligibility. The health insurance mandate expires in 2019, but the ACA Marketplaces are still operating with large government subsidies. Thus, the expiration of the mandate will not reverse these trends in hospital profits if healthier people who do not utilize hospital services are the only ones to drop Marketplace coverage.