Health Reform, Health Insurance, and Selection: Estimating Selection into Health Insurance Using the Massachusetts Health Reform.

Approximately 49.9 million people in the United States lack health insurance (DeNavas-Walt, Proctor and Smith (2011)). One potential driver of uninsurance is asymmetric information on health risk between insurers and the insured. Asymmetric information can distort available insurance contracts, as in Rothschild and Stiglitz (1976), or it can raise premiums for the relatively healthy, as in Akerlof (1970). Both distortions result in inefficiently low levels of insurance coverage. Predicated, at least in part, on concerns about adverse selection, the state of Massachusetts passed health reform in April 2006 aimed at achieving near-universal health insurance coverage. The Massachusetts approach is considered a model for national health reform, the Patient Protection and Affordable Care Act (PPACA), signed in March 2010. A central feature of both reforms is a mandate that individuals obtain health insurance or pay a penalty. The Massachusetts mandate allows us to examine whether there was ad-