The ACA markets rely on choice. The ACA markets are highly inertial. People who make a first choice are not too likely to make a second choice beyond a stay or go decision on a regular basis. This means that the first choice is quite important as it has significant and long lasting impact.
A new working paper by Saltzman, Swanson and Poltzky lay out some empirical evidence on how much effort it takes to get someone to change their mind from their initial choice.
We estimate high inertia costs, equal to 44% of average premiums. Although eliminating inertia exacerbates adverse selection, it significantly reduces market power such that
average premiums decrease 13.2% and annual per-capita welfare increases $902. These effects are substantially smaller in settings without market power and/or risk adjustment
As a side note, they are measuring the cost of inertia as a function of average PRE-SUBSIDY premiums. It is quite plausible that the cost of inertia for many individuals is greater than the net of subsidy premium that they pay.
Figure 1 of their paper blew me away as it is a great representation of the stickiness of the market for people who stayed enrolled. The first image is movement by metal band between Year 1 and Year 2. The bottom image is movement between insurers from Year 1 to Year 2.
I have a couple of concerns with this paper. The biggest one is that the data set is only from 2014-2018. 2014-2017 had one pricing regime. 2018 had a very distinctly different pricing regime due to silverloading. We know from Rasmussen et al that there was in-plan and intra-plan movement and our recent work shows that 2018 got a lot more movement. Silverloading is a massive price and attention shock. The extra attention only did so much as a lot of people still stayed in dominated plans, but there was a lot of movement occurring. We’re also experiencing a huge price and attention shock right now from the combination of the passage of the American Rescue Plan and the ongoing pandemic. But this is a modest concern as pretty much every other researcher, myself and my co-authors included, who are trying to use Covered California data hits a data limit sometime in 2018. I assume they, along with everyone else, is in the process of getting new data.
The important thing from this paper is that the first choice is a long lasting choice for many people. What that tells me is that we should encourage high quality first choices by improving the choice environment, minimizing extraneous junk and providing the needed assistance in a seamless and aggressively unobtrusively manner as possible.