This year, we feature an interview with the 2021 Student Paper Award winners: Emily Cuddy and Jonathan Holmes. You can find more about the other awardees on this site. The following is an interview with Jonathan Holmes. Jonathan is currently a Postdoctoral Fellow at the National Bureau of Economic Research. He will join the faculty in the Economics Department at the University of Ottawa next year.

Thank you for being here with us today. Can you tell us a bit about your broad area of work?

My current research agenda seeks to understand the cross-market impacts of health insurance policy. I study interactions between different health insurance markets and how health insurance policy affects the labor market.  I am particularly interested in documenting the redistributive effects of health insurance policies.

That sounds great. Congratulations on your award! Tell us a bit about what the paper is about.

Thanks a lot! My paper studies how health insurance markets interact and how these interactions affect premiums. American residents get health insurance from many sources, such as Medicaid, employer-sponsored insurance, and the health insurance exchanges. In my paper, I show that the price of coverage can vary widely by market. For example, in 19 states, an individual market plan costs more than 1.5 times more than an equivalent plan sold to a typical firm, on average. The main reason why prices vary is because of how risk is pooled. Individual health insurance is more expensive (before subsidies) because participants in the individual market are more likely to have a pre-existing condition than consumers who receive employer-sponsored coverage. This is precisely why student health insurance plans tend to be great: They usually have a healthy risk pool and so can offer generous coverage for a comparatively low premium.

I then consider how different policies, such as Medicaid expansion, can affect how people sort across these markets. For example, I find that when a state expands Medicaid, some participants in the individual market switch to a Medicaid plan (this phenomenon is traditionally called “crowd-out”). I find that these “switchers” have more pre-existing conditions than those who stay in the individual market. As a result, Medicaid expansion improves the individual market risk pool, lowering prices for the stayers. In my paper, I also propose a general model that can simulate how a variety of policies would affect consumer choices and insurance premiums across public and private health insurance markets.

When you say “how risk is pooled,” how do insurers measure risk? Is it by the billing they receive? Or expected risk?

When I say risk, I mean expected risk based on demographics (age, gender), underlying health conditions, and other observables (e.g., income). A risk pool is a group of consumers whose premiums depend on the expected risk of other participants in the risk pool. For example, on the individual exchanges, insurance companies are not allowed to charge individuals with pre-existing conditions more than their healthier peers. As a result, if many expensive consumers join the exchange, prices on the exchange must rise for insurance plans to remain solvent. Americans that have access to a healthy risk pool (like students or employees of certain large firms) can get coverage for a much lower price than those that only have access to expensive risk pools (such as independent contractors).

How did the idea come about? When did you start working on it?

When I was in the fourth year of my Ph.D., I took a deep dive into regulations affecting the individual health insurance exchanges in the U.S. I realized that some obscure and wonky forces (such as the reinsurance and risk corridor programs) played a massive role in how expensive premiums were in the individual market. I became a little obsessed trying to figure out what other causes explained the dramatic divergence in premiums across states’ individual markets, which started largely in 2017. This paper is my attempt to explain some of these facts.

Will there be follow-ups to this paper, or has this paper made you think of new questions?

Of course! In my next project, I will attempt to provide a complete explanation of how health insurance premiums affect the labor market, both for employers and job seekers.

What does this award mean to you?

The ASHEcon conference has been valuable to me to meet colleagues and friends and get feedback on my projects. It feels great to be recognized for an award by a community that I really like.

Where are you heading next?

This year, I am a Postdoctoral Fellow in the Economics of an Aging Workforce at the National Bureau of Economic Research. I will join the faculty in the Economics Department at the University of Ottawa next year.