Federalism in Practice: State Policy Discretion and Coverage and Market Outcomes in the ACA

Session Submission Type: Panel

Abstract

The Affordable Care Act was designed as a cooperative federalism framework, granting states substantial discretion over how its core provisions are structured and administered. The three papers in this panel examine how state-level policy choices related to the ACA — over marketplace administration, reinsurance design, and cost-sharing reductions — translate into meaningfully different coverage and premium outcomes for enrollees. Moving from broad to narrow, these papers collectively make the case that the ACA's performance is not fixed by federal statute but is actively produced through the policy decisions states make within the latitude the law affords them. 

Aboulafia, Sommers, and Gruber examine this dynamic at the macro level, tracing ACA coverage gains from 2013 to 2023 across presidential administrations and varying state implementation environments. Using survey data and a triple-difference design, they find that Marketplace subsidies account for roughly half of ACA-attributable coverage gains, with the American Rescue Plan (and later the Inflation Reduction Act) Marketplace subsidy enhancements adding meaningfully to those totals. The most striking finding concerns state discretion over Marketplace governance: state-based Marketplaces outperform the federal platform by more than twofold in converting subsidy dollars into coverage, independent of state political ideology. Administrative infrastructure — a choice states make — emerges as a first-order determinant of how effectively federal subsidy dollars reach those eligible for Marketplace coverage.  

Ludiwinski and Anderson narrow to another prominent venue of state discretion: Section 1332 reinsurance waivers, through which sixteen states have chosen to inject roughly $5 billion annually in state revenue into claims payment in order to reduce gross premiums. Using CMS risk adjustment data from 2015 to 2024 and staggered difference-in-differences methods, they evaluate how this form of state discretion reshapes enrollment and risk pools across metal levels and market types. Prior evidence suggests reinsurance may reduce enrollment among subsidized populations, raising questions about whether states are meeting the mandatory coverage and access guardrails the law requires — and whether the design of these programs is achieving their intended goals. 

Anderson, Shepard, and Drake examine another critical test of state regulatory discretion: how states responded to the federal government's 2017 decision to halt direct reimbursement of cost-sharing reduction subsidies. Forty-three states exercised their authority to permit insurers to concentrate CSR costs in silver plan premiums, a practice known as silver loading. Using county-level data through 2021, they find that this state policy choice reduced net premiums for bronze and gold plans by roughly 11 to 15 percent and drove substantial enrollment gains among middle-income households. The projected consequence of eliminating silver loading — coverage losses exceeding one million enrollees — illustrates how much turns on whether states use the regulatory room available to them, and how vulnerable those gains are to federal retrenchment. 

Together, these papers reveal that variation in how states exercise their discretion within the ACA's cooperative federalism structure is not incidental — it is a primary driver of how well the law works for beneficiaries.

Policy Area

• Health Policy

Chair

• Adrianna McIntyre, Harvard University

Discussant

• Amanda Nichole Davis, Boston University

Organizer

• Gaby Aboulafia, Harvard University

Individual Presentations

• The Rise and Fall (and Rise) of the ACA: Varying Coverage Impacts Over Time and Place - Presenting Author: Gaby Aboulafia, Harvard University

• Silver Loading Decreased Premiums and Increased Enrollment in the Health Insurance Marketplaces - Presenting Author: David Anderson, University of South Carolina

• The Impact of Section 1332 Waivers in the ACA Individual Market Risk Pool - Presenting Author: Daniel Ludwinski, Emory University

• Policy-Driven Premium Increases and Consumer Plan Selection: Evidence from Maine’s Marketplace - Presenting Author: Jordan Rhodes, Maine Department of Health and Human Services