On December 10, Cameron M. Ellis, Hentges Fellow in Finance and Assistant Professor at the University of Iowa, presented his paper «Moral Hazard Induced Unraveling: Theory and Evidence from the Affordable Care Act» at our I.VW Research Seminar.
In collaboration with Meghan I. Esson and Eli Liebman, Cameron identifies and quantifies a new form of welfare loss in insurance markets. Cameron and his co-authors show theoretically that moral hazard from cost-sharing subsidies combined with community rating can produce effects similar to adverse selection. They also present a very insightful empirical analysis of the new mechanism in the US health insurance market.