We develop and estimate an equilibrium model with heterogeneous local markets, households, and firms, highlighting the interrelationship between various components of the health insurance system—employer-sponsored health insurance (ESHI), individual health insurance (HIX), and Medicaid—and their relationship with the labor market. We estimate the model exploiting variation across states and before and after the Affordable Care Act. We consider counterfactual policies that cross subsidize between ESHI and HIX, including pure ESHI-HIX risk pooling as a special case. We find that such policies would increase household welfare and output and decrease government expenditure and would be more effective with Medicaid expansion.

While the traditional role of insurers is to provide protection against individuals? idiosyncratic risks, insurers themselves face substantial uncertainties due to aggregate shocks. To prevent insurers from passing these aggregate risks onto consumers, governments have increasingly adopted dynamic pricing regulations, which limit insurers? ability to change premiums over time. We evaluate dynamic pricing regulation using an equilibrium model of the US long-term care insurance market, featuring insurers? lack of commitment and endogenous market structures. We find that stricter dynamic pricing regulation has a limited impact on improving consumer welfare, while it reduces insurer profits and increases market concentration.

This article studies how firms’ screening incentives in the labour market affect the optimal design of social insurance programs and quantitatively assesses the U.S. disability policies accounting for firms’ screening of the disabled. We develop an equilibrium search model where workers with different productivities have heterogeneous preferences over non-wage benefits and firms cannot offer an employment contract that explicitly depends on worker types. In this environment, firms may use contracts to screen out a certain type of workers, distorting employment rates and contracts in equilibrium. Therefore, the optimal structure of social insurance policies depends on firms’ screening incentives. We extend and structurally estimate this framework to quantitatively understand the inefficiencies arising from firms’ incentives to screen out disabled workers and examine the optimal joint design of disability insurance (DI) and various forms of firm subsidies. We find that hiring subsidies mitigate screening distortions; at the same time, they interact with DI by reducing the labour supply disincentives it generates. The optimal policy structure leads to a considerable welfare gain by simultaneously making firm subsidies and DI benefits more generous.