Public and Private Provision of Information in Market-Based Public Programs: Evidence from Advertising in Health Insurance Marketplaces

Abstract

This paper studies the effect of provision of information by the government and private firms through marketing activities in the Affordable Care Act health insurance marketplace. Using detailed TV advertising data, we present evidence that government advertising and private
advertising target different geographical areas and provide different messaging content. We estimate the impacts of both types of advertising on consumer demand. We find that government advertising increases overall enrollment and enhances welfare; however, it does not induce consumers to select a particular insurer. Private advertising, in contrast, increases demand for specific insurers, and insurers spending more on advertising tend to offer plans associated with higher consumer utility. However, private advertising alone does not induce consumers to select insurers with better plans very efficiently because it tends to be excessive due to rent-seeking competition.

Keywords: market-based public program, health insurance, government advertising, advertising competition

JEL Classification: G2, I1, I3, L1, M3