Health Insurance Premium and Psychological Distress: Evidence From the ARPA Enhanced Subsidies

Area of Science:

• Health Economics
• Public Health Policy
• Mental Health Research

Background:

• High health insurance costs are a significant stressor for Americans.
• Limited causal evidence exists linking insurance affordability to psychological well-being.
• The American Rescue Plan Act (ARPA) of 2021 introduced enhanced premium subsidies.

Purpose of the Study:

• To assess the causal impact of ARPA's enhanced premium subsidies on psychological distress.
• To determine if improved health insurance affordability reduces mental health burdens.

Main Methods:

• Utilized a natural experiment design.
• Employed difference-in-differences analysis on nationally representative panel data (Panel Study of Income Dynamics, 2015-2023).
• Compared individuals with private health insurance (treatment) to those with employer-sponsored insurance (control) before and after ARPA implementation.

Main Results:

• ARPA subsidy expansions significantly reduced out-of-pocket premium costs by approximately 22% ($532 annually for single-person households).
• A notable reduction in moderate-to-severe psychological distress was observed.
• Distress prevalence decreased by ~33% among single adults with private insurance post-ARPA (p=0.039), and ~26.2% across all household types (p=0.022).

Conclusions:

• Increased health insurance affordability, driven by ARPA subsidies, is causally linked to reduced psychological distress.
• Policy interventions aimed at lowering insurance costs can positively impact mental health outcomes.
• Findings support the role of economic factors in mitigating mental health challenges.