Health insurance costs are a well-documented source of stress for Americans, yet little causal evidence links improved insurance affordability to better psychological health. We use a natural experiment from the American Rescue Plan Act (ARPA) of 2021 to assess whether enhanced premium subsidies reduced psychological distress. We utilize nationally representative individual-level panel data from the Panel Study of Income Dynamics (2015-2023) and a difference-in-differences design, comparing individuals with private health insurance (treatment group) to those with employer-sponsored insurance (control group) before and after the ARPA's implementation. Results indicate that ARPA's subsidy expansions led to a significant decline in out-of-pocket premium costs (approximately 22% or 532 annually for single-person households), which corresponded with a notable reduction in moderate-to-severe psychological distress. Among single adults with private insurance, distress prevalence dropped by about 33% (p-value 0. 039) post-ARPA, with a smaller but still significant decline of about 26. 2% (p-value 0. 022) observed when including all household types. These findings suggest that making health insurance more affordable can alleviate psychological distress.
Sankar Mukhopadhyay (Wed,) studied this question.