Coverage Cliffs and the Cost of Discontinuity: Health Insurance Transitions at Age 26

Abstract

The American health insurance system is defined by its seams—the institutional boundaries where coverage regimes meet and people fall through gaps. This paper examines one such seam: the Affordable Care Act's age-26 cutoff, where young adults lose eligibility for parental health insurance. Using a regression discontinuity design and universe data from the 2016–2023 CDC Natality Public Use Files covering approximately 13 million births to mothers ages 22 to 30 pooled across eight years, I estimate the causal effect of this coverage cliff on the source of payment for childbirth. First-stage evidence confirms a sharp disruption in insurance coverage trends at age 26, with the upward trajectory of private insurance flattening and the downward trajectory of Medicaid slowing at the cutoff. Crossing the age-26 threshold increases Medicaid-financed births by approximately 1.1 percentage points and decreases private insurance-financed births by approximately 1.0 percentage point, with local randomization inference confirming these findings with permutation p-values below 0.001. Heterogeneity analysis suggests that effects are larger among unmarried women, who lack access to spousal coverage as an alternative to parental insurance. The findings reveal substantial coverage churning at a critical moment, with back-of-envelope calculations suggesting the age-26 cliff shifts approximately \$22 million annually in delivery costs from private insurers to state Medicaid programs.