Do Protections Against Surprise Medical Bills Reduce Personal Bankruptcy?
This analysis estimates the effect of surprise balance billing restrictions on personal bankruptcy filings using the implementation of Florida House Bill 221 as a quasi-natural experiment. Enacted in 2016, Florida's House Bill 221 prohibited out of network health providers from balance billing patients for emergency and selected non-emergency services. We combine bankruptcy filing data from the U.S. Courts Bankruptcy Filings Statistics Database with state-level economic and demographic data from the Bureau of Economic Analysis and U.S. Census Bureau to construct a balanced panel from 2010 to 2019. Using the classical synthetic control method of Abadie, Diamond, and Hainmueller (2010), we construct a counterfactual Florida from a weighted combination of donor states that closely reproduces Florida’s pre-treatment bankruptcy trajectory and observed state characteristics. We find that after the implementation of HB 221, Florida saw a significant decline in both total personal bankruptcy and chapter 7 filings relative to its synthetic control state. The classical synthetic control estimates yield an average post-treatment effect of -15.8 percent for total personal bankruptcy and -18.1 percent for chapter 7 bankruptcy. We evaluate the credibility of our classical estimates by preforming a series of robustness checks such as the in-space placebo, in-time placebo, RMSPE-restricted placebo, and pre/post-treatment RMSPE ratio tests following methods cited in Abadie, Diamond, and Hainmueller (2010, 2015). We further assess sensitivity to pre-treatment imbalance using bias-corrected synthetic control estimators based on OLS, ridge, elastic net, and lasso regression models following Ben-Michael, Feller, and Rothstein (2021) and Wiltshire (2022). Our results suggest that restrictions on balance billing practices may contribute to meaningful reductions in personal bankruptcy filings.
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