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Tag: ACA Marketplace

Improving the Affordable Care Act Markets (Part 2)

By JONATHAN HALVORSON

In a previous post, I described how some features of the Affordable Care Act, despite the best intentions, have made it harder or even impossible for many plans to compete against dominant players in the individual and small employer markets. This has undermined aspects of the ACA designed to improve competition, like the insurance exchanges, and exacerbated a long term trend toward consolidation and reduced choice, and there is evidence it is resulting in higher costs. I focused on the ACA’s risk adjustment program and its impact on the small group market where the damage has been greatest.

The goal of risk adjustment is commendable: to create stability and fairness by removing the ability of plans to profit by “cherry picking” healthier enrollees, so that plans instead compete on innovative services, disease management, administrative efficiency, and customer support. But in the attempt to find stability, the playing field was tilted in favor of plans with long-tenured enrollment and sophisticated operations to identify all scorable health risks. The next generation of risk adjustment should truly even out the playing field by retaining the current program’s elimination of an incentive to avoid the sick, while also eliminating its bias towards incumbency and other unintended effects.

One important distinction concerns when to use risk adjustment to balance out differences that arise from consumer preferences. For example, high deductible plans tend to attract healthier enrollees, and without risk adjustment these plans would become even cheaper than they already are, while more comprehensive plans that attract sicker members would get disproportionately more expensive, setting off a race to the bottom that pushes more and more people into the plans that have the least benefits, while the sickest stay behind in more generous plans whose premium cost spirals upward. Using risk adjustment to counteract this effect has been widely beneficial in the individual market, along with other features like community rating and guaranteed issue.

However, in other cases where risk levels between plans differ due to consumer preferences it may not be helpful. For example, it has been documented that older and sicker members have a greater aversion to change (changing plans to something less familiar) and to constraints intended to lower cost even if they do not undermine benefit levels or quality of care, like narrow networks. These aversions tend to make newer plans and small network plans score as healthier. Risk adjustment would then force those plans to pay a penalty that in turn forces enrollees in the plans to pay for the preferences of others.

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Win, Lose, or Draw: Not all ACA Enrollees Gain from Increased Competition

By KATHERINE HEMPSTEAD PhD 

The 2019 ACA plan year is notable for the increase in insurer participation in the marketplace. Expansion and entry have been substantial, and the percent of counties with one insurer has declined from more than 50 percent to approximately 35 percent. While urban areas in rural states have received much of the new participation, entire rural states have gained, along with more metropolitan urban areas.

Economic theory and common sense lead most to believe that increased competition is unquestionably good for consumers. Yet in the paradoxical world of the subsidized ACA marketplace, things are not so simple. In some markets, increased competition may result in a reduction in the purchasing power of subsidized consumers by narrowing the gap between the benchmark premium and plans that are cheaper than the benchmark. Even though the overall level of premiums may decline, potential losses to subsidized consumers in some markets will outweigh gains to the unsubsidized, suggesting that at the county level, the losers stand to lose more than the winners will win.

One way to illustrate this is to hypothetically subject 2018 marketplace enrollees to 2019 premiums in counties where new carriers have entered the market. Assuming that enrollees stay in the same metal plan in both 2018 and 2019, and that they continue to buy the cheapest plan in their metal, we can calculate how much their spending would change by income group.

Under these assumptions, in about one quarter of the counties with federally facilitated marketplaces (FFM) that received a new carrier in 2019, both subsidized and unsubsidized enrollees would be better off in 2019, meaning that they could spend less money and stay in the same metal level. In about thirty percent of these counties, all enrollees are worse off. In almost all of the rest, about forty percent, there are winners and losers, but in the aggregate, the subsidized lose more than the unsubsidized win. Overall, in about 70 percent of FFM counties with a new carrier, subsidized enrollees will lose purchasing power, while in about 66 percent of these counties, unsubsidized customers will see premium reductions. In population terms, about two-thirds of subsidized enrollees in counties with a new carrier will find plans to be less affordable, while a little more than half of unsubsidized enrollees will see lower premiums.

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Open Enrollment, Take 2: What Matters For The ACA Marketplace?

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By the end of 2014, more than 6.5 million people were enrolled in health insurance plans through the Affordable Care Act (ACA) Marketplace, also called the “exchanges.” In some cases, this was relatively easy. But for many, the ACA’s first open-enrollment period was a confusing and frustrating time, compounded by a lack of clear, easy-to-understand information about plan options, coverage, and cost.

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