Are the ACA’s Reforms of the Individual Health Insurance Market Working?

December 17, 2015

Recent research from The Commonwealth Fund, a private foundation that aims to promote a high-performing health care system, explored how the ACA’s reforms of the individual health insurance market are working. Researchers compared the cost of subsidized plans offered on public exchanges with non-subsidized plans available off exchanges to determine the validity of early concerns that lower risk customers would prefer off-exchange plans. If that were to happen, the number of individuals needing government subsidies and subsidy amounts for plans on exchanges would increase — thwarting the ACA’s goal of offering good coverage at relatively low prices on public exchanges.

In fact, just the opposite has proven to be true. Richer plans that typically appeal to people with health problems make up a greater proportion of plans sold off exchanges than on them. According to the researchers, this means that the ACA’s provisions that discourage this type of risk segmentation are working.

Premium increases tell the story

To make this determination, researchers looked at 2015 premium increases, based on insurers’ federal filings for ACA-compliant plans both on and off exchanges. They found that the average premium for plans in the individual market increased $30 per person per month overall, with the average premium for plans purchased off exchanges ($34) higher than for on-exchange plans ($29). The reason for this premium increase differential has to do with the different preferences of purchasers, such as access to specific doctors or hospitals, which are met by plans bought directly from carriers compared with plans purchased on the public exchanges.

With the ACA, all plans are “guaranteed issue,” which means no one can be denied coverage because of preexisting conditions. This is great news for individuals who might have been denied coverage in the past due to an existing illness or chronic condition. However, the cost to the carriers of accepting everyone is higher.

On public exchanges, the higher cost is mitigated by restricting the doctors and other medical service providers that are considered “in-network,” a practice known as narrow networks. Off-exchange plans, which are offered directly by carriers, are not similarly constrained, giving purchasers access to a wider range of service providers — an appealing feature to people with existing health problems and established relationships with doctors and other providers.

The complete report is available from The Commonwealth Fund’s website.

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