A new analysis confirms that premium rates for Affordable Care Act marketplace health plans are directly tied to the number of insurers in a given region—a troubling finding given that competition on the exchanges is dwindling.
Median benchmark premiums in areas with just one insurer participating in the marketplace were nearly double that of those in regions with six or more insurers participating in 2017, according to a report from the Urban Institute. The median was $451 in areas with one payer in the market, compared to $270 in regions with six or more.
Premium levels also increased much more dramatically between 2016 and 2017 in regions with less competition, the institute found. The median increase in markets with just one payer was 29.8%, while it was just 5% in those with six or more.
Additionally, the analysis found that regions with few payers participating in the marketplaces were more likely to permit the sale of “grandfathered” plans that do not comply with the ACA. That practice can be problematic, as evidenced by Tennessee, where the sale of non-ACA compliant plans may have siphoned off healthier, less expensive consumers from the marketplace and thus skewed the risk pool.
Meanwhile, the trend of rising premiums in the Affordable Care Act exchanges looks likely to continue in 2018.
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In terms of insurer competition, the number of U.S. counties featuring only one insurer rose from 7% in 2016 to 32% this year, according to the Kaiser Family Foundation. Looking ahead to 2018, the picture is likely to get worse, as insurers including Aetna and Humana have said they will exit the marketplaces entirely next year.
While the connection between higher premiums and lower competition on the exchanges is clear, the solution is less so. The marketplaces with few participating payers are concentrated in sparsely populated regions, particularly in the South, and it’s easier said than done to attract new competitors into a market with few potential enrollees, according to the report.
“Increased marketplace enrollment through better outreach and enrollment efforts, improved financial assistance and easier access to marketplace subsidies for working families could help to some degree, but given the population size of these areas, even significant enrollment efforts are unlikely to be sufficient,” the authors wrote.