Insurer competition drives down premiums

It's been a hotly contested debate since the Affordable Care Act passed: whether an increase in competition among insurers will actually lower healthcare costs. A recent paper from the National Bureau of Economic Research set out to reach a definitive answer.

The paper's authors used UnitedHealth, which choose not to participate in many health insurance exchanges during the first open enrollment period, as an example and simulated premium costs as if the Minneapolis-based insurer opted to sell plans on all the marketplaces, reported Insurance Network News.

Jonathan Gruber, a professor of economics at Massachusetts Institute of Technology and one of the authors of the NBER paper, determined exchange competition would have driven down costs. Premiums would have been 5.4 percent lower for silver exchange plans if UnitedHealth had participated. And if all insurers sold plans on exchanges in their current markets, premiums would have fallen by 11.1 percent.

"We find that exchange premiums are responsive to competition," the authors wrote in the NBER paper.

Based on that conclusion, the industry might see lower premiums come next open enrollment season, as UnitedHealth is reportedly considering entering several exchanges. For example, it will likely participate in the Illinois exchange, which could shake up the market that Blue Cross Blue Shield of Illinois clearly dominated, the Chicago Tribune reported.

UnitedHealth's decision to join the Illinois exchange "absolutely could have a meaningful impact, but it all depends on what they bring to market," Leemore Dafny, a professor at Northwestern University's Kellogg School of Management, told the Tribune.

To learn more:
- read the Insurance Network News article
- see the Chicago Tribune article

Suggested Articles

Welcome news to many health IT stakeholders: HHS announced Friday that it is extending the comment period for two proposed interoperability rules.

CMS took aim at increasing the use of generic drugs in ACA plans in a new rule filed Thursday evening.

Fidelity and the NBGH found large employers are expected to spend an average of $3.6 million this year on wellness programs.