More plans drive lower premiums in ACA exchanges

More competition in the Affordable Care Act marketplaces generally means lower health plan premiums, according to two new studies published in the December edition of Health Affairs.

In one study, researchers studied premiums and insurer competition during the first two years of the ACA marketplaces, concluding that the addition one insurer in a county was associated with a 3.5 percent lower premium for the "benchmark" plan in the federal marketplace. For the average silver plan, the addition of one insurer created a 1.2 percent lower premium.

However, the premium-lowering effects of insurer entry into the marketplaces did dilute after two or three additional entrants, the study notes. Overall, "our results suggest that competition among insurers can have an economically meaningful effect," the researchers write, adding that "jockeying to be the lowest- or second lowest-cost plan is an important part of the mechanism of competition in the marketplaces."

In another study, researchers analyzed data from the ACA marketplaces, insurer websites and state insurance departments to draw conclusions about the factors that drove premium pricing patterns in the marketplaces' second year. This analysis showed similar results to the other study, as it found that the addition of an insurer in a rating area lowered average premiums for the two lowest-cost silver plans and the lowest-cost bronze plan by 2.2 percent.

The study also found that consumer operated and oriented (CO-OP) plans and Medicaid managed care plans had lower premiums and lower average premium increases than national Blue Cross Blue Shield plans and commercial plans. Many CO-OP plans, however, are struggling with enrollment and staying financially viable, and 13 of the 23 plans created through the ACA have shut down.

What's more, the overall trend of low premium increases is unlikely to continue as insurers increasingly face mounting medical claims, the study authors write. Some of the nation's largest insurers are indeed struggling with their individual market business, with UnitedHealth recently announcing it may actually exit the marketplaces by 2017 if its losses continue. Nevertheless, its rivals have stressed that they don't intend to give up on the ACA marketplaces yet.

To learn more:
- here's one study (subscription required)
- here's the other study (subscription required)

Related Articles:
ACA marketplace stability under the microscope
Arizona the latest CO-OP to fail, will shut down at year's end
No official explanation for CO-OPs' struggles
Despite UnitedHealth's exchange struggles, other insurers still optimistic
Losses lead UnitedHealth to rethink role in ACA exchanges

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