States foster marketplace competition through consumer education, rate review

A new brief from the Commonwealth Fund reveals how individual marketplaces in four states promote competition among insurers, educate consumers and ensure a level playing field for premiums through the rate review process.

The study found that the marketplaces are adept at promoting competition based on price, in part because they educate consumers to help them sort out their coverage options. The tactic forces insurers to be more careful when pricing plans.

To promote fair competition among insurers, the Affordable Care Act requires states to have an effective rate review program. Federal regulators review premium rate increases in the individual and small-group markets to ensure that any premium increases comply with the law's requirements and are not excessive, unjustified or unfairly discriminatory, the brief notes. 

However, insurers have said that when consumers shop based only on price, they fail to consider other factors like quality, cost-sharing structures or provider networks. This has caused some insurers to limit their number of offerings so consumers can easily differentiate between their options and don't become overwhelmed.

The states in this analysis--Kansas, Nevada, Rhode Island and Washington--welcomed new insurers into the marketplace with open arms, the brief says. But they could only do so much: It's ultimately up to the insurance company to decide if it's worth the time, effort and cost to enter a marketplace.

The brief concludes by saying that the "early efforts of state-based marketplaces that have embraced selective purchasing may help to identify policies that show promise in promoting quality, value and robust competition."

To learn more:
- here is the Commonwealth Fund brief