Sources of Inertia in Health Plan Choice in the Individual Health Insurance Market

One of the Affordable Care Act’s (ACA) signature reforms was creating centralized Health Insurance Marketplaces to offer comprehensive coverage in the form of comprehensive insurance complying with the ACA’s coverage standards. Yet, even after the ACA’s implementation, millions of people were covered through noncompliant plans, primarily in the form of continued enrollment in “grandmothered” and “grandfathered” plans that predated ACA’s full implementation and were allowed under federal and state regulations. Newly proposed and enacted federal legislation may grow the noncompliant segment in future years, and the employment losses of 2020 may grow reliance on individual market coverage further. These factors make it important to understand how the noncompliant segment affects the compliant segment, including the Marketplaces. We show, first, that the noncompliant segment of the individual insurance market substantially outperformed the compliant segment, charging lower premiums but with vastly lower costs, suggesting that insurers have a strong incentive to enter the noncompliant segment. We show, next, that state’s decisions to allow grandmothered plans is associated with stronger financial performance of the noncompliant market, but weaker performance of the compliant segment, as noncompliant plans attract lower-cost enrollees. This finding indicates important linkages between the noncompliant and compliant segments and highlights the role state policy can play in the individual insurance market. Taken together, our results point to substantial cream-skimming, with noncompliant plans enrolling the healthiest enrollees, resulting in higher average claims cost in the compliant segment.

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Individual Health Insurance Market with an Entrant – The ACA Health Insurance Exchange Observations

Asia-Pacific Journal of Risk and Insurance ◽

10.1515/apjri-2018-0001 ◽

2018 ◽

Vol 12 (2) ◽

Author(s):

Bo Shi ◽

Wen Chen

Keyword(s):

Health Insurance ◽

Health Plan ◽

Information Search ◽

Driving Forces ◽

Insurance Market ◽

Search Cost ◽

Baseline Model ◽

Individual Health ◽

Health Insurance Market ◽

Market Coverage

Abstract In this paper, a general framework is built up to model the dynamic of consumer health plan choice and individual health insurance market competition. A primary goal is to identify driving forces to individual health insurance equilibrium market coverage and premium. In the baseline model, we introduce plan quality information search cost as an additional determinant to consumer’s plan choice. Health insurers compete under the Hotelling’s game theory framework. Equilibrium solutions of the baseline model highlight the importance of budget limit and information search cost to health plan enrollment. The more important objective is to examine the impact of market entrants on equilibrium insurance market coverage and plan prices. In the model with market entry, we add an additional dimension to the baseline model. Equilibrium solutions and numerical studies show positive impact of higher insurance market coverage and lower health plan prices. The Affordable Care Act (ACA) brought multiple unprecedented changes to the health insurance market and provided opportunities to study market dynamics and driving forces. The ACA health insurance exchange market experience shows consistency with our model findings even at the early stage of implementation. More importantly, market observations suggest that entry barriers of claim costs and information search cost are high for entrants.

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Premiums and Stability in the Individual Health Insurance Market: The Effects of Young Adult Enrollment and Subsidies

10.7249/rb9798 ◽

2014 ◽

Author(s):

Christine Eibner ◽

Evan Saltzman

Keyword(s):

Health Insurance ◽

Young Adult ◽

Insurance Market ◽

Individual Health ◽

Health Insurance Market ◽

The Individual

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Prospects for Change in the Individual Health Insurance Market

10.7249/rb9097 ◽

2005 ◽

Author(s):

Melinda Buntin ◽

M. Marquis ◽

Jose Escarce ◽

Kanika Kapur ◽

Jill Yegian

Keyword(s):

Health Insurance ◽

Insurance Market ◽

Individual Health ◽

Health Insurance Market ◽

The Individual

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Estimated Costs of a Reinsurance Program to Stabilize the Individual Health Insurance Market: National- and State-Level Estimates

INQUIRY The Journal of Health Care Organization Provision and Financing ◽

10.1177/0046958019836060 ◽

2019 ◽

Vol 56 ◽

pp. 004695801983606 ◽

Cited By ~ 1

Author(s):

Coleman Drake ◽

Brett Fried ◽

Lynn A. Blewett

Keyword(s):

Health Insurance ◽

Financial Risk ◽

Medical Expenditure Panel Survey ◽

Insurance Coverage ◽

Health Spending ◽

Medical Expenditure ◽

Insurance Market ◽

Individual Health ◽

Health Insurance Market ◽

The Individual

Reinsurance, an insurance product designed to protect health insurers against the financial risk of covering high-cost enrollees, has attracted bipartisan policy interest as a mechanism to stabilize individual health insurance markets. Three states—Alaska, Minnesota, and Oregon—have implemented state-based reinsurance programs under the Affordable Care Act’s 1332 State Innovation Waivers, and reinsurance waivers have been approved though not yet enacted in Maine, Maryland, New Jersey, and Wisconsin. In this article, we estimate the costs of implementing national and state-based reinsurance programs using health spending data from the 2007-2016 Medical Expenditure Panel Survey and state demographic and health insurance coverage data from the 2015-2017 Current Population Survey Annual Social and Economic Supplement. We project that a reinsurance program with an 80% payment rate for expenditures between $40,000 and $250,000 would cost $30.1 billion from 2020-2022. We observed considerable variation in reinsurance programs and estimated costs between the 4 states we examined: California, Florida, Illinois, and Texas. Our projections provide updated estimates of the costs of implementing federal reinsurance programs for the individual health insurance market.

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