Benefit Design in Marketplace Plans: Issuer Decisions and Consumer Enrollment

This paper analyzes issuer incentives and decisions regarding benefit design among the 2014, 2015, and 2016 plans sold through the Affordable Care Act's (ACA) Federally-facilitated Marketplace. The ACA provisions regarding private health insurance market reforms predominantly affect health insurance offered in the nongroup and small group markets. These reforms establish minimum requirements with respect to access to coverage, premiums, benefits, and cost-sharing - collectively health insurance plan benefit design. For example, health insurance plans offered in the ACA Marketplaces are required to cover a core package of health care services, known as the essential health benefits. The ACA also imposes limits on cost sharing and prohibits plans from applying lifetime and annual dollar limits. Moreover, plans offered in the Marketplaces must meet minimum actuarial values which are indicated by four metal tiers: bronze, silver, gold, and platinum.

The market reforms as well as the metal tiers are designed to enable consumers to make apples-to-apples comparisons among their health insurance plan options. Nevertheless, insurers offering plans in the Marketplaces are experimenting with benefit designs. While the ACA does prohibit discrimination through plan design, insurers may utilize various benefit design features to signal value or incentivize positive behaviors. These features include cost-sharing, visit limits, benefits substitution, etc. Accordingly, while consumers are able to compare plans among the metal tiers, the plan benefit design within the metal tier may greatly vary from plan to plan.

First, we examine key cost-sharing features of the plans offered in the Marketplaces, such as copayments, coinsurance, and deductibles, using publicly available information on plan characteristics from the HealthCare.gov plan landscape files and public use files. In addition to cost-sharing mechanisms, we look at the type of plans that offer benefits above the required essential health benefits to better understand insurers’ tradeoffs in competing on lowest price and benefit generosity. Additionally, by examining actual enrollment in these plans based on HHS administrative data, we determine whether certain benefit designs attract more of a certain type of consumer. Finally, we analyze how benefits change over time, how insurer decisions regarding these changes vary with local market conditions, geographic area, and plan actuarial value, and the implications for changes in benefit design for consumer choice and enrollment.