Health Plan Choice and the Valuation of Plan Attributes in the ACA Marketplaces

Health insurance plans sold in the Affordable Care Act (ACA) Marketplaces cover a significant and increasing share of the US population. However, not much is currently known about how consumers value different health plan attributes in their choice of plans in these federally-facilitated and state-based marketplaces. In particular, it is unclear how enrollees consider non-financial plan attributes such as provider network size and plan quality ratings in their plan choices and how much they are willing to pay for these attributes. It is also unclear how changes in plan choice attributes are associated with switching decisions. In this paper, I explore how enrollees value and make tradeoffs between key financial and non-financial plan attributes. I also explore how enrollee plan switching decisions are associated with changes in plan attributes and choice set characteristics. I also simulate how consumer welfare changes as a result of hypothetical insurer exit decisions and plan provider network adequacy restrictions.

To explore these issues, detailed person-level plan enrollment data from the California, Colorado, and Washington state-based marketplaces for 2014-2017 are linked to plan characteristics from the Robert Wood Johnson Foundation HIX Compare data and provider network data from Vericred. Conditional and mixed logit regressions are used to examine enrollee plan choice as a function of various financial and non-financial plan attributes, and logit regressions are used to explore plan switching as a function of changes in both chosen-plan attributes and overall choice-set characteristics. These estimates are also used to calculate changes in expected consumer surplus due to simulated changes in the choice sets.

I find that enrollee plan choices are strongly related to premium, deductible, provider network size, and quality star ratings in the expected directions. In particular, enrollees have a significant willingness-to-pay for larger provider network size, in the range of $76 to $266 for a 10 percentage point increase in network size across these three states. Moreover, enrollees are sensitive to star rating measures of plan quality, with, for example, a willingness to pay of $427 for four vs. three stars in California and $361 for four vs. three stars in Colorado (as star ratings were not used in Washington during this time) Examining changes in plan attributes and choice set characteristics on switching, there is some evidence that enrollees are more likely to switch plans when a plan’s provider network size decreases and when a plan’s star rating decreases, but there is no strong evidence that individuals switch due to increases in premiums.