The Effects of Insurer Participation and Composition on Health Insurance Marketplace Plan Affordability for Subsidized and Unsubsidized Enrollees

The Affordable Care Act fundamentally altered the individual market for health insurance in 2014. Given significant premium growth over the past few years, consumers and policymakers continue to question the affordability of such coverage. Premium levels represent the most salient measure of health plan affordability. Yet, for the 81% of Marketplace enrollees who receive advanced premium tax credits, the ability to afford health insurance is determined by the pricing of the second lowest cost silver plan premium (“benchmark plan”) relative to the least costly plan offered in the market. As this difference in premiums or “premium spread” increases in magnitude, the post-subsidy premium of the lowest cost plan available in the market decreases for subsidized enrollees. In some cases where enrollees’ incomes are sufficiently low and/or premium spreads are sufficiently large, enrollees may purchase the lowest cost plan for zero dollars.

This study explores how insurer behavior and competition affects health plan affordability in Federally-Facilitated Marketplace (FFM) counties from 2014 through 2019. We do so by examining how the number and type of insurers participating in FFM counties affects both premium levels and premium spreads, relying on within-county variation over time to identify such effects.

Our primary data source is the 2014-2019 Qualified Health Plan Landscape Files augmented with insurer-level information from the National Association of Insurance Commissioners (NAIC), the Center for Consumer Information and Oversight, and the Association of Community Affiliated Plans to measure the presence of insurers in the Marketplaces that also operate Medicaid managed care plans in a state. We estimate log-linear models for 15,222 county-years to examine how changes in premium levels and premium spreads are explained by changes in the number of insurers in the county and the composition of those insurers (Blue Cross Blue Shield, Big 4 For-Profit (UHG, Aetna, Cigna, Humana), Medicaid managed care). Our models additionally control for year fixed effects and an indicator for whether the market is located in a state that expanded Medicaid eligibility.

Regression model results reveal that insurer participation improves affordability for unsubsidized enrollees vis-à-vis lower premiums levels. For a county in 2019 with average premiums, reducing insurer participation from three or more insurers to one insurer is associated with a $64 monthly premium increase for the lowest cost silver plan for a single 30-year-old adult. However, increased insurer participation decreases plan affordability for enrollees with subsidies through lower premium spreads. This surprising and somewhat counterintuitive result is explained in part by the incentives facing monopolist FFM insurers. With respect to insurer composition, Blue Cross Blue Shield insurer participation is associated with both higher premium levels and spreads. As state insurance commissioners and federal regulators monitor FFM performance and stability, they will need to consider how insurer participation may differentially affect subsidized and unsubsidized enrollees.