State insurance regulators are currently thinking about the 2020 individual market. Initial rate filings are due soon and regulators have to check to make sure that networks are adequate, policies are compliant, and premiums are justifiable. For some regulators, that is all that they will check. Other states will have regulators that can be more active in their decision making*.
Active regulators can shape the market.
The question then is what are they choosing to optimize?
In 2014, Kelly Krinn, Pinar Karaca-Mandic and Lynn Blewett looked at premium levels as a function of how active state regulators were as exemplified by whether or not the state had a clearinghouse model or an active buyer model and whether or not the state had its own exchange.**
They found in 2014 that state based marketplaces with a clearinghouse model (less active regulators) had lower premium levels than states with an active buyer model.
Lowest-cost silver plans | Second-lowest-cost silver plans | Lowest-cost gold plans | ||||||
Lowest-cost bronze plans | ||||||||
Model | Mean ($) | p value | Mean ($) | p value | Mean ($) | p value | Mean ($) | pvalue |
SBM-A | 179.49 | 0.008 | 225.37 | 0.006 | 245.27 | <0.001 | 266.91 | 0.007 |
SBM-C | 157.53 | Ref | 196.92 | Ref | 205.3 | Ref | 233.96 | Ref |
SPM | 182.51 | 0.004 | 229.87 | 0.003 | 242.72 | 0.001 | 272.92 | 0.003 |
FFMS | 185.14 | 0.003 | 224.02 | 0.019 | 234.91 | 0.014 | 268.97 | 0.012 |
FFM | 189.94 | <0.001 | 233.16 | <0.001 | 241.63 | <0.001 | 277.35 | <0.001 |
This study was valuing the experience of the non-subsidized individuals’ experience. For them, levels matter a lot. Healthier individuals within this cohort are heavily weighing premium for their buy/no buy decision. For the question of how does the plan management characteristics impact upper middle class experience of value on exchange, the answer is that clearinghouses are probably better value than active buyer models.
However the single individual in the middle class or the family of four making six figures is not the only interested purchasing stakeholder group. The subsidized population earning between 100% to 400% Federal Poverty Level is a significant portion of the ACA individual market. For them, they care more about the spread than the level as the federal government has taken on premium level risk. Using the same data above, I’ve looked at the spreads instead:
Here state based marketplaces with an active buyer model seem to be optimizing for the premium experience of the subsidized buyer. Bronze and the cheapest Silver plans are much less expensive than the benchmark plan in these states compared to everywhere else. Gold plans are only less expensive relative to benchmark compared to everywhere else.
Regulators face choices. In the ACA market, the first choice is whether or not to be an active regulator. Conditional on the choice to be an active regulator, the second choice is what experience should be prioritized? Should the exchange seek to prioritize on-exchange and subsidized buyers or should they seek to prioritize lower premium levels but tighter spreads that benefit non-subsidized buyers? Should the exchange and regulators seek simplicity or complexity that may allow for multiple objectives to be addressed?
Any of those choices are valid choices that solve a real problem. There are very few choices that will solve every problem. Regulators who are active need to decide what their objective is and the trade-offs inherent in achieving that objective.
* Disclosure: I’ve talked to some state regulators regarding pricing tensions and choices in the ACA markets.
** doi/10.1377/hlthaff.2014.0627
p.a.
I’d like to see state-by-state* demographics re: % of pop subsidy-qualified, Medicaid qualified, % not sub but in exchange, % with private (job) health ins, % Medicare.
(Not asking you to do it, just wondering if there’s a 1-click spot to look at this.)
*or even by county
JaySinWA
Your link isn’t working for me. Could you add an explanation of the row acronyms?
JaySinWA
@JaySinWA: Here is a link I found, and it lists the states determined to be in the various models.
https://www.healthaffairs.org/doi/pdf/10.1377/hlthaff.2014.0627
JaySinWA
@JaySinWA: Only the first line has active model states. the rest are clearinghouse. I believe SMB-A and SMB-C are state based exchanges and the rest are some form of Federal and State management.