New Report Finds Value in the ACA’s Marketplaces
Amidst the noise of insurance companies deciding whether or not to sell on the Affordable Care Act’s (ACA) marketplaces and proposed rates “doom,” the Commonwealth Fund released a new report that paints a brighter picture of the ACA and its marketplaces. Using insurer’s filings for the 2016 plan year, the report compares ACA-compliant plans on and off the marketplaces to better understand how effectively the marketplaces promote value for consumers.
The good news: Enrollment in marketplace plans continues to increase, and the report suggests plans offered on the marketplace have lower overhead costs and a slower rate of premium increases as compared to those outside of the marketplace.
The less good news: Premium savings on the marketplaces are likely attributable to the rise in enrollment in plans with closed or very narrow networks.
Insurers selling marketplace plans spend 2.5 percent less on administrative costs.
The ACA requires insurers selling ACA-compliant plans to use a certain portion of premium payments for paying medical claims and advancing quality – known as the medical loss ratio (MLR). The remaining funds from premium payments may be allocated to profits and overhead costs (i.e. salaries, marketing and broker and agent commissions). One benefit of the MLR is quite tangible – insurance companies must issue rebate checks to consumers if they fail to comply with the rule. While it is not entirely clear why marketplace plan administrative costs are lower, the report suggests that the marketplace structure itself might be the key, perhaps due to increased competition and sales efficiency.
2016 premium increases were lower for marketplace plans, but at what cost?
Certainly news of keeping premiums at bay is notable. However, as the report indicates, a closer look at the data suggests that the ability of marketplace plans to keep premiums lower is linked to increased enrollment in narrow-network plans. While plans providing out-of-network care both on and off the marketplaces were more expensive and experienced a decrease in enrollment, only the marketplace plans experienced an enrollment spike in narrow or closed network plans (37 percent in 2016). At face value this might indicate that price-sensitive consumers are simply choosing a plan that is the most affordable. However, until state and federal regulators figure out how to systematically protect consumers from falling prey to inaccurate provider directories and surprise out-of-network bills, the tradeoff for lower premiums might prove more costly in the end.
ACA is here to stay, and the forecasters of doom are wrong again. That doesn’t mean the law is perfect. It’s time to turn toward building the foundation to make coverage and care more affordable for more people.