Under the Affordable Care Act, states with fewer insurers have higher insurance premiums than states with more insurers. This expected feature of a competitive market has not been studied within states, however. We tested the hypothesis that insurance premiums decrease in more competitive geographic rating areas within states in the U.S.A.
This cross-sectional study utilized publicly
available premiums from the Federal Health Insurance Exchange website,www.healthcare.gov. Univariate and multivariate analyses were used to modelpremiums based on the number of insurers in geographic rating areas. The relationship between premiums and the number of insurers competing in a geographic rating area was also calculated for each unique insurance plan offered on the exchange. The data set and statistical code used for this research is linked in the publication. We found that there was an unexpected,marginally positive relationship between average monthly premiums and thenumber of insurers in a geographic rating area (+$5.71 in monthly premiumsper additional insurer, p<0.001). We also found that identical plans tend to be offered with marginally higher premiums in rating areas with more insurers(+$3.18 in monthly premiums per additional insurer, p=0.002), contrary to the relationship we expected from a competitive marketplace. The principal limitation of the study is that this unexpected relationship, which suggests alack of competitiveness of this early market, could be due to unobserved/confounding factors that influence pricing in more competitive rating areas.
On the Federal Health Insurance Exchange, the price of insurance is higher in more competitive rating areas within states. This may be explained by lack of competition in this early stage market.