The Effect of the Risk Corridors Program on Marketplace Premiums and Participation

January 17, 2018

We investigate the effect of the Risk Corridors (RC) program on premiums and insurer participation in the Affordable Care Act (ACA)’s Health Insurance Marketplaces. The RC program, which was defunded ahead of coverage year 2016, and ended in 2017, is a risk sharing mechanism: it makes payments to insurers whose costs are high relative to their revenue, and collects payments from insurers whose costs are relatively low. We show theoretically that the RC program creates strong incentives to lower premiums for some insurers. Empirically, we find that insurers who claimed RC payments in 2015, before defunding, had greater premium increases in 2017, after the program ended. Insurance markets in which more insurers made RC claims experienced larger premium increases after the program ended, reflecting equilibrium effects. We do not find any evidence that insurers with larger RC claims in 2015 were less likely to participate in the ACA Marketplaces in 2016 and 2017. Overall we find that the end of the RC program significantly contributed to premium growth.

via The Effect of the Risk Corridors Program on Marketplace Premiums and Participation by Daniel Sacks, Khoa Vu, Tsan-Yao Huang, Pinar Karaca-Mandic :: SSRN

Obamacare Enrollments Lagging Significantly

December 6, 2017

As of November 25, 2017, the open enrollment period for 2018 individual market coverage is more than 57% complete. To date, 2.8M individuals have signed up for coverage through, compared to more than 7M people during the prior two years’ enrollment seasons.

via 2018 Exchange Enrollment Tracking Behind Prior Years | Avalere Health

ACA Is Uninsuring the Insured | Mercatus Center

August 16, 2017

The number of people with individual health-insurance coverage is shrinking. Despite $146 billion in federal subsidies to low-income households and well-capitalized insurers, 2.6 million fewer people had individual policies in March 2017 than in March 2016, a drop of nearly 15 percent.

Source: ACA Is Uninsuring the Insured | Mercatus Center

Much of Rural Nevada Left With Zero ObamaCare Options in 2018 | Fox News Insider

August 8, 2017

Anthem announced it will back out of Nevada’s ObamaCare market next year, leaving most rural Nevada counties without a single ObamaCare insurer in 2018.

The insurance company also plans to cut its Georgia presence in half, and has already withdrawn from Ohio, Indiana, Wisconsin, and much of California.

“This is a significant blow to the state’s individual market,” Nevada Gov. Brian Sandoval (R) said in a statement. He added that he is “frustrated and disappointed” by Anthem’s “surprise and abrupt decision to leave the healthcare exchange.”

As many as 868,000 people nationally could lose coverage next year if the insurance companies planning to leave the Affordable Care Act markets do so. Seventeen counties nationally, 14 of them in Nevada will completely lose options in the Affordable Care Act next year.

Source: Much of Rural Nevada Left With Zero ObamaCare Options in 2018 | Fox News Insider

The disappearing ACA insurance market – Axios

June 19, 2017

We’ve all heard about the insurers that are pulling out of Affordable Care Act marketplaces, but sometimes you have to see it to really get it. This map is based on data from the Kaiser Family Foundation for the first four years of the ACA marketplaces. You can really see the difference in 2017, when high-profile insurance exits left 21 percent of all ACA customers with only one insurer in their area.

Source: The disappearing ACA insurance market – Axios

HHS Hits the Brakes on ACA Death Spiral – AAF

February 22, 2017

Yesterday, the Department of Health and Human Services (HHS) issued a proposed rule designed to lay the groundwork for stabilizing the individual and small group health insurance markets.

Source: HHS Hits the Brakes on ACA Death Spiral – AAF

Screening in Contract Design: Evidence from the ACA Health Insurance Exchanges by Michael Geruso, Timothy J. Layton, Daniel Prinz :: SSRN

February 12, 2017

By steering patients to cost-effective substitutes, the tiered design of prescription drug formularies can improve the efficiency of healthcare consumption in the presence of moral hazard. However, a long theoretical literature describes how contract design can also be used to screen consumers by profitability. In this paper, we study this type of screening in the ACA Health Insurance Exchanges. We first show that despite large regulatory transfers that neutralize selection incentives for most consumer types, some consumers are unprofitable in a way that is predictable by their prescription drug demand. Then, using a difference-in-differences strategy that compares Exchange formularies where these selection incentives exist to employer plan formularies where they do not, we show that Exchange insurers design formularies as screening devices that are differentially unattractive to unprofitable consumer types. This results in inefficiently low levels of coverage for the corresponding drugs in equilibrium. Although this type of contract distortion has been highlighted in the prior theoretical literature, until now empirical evidence has been rare. The impact on out-of-pocket costs for consumers affected by the distortion is substantial — potentially thousands of dollars per year — and the distortion creates an equilibrium in which contracts that efficiently trade off moral hazard and risk protection cannot exist.

Source: Screening in Contract Design: Evidence from the ACA Health Insurance Exchanges by Michael Geruso, Timothy J. Layton, Daniel Prinz :: SSRN