ACA Insurance Reforms Working on the Individual Market

The Affordable Care Act (ACA)'s provisions to prevent risk segmentation have been working. According to research from The Commonwealth Fund, there has been little indication that risk segmentation is causing adverse effects in the insurance market despite initial concerns that insurers might seek to enroll lower-risk customers.

Researchers took a look at insurers' federal filings to assess how well the ACA's provisions that keep risk segregation in check are working. They compared coverage sold on the exchanges with coverage sold off the exchanges in order to observe if risk segmentation is occurring.

"Before the exchanges launched, analysts speculated that insurers might attempt to segregate higher-risk from lower-risk subscribers by encouraging those at higher risk to purchase on the exchanges and those with lower risks to remain off the exchanges," the authors wrote. "If successful, that adverse selection strategy could increase the cost of government subsidies."

Risk segmentation could have occurred by insurers offering leaner plans off the exchanges, but the researchers found that more-generous benefit plans have constituted a greater portion of plans sold off-exchange than those sold on-exchange. For example, bronze-level plans have a similar share on and off the exchanges and gold- and platinum-level plans—the most expensive of plans—are much more prevalent off-exchange than on.

They also found that there is a much greater proportion of people in silver-level plans on the exchanges compared with off. One likely reason is that lower-income people who are eligible for reduced out-of-pocket cost-sharing must choose a silver plan to receive the full benefit of that subsidy.

"All the major plan types (bronze, silver, gold) are being actively sold in both market segments, and general patterns of medical cost increase are similar in each segment," the authors wrote.