County-Based Insurance Option Linked With Reduced ACA Premium Growth

Adding a county-based public insurance option may be a useful way to reduce premium growth without the government mandating participation or price regulation to implement a public option, new research shows.

Findings of the economic evaluation were published in JAMA Health Forum.

Researchers set out to collect empirical evidence on how a capitated risk-based county plan performs as a viable public option in the Affordable Care Act (ACA) marketplace in California. The plan, LA Care, is the state’s largest public insurer.

“LA Care is a nonprofit public agency that provides health care access to its 2.7 million members in East and West Los Angeles (regions 15 and 16 of [Covered California]),” the study authors explained.

Investigators used ACA silver plan premium data collected within the 19 Covered California regions to create difference-in-difference and event study models. The models included data on plan-level premiums for Health Insurance Exchange Compare for 2014 to 2022. In 2018, LA Care became the lowest-cost health plan on the ACA exchange.

In the current evaluation, researchers used East and West Los Angeles regions as the treatment group, while the remaining 17 Covered California regions served as controls. Los Angeles has some of the lowest premiums and premium growth rates on Covered California and is the only region with a public plan that competes with 6 private insurers on the exchange. A total of 504 plan-level observations were included in the study.

Data showed:

• ACA premium growth in LA declined by 4.8% after LA Care became the lowest-cost health plan on the exchange in 2018 (coefficient estimate, −0.048; SE, 0.022; 95% CI, −0.093 to −0.002)
• Savings due to lower premium growth from 2019 to 2022 were calculated to be $345 million
• Approximately 70% of the savings ($242 million) went to the federal government

“LA Care may be a viable public option with the potential to be expanded across California through the state’s 16 other county-based health plans,” the authors wrote. “A lower premium can increase consumer welfare given that the low premium is not due to narrower networks, fewer benefits, or a favorable risk profile.”

Had California applied for and received a State Innovation Waiver under section 1332 of the ACA, the state could have captured savings.

Since Covered California began in 2014, gross annual premiums for members have risen 41% ($9612 in 2022 vs $6804 in 2014). Between 2014 and 2017, the plan had around 25,000 enrollees per year, while enrollment rose to 74,000 in 2018, when it became the lowest-cost plan. In 2022, enrollment rose again to 115,000.

“This gain in enrollment paired with a reduction in premium growth suggests that LA Care may be a successful county public option for health care insurance,” researchers said.

The current study marks the first investigation to empirically evaluate how a county-based public option performs in the ACA Marketplace in California, to the authors’ knowledge.

Another county plan, CalOptima, has applied to be listed on the ACA exchange. The plan is the largest insurer in Orange County, with 911,000 Medi-Cal members. However, additional noncounty plans can also reduce premium growth if they offer a lower price, the authors explained.

Overall, the study provides important evidence at a time when several states are considering creating a public option.

Findings “show that a county-based public option can be a useful approach in reducing the growth of premiums without the government mandating participation or price regulation to implement a public option,” the researchers concluded.

Reference

Teotia A, Arnold DR, and Scheffler RM. Association between a capitated, low-cost, county-based public health insurance option an affordable care act premium growth in California. JAMA Health Forum. Published online April 21, 2023. doi:10.1001/jamahealthforum.2023.0488