Insurers Are Selling More Individual Health Plans in ACA Marketplaces

Fears that insurers would sell cheaper, “bare bones” plans to attract healthy enrollees away from the Affordable Care Act (ACA)’s marketplaces and shift sicker, more costly enrollees into the ACA plans have been unfounded, according to a new report from The Commonwealth Fund. The report compared 2 segments of the individual health insurance market: plans sold on the ACA marketplaces and those sold outside the marketplaces through insurers or brokers.

Researchers Michael J. McCue and Mark A. Hall found that insurers increasingly are selling more of their individual health insurance plans in the ACA marketplaces. Individual plans sold outside of the ACA marketplaces had larger premium increases and had higher administrative costs.

The data used for the study come from the unified rate review template spreadsheets for 2016 that insurers must file with the Center for Consumer Information and Insurance Oversight. Data were from 543 unique insurers in different states.

The study found that in 2016, 17% of individual health insurance plans are being sold exclusively outside the marketplaces, a 28% drop from 2014. Insurers projected that in 2016 there would be 12.8 million people enrolled in plans sold mainly through the ACA marketplace and 2.6 million in off-marketplace plans. Insurers had projected in 2014 that 11.1 million people would enroll in marketplace plans and 4.2 million would enroll in off-marketplace plans.

The report states that the bronze level plans, the least expensive plans that provide the lowest amount of coverage, are equally popular on and off the marketplaces. The gold and platinum plans, which are the most expensive and provide the most coverage, are much more prevalent off the marketplaces.

The report found that:

• Administrative costs are 2.5 percentage points higher in plans sold exclusively outside of marketplaces and medical loss ratios (percentage of a premium that pays for medical costs) are 2 percentage points lower in plans sold off marketplaces.
• Premiums increased more off the marketplaces than on them ($48 versus $30 per member per month), part of an enrollment shift in the ACA marketplaces away from more expensive preferred provider organizations (PPOs) and point-of-service (POS) plans to HMOs and exclusive provider organization (EPO) plans that limit coverage to contracted providers.
• HMO and EPO plans are increasingly popular in the marketplaces as buyers search for lower premiums. Plans sold predominantly in marketplaces projected a 37% increase in HMO/EPO enrollment, and a 22% decrease in PPO/POS enrollment.
• Health insurers do not seem to be segregating their enrollees according to health status on and off marketplace plans.

The data make a strong case for the viability of the ACA marketplaces, according to Sara Collins, the Commonwealth Fund’s vice president for health care coverage and access.

“Insurers inside the marketplaces appear to be competing well on price and continue to sell more of their business through them,” she said in a statement. “And the measures designed to encourage insurers to enroll healthier as well as sicker people in the marketplaces are working.”