NCPA - National Center for Policy Analysis

Keeping Competition in the Health Insurance Market

October 23, 2015

As the 2016 rates for Affordable Care Act (ACA) marketplace plans are finalized, there will be much interest in seeing to what extent premiums rise. It goes without saying that there is an overwhelming public interest in keeping these markets as competitive as possible. A large share of the total premiums is paid by the federal government. Consumers, for their part, are very sensitive to prices, and many report struggling with high premiums and out-of-pocket costs. Others remain outside of the marketplaces due to concerns about the price of coverage.

Many predict a scenario where an even greater number of states will use the federal technology platform, either as federally facilitated marketplaces (FFM) or "supported state marketplaces" that use the technology platform but conduct other plan -- and consumer-oriented functions as state-based marketplaces. However, more states may begin to take an active role in plan management and market regulation.

One place where states vary considerably is their approach to managing the participation of carriers in the marketplace. A small number of states have reserved the right to negotiate with plans before allowing them to participate in the marketplace -- i.e. active purchasing -- while others follow a "clearing house" model that allows all qualified plans to participate.

Soon the 2016 plans will be finalized, and this will provide new information on premium changes in states with varying regulatory approaches. At the same time, many states are contemplating new standards for network adequacy. State regulators should consider quality and access as well as affordability, but given the importance of premium prices to enrollment and retention, the impact of state marketplace regulation on competition and plan costs is doubtlessly something that should be better understood.

Source: Katherine Hempstead, "What State Policies Best Foster Insurance Market Competition?" Health Affairs, October 5, 2015.


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