Insurance Monopolies Primary Force Behind ACA Premium Increases

August 10, 2018

As the cost of health care premiums continues to increase, a new study published online in Health Affairs, suggests that carrier monopolies are the primary force behind these increases within states that have federally facilitated ACA marketplaces.

Jessica Van Parys, PhD, assistant professor in Health Economics, Econometrics at Hunter College at City University of New York, examined three potential reasons for geographic variation in ACA premium costs including: rating area health characteristics, providers’ ability to negotiate with insurers and competition among insurers. Dr Van Parys used a comprehensive database of information about premiums and market characteristics for rating areas in states with federally facilitated marketplaces in order to understand if higher premiums are associated with local health insurance monopolies.

According to Dr Van Parys, “the presence of a monopolist insurer was the strongest, and most precise, predictor of 2018 premiums in the individual markets.”

The findings suggest that premiums were roughly 50% higher in rating areas with one insurer and approximately 21% higher in areas with two insurers. These findings were compared with premiums in rating areas with three or more insurers. Notably, according to the study results, rating area characteristics and hospital market structure were less likely to predict premium prices.

“One of the goals of the ACA was to foster competition among insurers in the hope of moderating premium growth in the Marketplaces. However, competition is no longer viable in many areas of the country,” Dr Van Parys explained in the study. “Understanding how insurer competition has affected enrollment, costs and quality will help guide future Marketplace reforms.”

It is currently unclear how insurance monopolies will impact 2019 premium costs.

Julie Gould

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