Health Insurance Premiums on the Exchanges

Everyone is trying to figure out what the effect of reform is on the individual health insurance market, particularly in regard to policies bought on the exchanges.  A paper from the National Bureau of Economics uses one approach to estimate the previous costs and compare them to expected prices on the exchanges for comparable coverage.   (NBER Paper)   The researchers looked at California and the 23 states using the federal exchange and which previously had minimal individual insurance rate regulation. This is a difficult task because to do it right you would need to have the actual benefits and actual premiums for people previously in the individual marketplace, and then you would have to try to match those in some way with the bronze, silver, etc. benefit designs and associated prices on the exchanges.  These authors attempted to determine the total “price” for coverage–premiums and out-of-pocket payments–for individuals before and after exchange coverage.  Another complicating factor is the influence on premiums of the health plans’ perception of risk.  Even for the same benefit design premiums may be higher merely because the enrolled population is estimated to use those benefits more frequently.   To address these issues the authors used the Census Bureau’s Current Population Survey for 2010 to 2012 to try to ascertain what kind of total spending individual market participants experienced prior to reform.   They then compared this to the lowest cost bronze plan and the lowest and second-lowest cost silver plan on the exchanges in the studied states, using estimates for out-of-pocket spending based on MEPS data.  The total price–premium and expected out-of-pocket costs–was estimated to increase between 14% and 28% on average.  For the bronze comparison, premiums were identical, but out-of-pockets before reform were much lower.  In regard to silver plans, the pre-reform premiums were lower but out-of-pocket costs were similar.  The actual out-of-pocket costs obviously depend on the health care usage of the individual, as does the relative value of the plan.  High users may pay more but also get more value in terms of total health care services consumed.

This is an interesting approach to trying to ascertain what the real effect of the reform law was on people’s spending for health care coverage and services, but still likely very flawed, given the data source limitations.  There is a fair amount of detailed state insurance department data on benefit designs and enrollment, and in a post tomorrow we will look at one early analysis based on this data.  I can’t resist noting that once again these authors refer to their projected increases as “moderate” and I just don’t understand that.  In a world were personal income growth is essentially stagnant, and looking at typical household income levels, an increase in premiums and out-of-pocket spending in excess of 10% is a big hit to personal finances and will have an impact on the economy.