Larger Premium Increases Seen in Bigger Health Insurers Post-ACA

The largest health insurance carriers in each Affordable care Act (ACA) marketplace had a 75% higher premium increase from 2014 to 2015 compared with other same-state carriers, according to a recent study of individual health insurance carriers in 34 federally facilitated and state-partnership health insurance exchanges.

The study was published in Technology Science by Eugene Wang and Grace Gee, founders of HoneyInsured.com.

The study sought to find out whether the ACA’s exchanges are keeping anticompetitive pricing behavior of dominant carriers in check—something the act was designed to do through changes intended to ensure fair premium pricing, even among carriers with dominant market shares. The ACA’s reforms sought increased transparency in premium pricing behavior by requiring that premium changes be reviewed through Rate Filing Justification documents, and carriers disclose claims, utilization, taxes/fees, and other expenses to justify premium changes.

Beyond the rate review process, carriers must also ensure that a minimum proportion of the collected premiums (medical loss ratio) must be spent on medical expenditures and premiums in excess of the minimum must be rebated to consumers.

The study followed health insurance plans in 34 state exchanges for pricing changes from 2014 to 2015. Their data show that the largest insurance carrier in each marketplace had a 75% higher premium increase compared with other same-state carriers (P = .03).

On average, the largest carriers raised rates by 23.9%, whereas the other carriers only raised rates by 13.7%. The largest carriers’ premium increases affect a larger proportion of plans (P = .008) and do not seem justified from the standpoint of incurred claims-to-premium ratio (P = .31), the authors conclude.

In conclusion, the researchers found evidence that even after the implementation of the ACA, the largest health insurance carriers on the exchanges may be in a better position to practice anti-competitive pricing compared with their same-state counterparts.

“This evidence should be prudently considered in any antitrust debate,” they concluded.