The research, published in the May issue of Health Affairs, was conducted at the UC Berkeley School of Public Health in collaboration with New York University’s Robert F. Wagner Graduate School of Public Service.
“Covered California is one of the few ACA marketplaces that directly negotiates premiums with insurers,” Richard Scheffler, lead author and distinguished professor of health economics and public policy at UC Berkeley, said in a prepared statement. “Our study suggests that these negotiations successfully constrained premiums during the early years of the marketplaces.”
The study looked at the growth in health insurance premiums from 2014 to 2015 in two state-based ACA marketplaces: Covered California and NY State of Health. Under the ACA, marketplaces have the option of accepting all insurers that want to participate or selecting a limited number of insurers to sell coverage, the study’s authors note. New York permitted all willing insurers to join the marketplace, while California only selected 12 insurers to participate (based on rates, for the most part) and rejected 20 insurers who had shown interest in offering coverage.
In both states, areas with less hospital competition experienced larger premium increases between 2014 and 2015, the study found. However, the effect of insurer competition was significantly different across the states.
In New York, premiums grew faster in the areas with less insurer competition, the study found. In California, though, premiums grew slower in areas with less insurer competition compared to areas with more insurer competition. The study’s authors said Covered California’s ability to exclude insurers seemed to give it the leverage to force insurers in concentrated markets to pass on to consumers the savings they obtained from their strong bargaining positions with providers.
“Our study demonstrates the potential of allowing third parties to use their purchasing power to ensure that negotiating better health care prices benefits consumers, not insurers,” Sherry Glied, dean and professor of public service at NYU Wagner, said in a prepared statement. “The choice between regulation and competition is a false one. To best manage our health care system, we will need both.”
Given the importance of the ACA marketplaces for providing individual health insurance coverage, the authors said it is critical to further evaluate the current effectiveness of the marketplaces, and to find ways in which the marketplaces could be improved.
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