Recently, Health Affairs published an article by Loren Adler and Paul B Ginsburg of the Brookings Institution. Their analysis suggested that “average premiums in the individual market actually dropped significantly upon implementation of the ACA (Affordable Care Act)”while providing “better coverage.” However, the majority of other studies, including one published by the same Brookings Institution in 2014, indicate that premiums have increased substantially due to implementation of the ACA.
The Adler and Ginsburg study is flawed for numerous reasons, including but not limited to the fact that they cherry picked narrow data samples from the exchanges. Specifically, the only plans that Adler and Ginsburg studied were the second least expensive silver plans on the exchanges – the ones that determine the amount of subsidies on the exchanges. Note that participants whose household incomes are in the 133% to 250% range of the Federal Poverty Level (FPL) receive a premium tax credit (subsidy) and reduction in their out-of-pocket exposure. Individuals above the 250% FPL do not receive a reduction in their out-of-pocket exposure and their premium subsidy drops off sharply up to 400% FPL while individuals above 400% FPL level receive no premium subsidy.
Adler and Ginsburg’s narrow analysis does not consider the effect of premium subsidies and lower subsidized out-of-pocket exposure on individual behavior. Also, adverse selection is in play since individuals will purchase “richer plans” if they know or believe they will incur higher than normal medical expenses. Insurers were allowed to reduce the premium cost for their least expensive silver plan due to substantial subsidies received, passing the cost on to their other individual medical plans.
Brian Blasé, in his article published in Forbes Magazine, writes that the Brooking’s 2014 study found “enrollment weighted premiums in the individual health insurance market increased by 24.4% beyond what would have had they simply followed…trends.” He also pointed out the study by S&P Global Institute found that average individual market medical premium costs increased by 69% between 2013 and 2015. He quotes another Brookings Institution Scholar, Stuart Butler, who stated two weeks ago that “the ACA might be more appropriately labeled the Medicaid Expansion Act because enrollment in the ACA exchanges has been disappointing with an estimated 10 million fewer people enrolled compared with earlier expectations.” As Mr. Blasé states, if the ACA improved coverage and lowered participant’s costs, the exchanges would be more successful. Instead, total enrollment on the exchanges is 10 million less than originally forecast.