Health insurance carriers have not poached healthier customers from the exchanges for plans sold outside the exchanges, which some feared would lead to adverse selection in the public exchange market, concludes a recent issue brief by the Commonwealth Fund. The research, in fact, shows that most of their off-exchange sales involve generous benefits that appeal to sicker populations.
“We see little evidence of insurers actively pursuing risk segmentation in their offerings on and off the exchanges,” according to the report. Data for this analysis from unified rate review template spreadsheets for 2015 examined 570 insurers with 1,060 product lines.
Insurers projected that just 21% of the 14 million subscribers they anticipated for 2015 would enroll in plans compliant with the Affordable Care Act sold only off the exchanges, presumably because of the public exchange subsidies.
While bronze-level plans were found to be about evenly split on and off the exchanges, roughly one-third of gold and platinum plans were off the exchanges and less than one-fifth on. It was a different story for silver plans, with 58% on vs. 37% off the exchanges.
The report surmised that one likely reason for this result “is that lower-income people who are eligible for reduced out-of-pocket cost-sharing must choose a silver plan to receive the full benefit of that subsidy.”
Another factor that the Commonwealth Fund highlighted as evidence that adverse selection never materialized in the exchanges because more costly plans with broader networks were offered outside the exchanges. It cited a source that aggregates insurance prices noting how the cheapest ACA-compliant plans sold only off the exchanges cost 40% more than comparable coverage on the exchanges – with a footnote about “disregarding subsidies."
The report also cited research showing that “overall, the member-weighted average premium paid in the individual market increased $30 per person per month in 2015, with a somewhat higher increase off the exchanges ($34) compared with on ($29).” Most of the premium increase was attributed to higher medical costs (70%), with the remainder tied to overhead and profits.
Government fees and taxes drove nearly all of the 2015 premium increase in the nonmedical component instead of profits or administrative costs, according to the Commonwealth Fund. Roughly half the tax increase was traced to fees that exchanges began to charge in 2015, with taxes affecting all products accounting for the rest. “These new fees should affect premium increases for only one year, after which they will become part of insurers’ base rates,” the report added.
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