Jessica Van Parys is an Assistant Professor of Economics at Hunter College.
Seminar topic: “Insurer Competition and Premium Growth in the Affordable Care Act (ACA) Individual Markets”
Abstract: Premiums have been increasing rapidly in the ACA individual markets since 2016, with notable divergence across US counties. Experts speculate that the nationwide increases in premiums have occurred in response to the 2016 expiration of the federal government’s market stabilization policies (Layton et al. 2016) and to the Trump administration’s lack of support for the ACA in general and for the cost-sharing subsidies in particular (Aaron et al. 2017). While these facts may explain why premiums are increasing overall, they do not explain why some counties have experienced such rapid premium growth (>$500 more per month since 2014), while other counties have experienced more modest price increases (<$200 more per month). This paper explores three hypotheses for the geographic variation in premium growth rates: (1) adverse selection of enrollees, (2) provider market power, and (3) insurer market power. I combine plan-level data and county-level enrollment data from the federally-facilitated marketplaces with other county-level data sets that contain information on population health, health care utilization, provider market power, and characteristics of the uninsured population to identify the most important predictor of premium increases. I estimate OLS models using static cross section data sets as well as first-differenced models using panel data, but all models point to the same conclusion: local insurer monopolies are the most important determinant of premium growth rates. Premiums in counties with monopoly insurers have increased $30-$100 more per month compared to premiums in counties with more than two insurers.