For shoppers looking for the best value in individual health insurance plans, marketplaces created by the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) are the place to go, according to a recent report by the Commonwealth Fund (CWF). Not only do they have the best prices, but more people are flocking to them to find the best plan. What’s on the other side isn’t as appealing—individual plans sold outside of the marketplaces have experienced much larger premium increases by an average of $8 per member per month and have higher administrative costs than those sold on the exchanges.
Cost analysis. The study found that plans outside of the marketplaces are spending more on administrative costs and less on patient care, while plans operating through the marketplaces are able to spend a greater portion on medical care. Administrative costs were 2.5 percentage points higher in plans sold exclusively outside the exchanges. When analyzing why this might be, the CWF could not determine whether the exchanges themselves cause insurers to devote a lower proportion of premiums to overhead and profits, or if insurers with historically higher overhead or profits choose not to participate in the exchanges.
Point of sale. The CWF also looked into where certain policies are sold. Insurers are not required by the ACA to sell their policies through the marketplaces, but it is the only place that they can sell subsidized insurance for individual policies. Insurers have the option to sell outside of the exchanges to people who do not qualify for or claim premium subsidies. Despite this opportunity, the CWF found that insurers are becoming less likely to sell outside of the marketplace. In 2016, only 17 percent of individual health insurance plans are projected to be sold off the ACA exchanges compared to 28 percent in 2014, indicating a steady decline.
"Collectively, the data in this report make a strong case for the viability of the Affordable Care Act marketplaces," said Sara Collins, Vice President for Health Care Coverage and Access at the CWF. "Insurers inside the marketplaces appear to be competing well on price and continue to sell more of their business through them. And, the measures designed to encourage insurers to enroll healthier as well as sicker people in the marketplaces are working."
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