ACA marketplace premiums grew more rapidly in areas with monopoly insurers than in areas with more competition

Abstract

Premiums have increased rapidly in the two most recent years of the health insurance Marketplaces, with notable variation across state rating areas. Some experts have speculated that these increases are due to greater enrollment among sicker patients, the expiration of market stabilization policies, or the federal government's discontinuation of funding for cost-sharing subsidies. However, these factors do not explain why some rating areas have experienced rapid premium growth, while others have experienced more modest increases. I used a comprehensive database of information about premiums and market characteristics for rating areas in states with federally facilitated Marketplaces to demonstrate that higher premiums are associated with local health insurance monopolies. In 2018, Marketplace premiums were 50 percent ($180) higher, on average, in rating areas with monopolist insurers, compared to those with more than two insurers. This was driven by large premium increases for the monopolist insurers' lowest-cost plans. Understanding how insurer competition has affected enrollment, costs, and quality will help guide future individual-market reforms.