Health Plan Payment in U.S. Marketplaces: Regulated Competition with a Weak Mandate
The Affordable Care Act Marketplaces were introduced in 2014 as part of a reform of the U.S. individual health insurance market. While the individual market represents a small slice of the U.S. population, it has historically been the market segment with the lowest rates of take-up and greatest concerns about access to robust coverage. As part of the reform of the individual insurance market, the Marketplaces invoke many of the principles of regulated competition including (partial) community rating of premiums, mandated benefits, and risk adjustment transfers. While the Marketplaces initially appeared to be successful at increasing coverage and limiting premium growth, more recent outcomes have been less favorable and the stability of the Marketplaces is currently in question. In this paper, we lay out in detail how the Marketplaces adopt the tools of regulated competition. We then discuss ways in which the Marketplace model deviates from the more conventional model and how those deviations may impact the eventual success or failure of these new markets.
This essay was prepared as a chapter in "Risk Adjustment, Risk Sharing, and Premium Regulation in Health Insurance Markets: Theory and Practice" edited by Thomas McGuire and Richard van Kleef and published by Elsevier. We thank the editors for helpful comments. Layton acknowledges funding from the Laura and John Arnold Foundation and from the National Institute of Mental Health (R01 MH094290). Montz acknowledges support from grant number T32HS000055 from the Agency for Healthcare Research and Quality. The content is solely the responsibility of the authors and does not necessarily represent the official views of the Agency for Healthcare Research and Quality. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Disclosures, Timothy Layton
No funder or other agency had the opportunity to review this research prior to publication. Potentially relevant professional and financial relationships in the past 3 years:
1. NIMH Postdoctoral Fellowship [T32-019733] (salary)
2. Harvard Medical School: Assistant Professor (salary)
3. Litigation consulting with Greylock MacKinnon and Associates (consulting fees $30-40k)
4. Consulting fees from University of Texas – Austin for project “Selection Incentives in US Health Plan Design.” [funded by Pfizer] ($10k)
5. Grant from John and Laura Arnold Foundation. “Risk Adjustment Re-design.” Co-investigator. (12% time)
6. Grant from NIMH. “Mental Health Coverage and Payment in Private Health Plans.” [R01-MH094290] Co-investigator. (20% time)