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Health Plan Payment in U.S. Marketplaces: Regulated Competition with a Weak Mandate

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  • Timothy Layton
  • Ellen J. Montz
  • Mark Shepard

Abstract

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.

Suggested Citation

  • Timothy Layton & Ellen J. Montz & Mark Shepard, 2017. "Health Plan Payment in U.S. Marketplaces: Regulated Competition with a Weak Mandate," NBER Working Papers 23444, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23444
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    References listed on IDEAS

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    1. Michael Geruso & Timothy Layton & Daniel Prinz, 2019. "Screening in Contract Design: Evidence from the ACA Health Insurance Exchanges," American Economic Journal: Economic Policy, American Economic Association, vol. 11(2), pages 64-107, May.
    2. Frean, Molly & Gruber, Jonathan & Sommers, Benjamin D., 2017. "Premium subsidies, the mandate, and Medicaid expansion: Coverage effects of the Affordable Care Act," Journal of Health Economics, Elsevier, vol. 53(C), pages 72-86.
    3. Liran Einav & Amy Finkelstein & Mark R. Cullen, 2010. "Estimating Welfare in Insurance Markets Using Variation in Prices," The Quarterly Journal of Economics, Oxford University Press, vol. 125(3), pages 877-921.
    4. Sonia P. Jaffe & Mark Shepard, 2017. "Price-Linked Subsidies and Imperfect Competition in Health Insurance," NBER Working Papers 23104, National Bureau of Economic Research, Inc.
    5. Ellis, Randall P. & McGuire, Thomas G., 2007. "Predictability and predictiveness in health care spending," Journal of Health Economics, Elsevier, vol. 26(1), pages 25-48, January.
    6. Jaffe, Sonia & Shepard, Mark, 2017. "Price-Linked Subsidies and Health Insurance Markups," Working Paper Series rwp17-002, Harvard University, John F. Kennedy School of Government.
    7. Layton, Timothy J. & Ellis, Randall P. & McGuire, Thomas G. & van Kleef, Richard, 2017. "Measuring efficiency of health plan payment systems in managed competition health insurance markets," Journal of Health Economics, Elsevier, vol. 56(C), pages 237-255.
    8. Michael Geruso & Timothy J. Layton & Jacob Wallace, 2020. "Are All Managed Care Plans Created Equal? Evidence from Random Plan Assignment in Medicaid," NBER Working Papers 27762, National Bureau of Economic Research, Inc.
    9. Liran Einav & Amy Finkelstein, 2011. "Selection in Insurance Markets: Theory and Empirics in Pictures," Journal of Economic Perspectives, American Economic Association, vol. 25(1), pages 115-138, Winter.
    10. Mark Shepard, 2016. "Hospital Network Competition and Adverse Selection: Evidence from the Massachusetts Health Insurance Exchange," NBER Working Papers 22600, National Bureau of Economic Research, Inc.
    11. Timothy J. Layton & Randall P. Ellis & Thomas G. McGuire, 2015. "Assessing Incentives for Adverse Selection in Health Plan Payment Systems," NBER Working Papers 21531, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Thomas G. McGuire & Sonja Schillo & Richard C. van Kleef, 2018. "Reinsurance, Repayments, and Risk Adjustment in Individual Health Insurance: Germany, The Netherlands and the U.S. Marketplaces," NBER Working Papers 25374, National Bureau of Economic Research, Inc.
    2. Michael Geruso & Timothy J. Layton, 2017. "Selection in Health Insurance Markets and Its Policy Remedies," Journal of Economic Perspectives, American Economic Association, vol. 31(4), pages 23-50, Fall.
    3. Sherri Rose & Thomas G. McGuire, 2018. "Limitations of P-Values and $R^2$ for Stepwise Regression Building: A Fairness Demonstration in Health Policy Risk Adjustment," Papers 1803.05513, arXiv.org, revised Aug 2018.
    4. Maria Polyakova & Stephen P. Ryan, 2019. "Subsidy Targeting with Market Power," NBER Working Papers 26367, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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