1. ACA policies and market outcomes: rating regions, age-rating, and APTC
HIX 5.0 Penn-LDI
September 2017
Pietro Tebaldi
University of Chicago
Financial support from the Kapnick Foundation through a grant to the Stanford Institute for Economics Policy Research and from the Becker-Friedman Institute Healthcare Initiative is gratefully acknowledged

2. What did we learn from the early years?
Combination of
Data on plans, choices, and models of ACA regulations
teach lessons on the effect of specific rules on policy relevant outcomes
Who gets covered?
How much does it cost?

3. Three questions with some answers
How do insurers respond when we change rating regions?
Dickstein, Duggan, Orsini, Tebaldi (2015)
What is the effect of constraints on age-rating?
Ericson, Starc (2015); Orsini, Tebaldi (2017)
How does the design of APTC affect enrollment and spending?
Jaffe, Shepard (2017); Tebaldi (2017)

4. How does rating region determination affect market outcomes?
Rating region defines a market: group of counties (zip codes) defining level at which regulations apply and decisions of buyers and sellers take place
Critical design decision: how to bundle counties?
Tradeoffs:
Larger markets increase size of enrollment pools, which also have a more homogeneous composition
Larger markets force insurers to have a broader network of medical providers covered by their plan

5. States behaved very differently

6. Our analysis Compare carriers and premiums in
Rural counties that were bundled with nearby urban counties
Rural counties that were not bundled with nearby urban counties

7. Main results:
When a small, rural county is bundled in a rating region with a large, urban county:
One extra carrier on average
Silver premium (for 45 year olds) is ≈$300/year lower
Should we then have very large regions?
No: larger regions (in land area) and heterogeneous regions (e.g. large within region variation in population density or racial composition) present – ceteris paribus – less insurers and higher premiums
We should think of optimal region determination as a function of
Markets of medical providers
Population composition and geographic distribution

8. WHAT IS THE EFFECT OF THE CONSTRAINTS ON AGE-RATING?

9. Subsidies + age-rating adjustments
Premium
Public Spending in APTC
Premium received by insurer absent constraint on age-rating
Premium received by insurer under constraint on age-rating
Price ceiling = premium paid by subsidized buyer
maximum affordable amount
Age of buyer
For APTC beneficiaries (≈85%) no transfer from Y to O; change in public spending

11. Second implication of age-rating adjustments
Positive relationship between price of 21-y.o. and share of over 50 uninsured in a region
Relatively older markets have higher premium for young buyers
3:1
Constrained premium
in “old market”
Premium
Constrained premium
in “young market”
Unconstrained premium
3:1
5:1
Age of buyer

12. Difference in pre-APTC monthly premium for 21 year olds between counties
with above average % uninsured and below average % uninsured

13. Effect of age-rating constraints imposed under ACA on APTC spending
(federally facilitated marketplaces)
Smaller impact on coverage:
≈3% enrollment reduction among under 50 below 400% FPL
≈6% enrollment reduction among under 50 above 400% FPL

14. SHOULD MAXIMUM AFFORDABLE AMOUNTS VARY WITH AGE?

15. Over 50 vs young invincible in Covered California enrollment data
Relatively older buyers are more willing to pay for health insurance

16. % drop in participation if APTC are $100/year lower

17. Age-adjustments to APTC
Public Spending
Premium received
by insurer
Premium
Premium
Premium received
by insurer
Public Spending
Price ceiling = premium paid by buyer
Age adjusted price ceiling
Age of buyer
Age of buyer
subsidize more young invincible and achieve lower cost, lower (gross) premium for all buyers
can also lower maximum affordable amount for older buyers
 lower spending, more participation from all groups, higher total profits

18. Equilibrium calculations with estimates from Covered California
Increase APTC of under 45 by $50/month , decrease APTC of over 45 by $25/month
All buyers face lower net-of-APTC premiums

19. Wrapping up
Observational data and economic models teach us how specific rules in ACA marketplaces are critical to policy-relevant outcomes
How we draw rating regions matters
Age-rating constraints impact both, participation and spending
Age adjustments to maximum affordable amounts can make all buyers better off without extra spending
Many open questions:
How important is active purchasing?
How would insurers adjust entry/networks/generosity if we were to change APTC?
Can re-insurance / risk-adjustment play a complementary role to APTC?