Issue

The Affordable Care Act (ACA) is often criticized for being costly and inefficient. In this brief, we analyze Marketplace premiums to assess how well ACA Marketplaces control premiums, affecting individuals’ costs and government subsidies.

Goals

We use data on employer-sponsored insurance (ESI) plan premiums and compare them to Marketplace premiums, adjusting for important differences between the two groups. We use data from the 2022 Medical Expenditure Panel Survey Insurance Component and Marketplace premiums to compare.

Methods

The ESI population is younger and generally healthier than Marketplace enrollees. ESI benefits are richer than those in the Marketplace plans most enrollees choose. Marketplace plan premiums include funds needed to provide required cost-sharing subsidies for low-income people, while ESI premiums do not. We adjust for these differences to make apples-to-apples comparisons.

Key Findings

After adjusting for differences in age, actuarial value, and cost-sharing reductions, we find that average silver Marketplace premiums are now 23 percent below premiums in the small-group market and 15 percent lower premiums in the large-group market. We conclude that the most likely reason Marketplace premiums are lower is the substantially higher payment rates and breadth of provider networks in commercial markets than in Marketplaces.