In this brief, we provide data on 2025 premiums in the Affordable Care Act (ACA) Marketplaces and the growth in these premiums since 2019. We present the regression analysis results, which identify factors correlated with variations in benchmark premiums. We provide data on the markets with the country's highest and lowest benchmark premiums and detailed data on five high-cost and five low-cost markets, illustrating how competition and other factors affect Marketplace premiums. Finally, we identify ways a public option or capped rate strategy could be targeted in the highest-cost areas.
Why This Matters
Many markets, especially those with robust competition in insurer and hospital markets, have low premiums for silver plans. But there are many other markets in which premiums are high because of the lack of competition among insurers and hospitals, among other reasons. This leads to higher government spending and higher costs for individuals ineligible for premium tax credits.
What We Found
We show widespread variation in premiums across rating areas in the ACA Marketplaces. Premiums are higher in areas with only one or two insurers, hospital markets are concentrated, and teaching hospitals have a major presence. The presence of few insurers means that one or two insurers have considerable ability to pass on higher premiums to consumers. Markets with high hospital concentrations are often small urban or rural areas that have few hospitals. These hospitals thus have considerable market power over insurers. A different kind of market power exists in urban areas, where teaching hospitals account for a higher share of hospital admissions. These markets often have many hospitals, but insurers simply cannot afford to exclude teaching hospitals from their networks. We conclude that, because of the lack of strong competition in insurance and hospital markets, there may be a need for some form of price regulation, either through a public option in areas with few insurers or through caps on provider payment rates.
How We Did It
We collected several years of data on premiums in the ACA Marketplaces. We conducted a regression analysis to identify the correlates of high and low premiums, focusing on the number and types of insurers, measures of hospital concentration, and the presence of teaching hospitals. We provide a detailed look at five high-cost and five low-cost markets.
