Is There Potential for Public Plans to Reduce Premiums of Competing Insurers?

Brief

Is There Potential for Public Plans to Reduce Premiums of Competing Insurers?

Abstract

There is considerable interest in making a public option available in the Affordable Care Act (ACA) nongroup marketplaces. A public option could catalyze competition in less competitive markets, leading other marketplace insurers to lower their premiums. We analyze commercial insurers’ experiences competing in marketplaces with managed-care organizations, which, prior to ACA implementation, only offered coverage within public programs (either Medicaid only or Medicaid and Medicare). These managed-care organizations, though not purely public options, represent a proxy for them. Our analysis finds an association between the presence of a Medicaid insurer in a rating region and competing insurers (e.g., Blue Cross Blue Shield, provider-sponsored plans, national and local commercial insurers) offering lower premiums.

This brief was updated November 12, 2019, to correct an error on page 4. As the number of insurers in a rating area increases, premiums tend to decrease; a previous version said premiums tend to increase.

Research Area: 

Centers

To reuse content from Urban Institute, visit copyright.com, search for the publications, choose from a list of licenses, and complete the transaction.
LATEST IN Health and Health Policy
To reuse content from Urban Institute, visit copyright.com, search for the publications, choose from a list of licenses, and complete the transaction.