Brief Is There Potential for Public Plans to Reduce Premiums of Competing Insurers?
Linda J. Blumberg, John Holahan, Erik Wengle, Caroline Elmendorf
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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 Areas Health and health care
Tags Federal health care reform Health care spending and costs
Policy Centers Health Policy Center