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The Effect of Increased Competition on Premium Changes in the Individual ACA Market

The Effect of Increased Competition on Premium Changes in the Individual ACA Market thumbnail

Veristat: A Data-Driven Look at Today’s Insurance Markets

During the early years of the ACA individual plan, premiums rose steadily and often steeply, not least because of carriers’ decisions to exit various markets. But now that uncertainty has receded and the risk pool is better understood, carriers are changing course. Bright, Oscar, Centene (Ambetter) and Cigna have all aggressively expanded their footprints, and in 2021 UHC re-entered the individual market in five states.  

To evaluate the impact of this increased competition we looked at premium changes in individual ACA plans over a three-year period, from plan year 2019 to plan year 2021.  

Over that time, state-average, lowest-cost Bronze plan premiums fell in real dollar terms in 94% of states with increased competition (from new entrants), compared with 54% of states without such an increase. State-average, lowest-cost Silver plan premiums fell in 88% of states with increased competition, compared with 54% of states without. And state-average, lowest-cost Gold plan premiums fell in 81% of states with increased competition, compared with 60% of states without. In all, 16 states welcomed new entrants or increased competition; of these, only Louisiana failed to realize real-dollar reductions in Bronze plans over the past three years.

Premiums dropped in the nation as a whole during the same period—with or without increased competition. The nationwide average of each state’s average lowest-cost Bronze plan dropped by 9.4% in states where competition increased, and by 2.7% in those where it didn’t. Similarly, the nationwide average of each state’s average lowest-cost Silver plan dropped by 12% in states where competition increased, and by 5.2% in those where it didn’t. And the nationwide average of each state’s average lowest-cost Gold plan dropped by 25% in states where competition increased, and by 6% in those where it didn’t. 

In short, the news is good. Not only is increased competition expanding consumer choice. It’s accelerating a decrease in individual premiums, too.