As the autumn leaves change and the weather gets colder, we at CHIR are thankful for new health policy research. This November, we reviewed studies on policy interventions aimed at lowering health care costs, the impact of eliminating essential health benefits from private insurance plans, and tracking ACA marketplace premium costs for the coming year. 

Fiedler, M. Capping Prices or Creating a Public Option: How Would They Change What We Pay for Healthcare?, The Brookings Institution, November 2020. 

In this report, Matthew Fiedler outlines policy interventions that can be implemented to drive down health care costs, particularly those aimed at increasing the public role in determining provider prices for commercial coverage. Specifically, Fiedler discusses capping prices for various services, creating a public option, and implementing an alternative price regulation tactic, which he terms the “default contract” approach.

What it Finds

• Placing caps on out-of-network prices could drive down prices for in-network emergency services. However, this measure would likely only have a minimal effect (of 10 percentage points or less) on the prices of most other health care services. 
• Placing a comprehensive cap on both in-network and out-of-network prices could encourage more broad price reductions, but policymakers may have more difficulty ensuring compliance among providers who attempt to circumvent this measure. 
  • Fiedler finds that providers may respond to a loss of negotiation power by seeking other allowances from insurers, such as by demanding higher prices for other services, using alternative payment methods to “hide” payments, or by opposing contract provisions meant to reduce utilization.
• An alternative pricing regulation strategy, which Fiedler terms the “default contract” approach, could generate broad cost reductions while avoiding the challenges associated with a comprehensive price cap. Under this approach the government would publish a model network agreement specifying the prices a provider would be paid and the minimum level of access that that provider must offer to the insurer’s enrollees. Providers could either accept the default contract or negotiate other terms with insurers. This policy functions by increasing insurers’ bargaining power rather than by directly influencing contract prices, allowing policymakers to avoid the main enforcement challenges associated with a comprehensive price cap model.
• A public option could provide consumers with a lower-premium marketplace option, and drive down premium rates for private plans as well.

Why it Matters

Health care is becoming increasingly unaffordable, driven primarily by high provider prices. In many markets, significant provider consolidation has reduced insurers’ ability to effectively negotiate lower reimbursement rates, making it important for the government to play a more active role to address the adverse effects of these market failures. This report offers policymakers and other interested parties seeking to address this issue with a robust analysis of selected policy solutions. Moving forward, these groups can utilize this report as a reference. 

Blumberg, L. and Banthin, J. The Implications of Eliminating Essential Health Benefits: An Update. Urban Institute, November 16, 2020.

In this report, researchers at the Urban Institute, supported by the Robert Wood Johnson Foundation, update previous estimates outlining essential health benefits as shares of a premium for a typical individual market insurance plan. In addition, the researchers discuss the potential financial impact of eliminating these benefits. 

What it Finds

• In 2020, the annual premium for a typical nongroup silver plan for an individual 40-year-old enrollee was $5,883.
• Of all nongroup enrollees, 58% used benefits for physician care in office-based settings, 54% used benefits for prescription drug coverage, 3% used benefits for inpatient hospital care, and 1% of enrollees used benefits for maternity and newborn care.
• The essential health benefits that accounted for the largest shares of premium costs were: 
  • office-based and outpatient hospital care, which accounted for almost 40% of premiums, or $2,291 of the example premium,
  • prescription drugs, which accounted for 29% of premiums, or $1,718 of the example premium, and
  • inpatient care, which accounted for 20% of premiums, or $1,154 of the example premium.
• The essential health benefits that accounted for the smallest shares of premium costs were:
  • emergency room care (including facility charges), which accounted for 7% of premiums, or $402 of the example premium, 
  • maternity and newborn care, which accounted for 4% of premiums, or $211 of the example premium,
  • rehabilitative and habilitative care, which accounted for 1% of premiums, or $84 of the example premium, and
  • pediatric dental and vision care, which accounted for less than 1% of premiums, or $24 of the example premium.

Why it Matters 

These findings illustrate the way costs associated with specific essential health benefits are spread across all enrollees. Some stakeholders support the reduction or elimination of some of the less widely used benefits–such as maternity care or rehabilitative and habilitative care–from ACA-compliant nongroup insurance packages. However, while excluding these benefits may lower overall premium costs, such a measure would significantly raise out-of-pocket costs for those who do use those services, making them largely inaccessible.

McDermott, D. and Cox, C. How ACA Marketplace Premiums are Changing by County in 2021. KFF, November 11, 2020.

In this report, researchers from KFF analyze data from insurer rate filings to assess how premium costs are expected to change at the county level in 2021. 

What it Finds

• • Overall, premiums for benchmark silver plans offered on the ACA marketplace are expected to decrease in 2021. However, a consumer’s out-of-pocket contribution depends on their income, location, and differences in pricing between their selected plan and the benchmark silver plan for their location.
    • Consumers must consult with Healthcare.gov or their state’s marketplace in order to determine how much they will pay net of subsidies.
  • Nationally, the unsubsidized premium cost for the average benchmark silver plan is expected to decrease by about 2.2% in 2021. Comparatively, premiums for the lowest-cost bronze and lowest-cost silver plans will decrease by an average of 1%, while premiums for the lowest-cost gold plan will decrease by an average of 4%.
  • Enrollees in approximately 1 out of 5 counties in the nation will have the option to select a gold plan with a cheaper monthly premium than the lowest-cost silver plan offered in their area. In total, there are 983 counties where the unsubsidized premium for the lowest-cost gold plan is either cheaper or comparable to the unsubsidized premium for lowest-cost silver plan.
  • Because 2021 premiums for benchmark silver plans are expected to be higher than those of bronze plans, “free” (zero-premium) bronze plans will be available in 84% of counties to the low-income subsidized marketplace enrollees. 

Why it Matters

When selecting a plan during this year’s open enrollment period, which began on November 1 and ends on December 15 in most states, marketplace enrollees must consider their coverage options carefully. As the report outlines, there are many trade-offs to consider depending on each consumers’ unique circumstance during the coming year. For example, although many eligible enrollees will have access to “free” bronze plans, it is still important for them to consider the cost-sharing subsidies they may lose if they choose not to enroll in a silver plan. Marketplace enrollees eligible for this assistance may actually be able to reduce their total out-of-pocket costs for medical care by paying higher premiums each month. Whatever consumers decide, it is important that they are well informed, and enrolled in a health plan that adequately meets their medical needs, particularly given the ongoing COVID-19 pandemic.