April showers bring May flowers, and plenty of health policy research. This month, we read studies on the burden of health care costs on families, the affordability of employer-sponsored insurance (ESI), the effects of hospital concentration on insurance premiums, and why Medicaid insurers hesitate to sell plans on the Affordable Care Act’s (ACA) individual market.

Glickman, A and Weiner, J. The Burden of Health Care Costs for Working Families: A State-Level Analysis. University of Pennsylvania Leonard Davis Institute of Health Economics; April 1, 2019. Health care is a huge concern for Americans, and costs of care, premiums, and cost sharing are top of mind. While researchers have highlighted the burden of health care spending nationally, there is a dearth of analyses on how costs affect working families state to state. This study from the University of Pennsylvania’s Leonard Davis Institute applies the affordability index (total ESI premiums as a proportion of household income) to states to develop a more focused, state-level picture of what financial burdens health care brought upon Americans from 2010-2016.

What It Finds

• While the national health care cost burden for families rose on an affordability index from 28 percent to 30 percent from 2010 to 2016, there was significant variation among states, from 37 percent in Louisiana (a 27 percent increase from 2010-2016) to 24 percent in Minnesota (a 5.6 percent decrease from 2010-2016).
• In states with the highest cost burden, researchers point to incomes not keeping pace with rising premiums. For example, in Idaho, the median income increased almost 21 percent over the six-year period, but premiums increased by 54 percent, easily outpacing the increases in income.
• Although unmeasured in cost burden calculations, deductibles play a large role, with increases ranging from 24 percent in Idaho to 117 percent in New Hampshire. Researchers found no association between state-level deductibles and average premiums, leaving room for doubt that insurers raise deductibles in order to keep premiums down.

Why It Matters

Health insurance is an enormous financial outlay across the country. The cost of coverage is felt alongside mortgages or rent, car payments, groceries, student loans, and other bills families must pay out of their household income. It is important for policymakers to understand the significant financial burden of health insurance, which is supposed to provide financial security, and this state-by-state look underscores the wide and varied challenges faced by families across the country.

Claxton, G, et al. How Affordability of Health Care Varies by Income Among People with Employer Coverage. Kaiser Family Foundation; April 15, 2019. While the ACA individual market garners a lot of attention, most consumers with commercial insurance get it through their employers. Using the Current Population Survey, researchers at the Kaiser Family Foundation analyzed the share of family income that ESI-covered families pay out-of-pocket (OOP) toward their premiums and direct payments for medical care in 2017.

What it Finds

• People in low-income families (incomes under 200 percent of the federal poverty level (FPL)) paid an average of 14 percent of their income on combined premium and OOP payments for medical care, compared to an average 4.5 percent of family income for those in families at or above 400 percent FPL.
• When a family member is sick, those in low-income families spent an average of 18.5 percent of their income on premiums and OOP expenses, versus an average of 7.4 percent for those at or above 400 percent FPL.
• Regardless of income level, people who were in worse health spent more on premiums and OOP payments for medical care than those in better health.

Why it Matters

While the ACA implemented cost sharing reductions and premium tax credits to make health care spending more proportional to income, the law did not extend those protections to families with ESI. This study finds that employees covered with ESI still face significant financial burden, especially those who are in middle- to low-income households.

Boozary, A, et al. The Association Between Hospital Concentration and Insurance Premiums in ACA Marketplace. Health Affairs; April 1, 2019. Premiums are often discussed in relation to how many insurers participate on the ACA marketplace each year. While competition among insurers is important to keep prices competitive, providers also play a role in premium levels. In this study, researchers analyzed the effects of competition among hospitals on premium prices across states between 2014-2017.

What it Finds

• Areas with the highest levels of hospital consolidation saw 5 percent higher marketplace premiums on average than markets with the lowest levels of concentration.
• While a greater number of insurers was independently associated with lower premiums, increased insurer competition did not sufficiently offset the effects of hospital concentration, suggesting that lower levels of hospital concentration may be associated with lower marketplace premiums.
• Communities with a lower median income were more likely to see higher hospital concentration.

Why it Matters

As health economists often state, “It’s the prices, stupid!” In markets with only one (or few) dominant hospital systems, insurers have less bargaining power when negotiating reimbursement rates for services. When insurers have to pay out more to the hospital systems, they typically raise premiums. And while market competition among insurers is certainly important, one dominant hospital system can reduce their ability to price competitively. As policymakers and employers look for ways to increase market competition and lower premiums, the effects of provider consolidation should be a part of the conversation.

Burton, R, et al. Why Don’t More Medicaid Insurers Sell Plans in the ACA Marketplaces? Urban Institute; April 29, 2019. A number of states are looking at Medicaid buy-in proposals. While opening a gateway between these markets could lead to increased access and lower premiums, currently, many Medicaid insurers have opted not to sell coverage on the marketplace. Researchers at the Urban Institute interviewed Medicaid plans and associations of Medicaid insurers to find out why.

What it Finds

• Respondents outlined the operational challenges of offering marketplace plans, citing Medicaid insurers’ lack of actuarial expertise, experience with premium collection, and comprehensive IT systems.
• The localized and non-profit nature of Medicaid insurers often means that they are smaller, and respondents noted that this makes certain commercial insurer requirements such as solvency and capital surplus standards difficult to meet.
• Competition on the individual market is more aggressive than in Medicaid. According to respondents, Medicaid insurers in states that assign enrollees to Medicaid plans, or where insurers are given exclusive territory by the Medicaid program, may be hesitant to enter a market where they have to compete with large commercial insurers.
• A Medicaid-buy in was seen as a more attractive option for Medicaid insurers than offering a plan on the current marketplace, if they would be able to enroll new consumers without having to make the necessary overhauls within their companies to adhere to the commercial market dynamics.

Why it Matters

As policymakers discuss ways to fill in coverage and affordability gaps, the capacity and ability of insurers to participate in the current market plays a major role in any future policy’s success. While Medicaid plans can offer a quality, community-based coverage solution, the current private insurance landscape is not particularly welcoming to them as a market player. When considering Medicaid buy-in proposals, as well as other efforts to increase market competition, state policymakers should engage the Medicaid community to find solutions to these issues and ensure positive outcomes for consumers.