By Kennah Watts and Sloane Daly

Last month, CHIR soaked up the sun and the latest in health policy research. In June, we read studies that examined hospital mergers’ impact on the economy, reviewed insurance coverage rates during various policy periods, and analyzed the benefits of enhanced premium tax credits.

Who Pays for Rising Health Care Prices? Evidence from Hospital Mergers

Brot-Goldberg, Zarek et al. National Bureau of Economic Research. June 2024. Available here.

Researchers from the University of Chicago, Yale, Harvard, the University of Wisconsin–Madison, and the US Department of Treasury combined data on privately insured healthcare prices and utilization to investigate how price increases following hospital mergers negatively impact premiums, payrolls, employment, federal tax revenue, and mortality. 

What it Finds

• In a healthcare market of predominantly employer-sponsored insurance (ESI), insurers pass rising costs to their customers, ESI employers and employees, tying together the healthcare and labor markets.
• As health care prices increase, so do insurance premiums, which employers then mitigate by laying off middle-to-low-income workers (salaries <$100,000).
  • A one percent increase in healthcare prices leads to a one percent increase in unemployment.
  • Unemployment then leads to reductions in collected federal income tax: for every one percent rise in healthcare prices there is 0.4 percent decline in tax revenue.
• Hospital mergers are a primary driver of healthcare costs, and have severe implications for insurance premiums, job and wage losses, and federal tax revenue.
  • One anticompetitive hospital merger – defined by the researchers as a merger that raises prices by five percent or more – produces an estimated $32 million in lost wages, 203 job losses, and $6.8 million in federal tax revenue.
• Rising healthcare prices and unemployment also have consequences for employees’ overall health and well-being.
  • One in every 140 individuals laid off due to healthcare spending increases will die due to suicide, drug overdose, or liver disease. 
  • A year of anticompetitive, unblocked hospital mergers leads to 12 to 25 deaths.

Why It Matters

Almost two-thirds of Americans rely on ESI for healthcare coverage, inextricably tying the healthcare and labor markets together. Accordingly, when healthcare prices rise, the consequences for the labor market can be severe. Hospital mergers raise cost containment concerns, as the hospital sector accounts for almost a third of healthcare prices, and causes more cost growth than almost any other sector. This analysis suggests that increased efforts to block or unravel anticompetitive mergers could prevent financial harms, both for individuals and the national economy, as well as save lives. Though the FTC has some regulatory power over hospital mergers, there is bipartisan support for increased oversight and allocation of resources to bolster the FTC’s enforcement capabilities. State policies can also prevent consolidation and strengthen oversight of provider mergers, with states like Oregon, California, and New York leading the way.

Improving Access to Affordable and Equitable Health Coverage: A Review from 2010 to 2024

Buchmueller, Thomas et al. Assistant Secretary for Planning and Evaluation (ASPE), Office of Health Policy. June 7, 2024. Available here. 

ASPE researchers conducted a review of policies related to the Affordable Care Act (ACA) to analyze how policy change can improve or hinder insurance coverage for non-elderly adults.

What it Finds

• The ACA implementation period (2010-2016) saw significant insurance coverage gains among non-elderly adults, with the greatest gains for young adults (<26 years old) and lower-income Americans.
  • By 2016 the uninsured rate for adults had fallen by 10 percent, from 22.3 to 12.4 percent.
• Between 2017 and 2020, some gains in insurance coverage were lost as policies attempted to roll back key ACA reforms.
  • From 2017 to 2020, the rate of uninsured adults increased by 2 percentage points (9.1 percent to 11 percent).
  • While some federal policies during the 2016-2020 period increased uninsurance rates, states that adopted Medicaid expansion during that time period (Virginia, Maine, Idaho, Utah, and Nebraska) mitigated these coverage losses.
• Since 2021, policy efforts to improve the health care system and address health-related needs have created a historic low in the rate of uninsurance, recorded as 7.7 percent in Q4 of 2023.
  • From 2020 to 2024, policies related to premium tax credits, enrollment, and affordability have nearly doubled the number of people who enrolled in the Marketplace from 11.4 million to 21.4 million.
  • In this period, continuous enrollment permitted more than 7 million adults to retain eligibility for Medicaid.
  • As of 2024, more than 45 million Americans have ACA-related coverage through the Marketplace, Basic Health Programs, or Medicaid expansion.
• Policies that produced insurance coverage gains were also correlated with improved access to care and increased preventive care, as well as broader financial and equity benefits.

Why It Matters

State and federal policies not only fundamentally impact health insurance coverage, but also the overall well-being of the American people. Just as the ACA provided significant increases in coverage, policies that hindered the ACA reduced access to healthcare. Following the end of the COVID-19 Public Health Emergency, policymakers are faced with many ACA-related policy choices, such as expanding continuous enrollment, maintaining Special Enrollment periods, extending advanced premium tax credits, and instating Medicaid expansion in 10 states. Given revived discussions about repealing the ACA and the approaching deadline to extend premium tax credits, policymakers should consider how these policies will impact insurance coverage and access to affordable health care services.

Who Benefits from Enhanced Premium Tax Credits in the Marketplace?

Banthin, Jessica et al. Urban Institute, June 2024. Available here.

Researchers from the Urban Institute used the Health Insurance Policy Simulation Model and open enrollment data to predict the impacts of enhanced premium tax credits (PTCs) on Marketplace enrollment and affordability in 2025. 

What It Finds 

• Enhanced PTCs decreased rates of uninsurance and increased Marketplace enrollment.
  • Based on previous trends, enhanced PTCs are estimated to increase Marketplace enrollment by 7.2 million people in 2025. 
  • The total nongroup market will cover 46 percent more people under the enhanced PTC policies than the original PTC policy.
• In 2025, Marketplace enrollment will likely rise across all income categories because of the financial incentives provided by enhanced PTCs.
  • Populations with incomes below 150 percent of the federal poverty level (FPL) are expected to experience a 59 percent increase in Marketplace enrollment in 2025. 
  • Individuals with incomes above 400 percent of the FPL became eligible for enhanced PTCs for the first time under American Rescue Plan Act’s (ARPA), which will lead to substantial enrollment gains in the subsidized Marketplace (approximately 1.5 million enrollees for this income group in 2025).
• Enhanced PTCs improve the affordability of Marketplace premiums across all income categories.
  • Under enhanced PTCs, average total Marketplace premiums will be 5 percent lower across all states in 2025. 
  • The majority of individuals with incomes below 150 percent of the FPL will pay no premiums.
• Enhanced PTCs allow some people to switch to plans with improved cost-sharing obligations: 1.8 million more Marketplace enrollees are expected to choose gold plans in 2025 relative to plan selection under original PTCs. 
• Enhanced PTCs have the greatest coverages affects in states without other options for subsidized insurance, such as Medicaid expansion, a Basic Health Program, or other subsidies. 

Why It Matters 

Enhanced PTCs, as enacted through the ARPA, have led to significant improvements in Marketplace insurance affordability and increased enrollment. As enrollment in the Marketplace grows, the risk pool expands and creates more predictable and stable premiums for all enrollees. Greater Marketplace enrollment also increases competition amongst insurers, which can further reduce costs, improve care access, and provide a stable market. Despite these gains, if Congress does not extend PTCs beyond their 2025 expiration date, almost all (92 percent) of Marketplace enrollees will face higher premiums.