The colder weather has us zipping up our winter coats, and we’ve been hit with a blizzard of health policy research. This month, we reviewed studies about insurer participation in the Affordable Care Act (ACA) marketplaces, how private equity ownership of air ambulances impacts surprise billing, and the potential impact of pending legislation to fill the Medicaid “coverage gap” on hospital finances.

David M. Anderson and Kevin N. Griffith, Increasing Insurance Choices In The Affordable Care Act Marketplaces, 2018-21, Health Affairs, November 2021. Researchers evaluated trends in county-level insurer participation in the ACA marketplaces from 2016 to 2021.

What it Finds

• Researchers found an increase in the number of insurers for a majority of counties studied:
  • The number of insurers grew in 1,986 counties (accounting for 66 percent of the US population under age 65); only 12 counties studied saw a decrease.
  • The number of counties with monopolist insurers (insurers that dominate a certain geographic market) decreased from 1,616 in 2018 to 294 in 2021. In 2021, only Alabama had one insurer serving the majority of the state.
  • Growth occurred disproportionately in counties that had fewer marketplace insurers in 2018.
• Counties that gained insurers from 2018 to 2021 were more likely than counties that did not gain insurers during this period to have: a limited number of insurers or a monopolist insurer in 2018; a loss of insurers from 2016 to 2018, and a Republican state government. They were also more likely not located in a state that had expanded Medicaid and/or had a state-based marketplace.
• At the time of the study’s publication in 2021, out of the 121 insurers participating in the marketplace, 10 had newly entered between 2019-2021 and 38 of the already existing insurers had expanded into new markets after 2018.
• Despite this growth, insurer participation in the ACA marketplaces is still far below its peak in 2015.
• Looking forward, the researchers predict that marketplaces will be “both stable and profitable” over the next several years, highlighting the Biden administration’s support for the ACA.

Why it Matters

Increased insurer participation in the marketplace generates competition, which can lead to lower premiums that benefit consumers. As the researchers note, limited insurer participation in the marketplaces has been associated with faster premium increases as well as a reduction in enrollment, reducing access to affordable coverage. The study explores the characteristics of the counties that gained insurers participating in the marketplace, suggesting counties experiencing insurer exits from 2016 to 2018 benefited from the entrants in the years since. It also shows that many insurers that were already active in the counties studied have expanded into new markets. The data confirms that the marketplaces have seen a steady rebound from 2018, when financial trouble and political uncertainty led to an all-time low in insurer participation, and signals that under a supportive administration, the stability and profitability is likely to persist for the next few years.

Loren Adler, Conrad Milhaupt, Bich Ly, and Erin Trish, Private equity-owned air ambulances receive higher payments, generate larger and more frequent surprise bills, Brookings, November 16, 2021. The No Surprises Act (NSA), which goes into effect January 1, 2022, aims to protect patients from enormous bills stemming from common out-of-network care episodes, including air ambulance transports. This study compares the operational structures of air ambulances owned by private equity or publicly traded companies with air ambulances owned by hospitals, nonprofits, and independent companies.

What it Finds

• Air ambulance transports provided by private equity or publicly traded companies averaged a standardized allowed amount (the maximum amount a plan will pay for a service) of $32,051 for 2016 and 2017, 60 percent higher than the average allowed amount of for rides provided by hospitals, nonprofits and independent companies, and 5.6 times the Medicare rate.
• Rides delivered by private equity/publicly traded providers from 2014 to 2017 were significantly more likely to be out-of-network: 89 percent of these rides were designated out-of-network for patients, while 59 percent of rides provided by other provider types were out-of-network.
• The authors estimated that 55 percent of air ambulance transports delivered by private equity/publicly traded companies could have led to a balance bill in 2017, compared to 29 percent of transports provided by other provider types. In addition to being more frequent, a potential balance bill from rides provided by private equity/publicly traded companies is more expensive, rising to an average of $26,507 in 2017. The corresponding average amount was $15,671 for other provider types.
• The researchers also anticipated how implementation of the NSA could affect air ambulance payments (which impact health insurance premiums, even if patients are protected from balance bills under the new law). For instance, if the legal arbitration process used to resolve payment disputes between insurers and providers generally aligns with the Qualifying Payment Amount (QPA)—a plan’s median contracted rate—then the authors expect prices to decrease (or at least not increase further).

Why it Matters

The high air ambulance costs cited in this study underscore the importance of the NSA’s protections against balance bills. Consumers typically do not have a choice among providers when they need ambulance transport, and the high charges resulting from rides provided by private equity/publicly traded companies may leave them exposed to exorbitant bills. The analysis also raises questions for policymakers and stakeholders about effective implementation of the NSA; the authors warn that, if arbitration outcomes do not align with the QPA, the frequency and price of bills arising from private equity-owned air ambulances may skew prices for emergency transport even higher, raising health costs and subsequently premiums.

Matthew Fielder, How would filling the Medicaid “coverage gap” affect hospital finances? Brookings, November 4, 2021. One important health policy proposal currently on the table in Congress is the Build Back Better Act’s (BBB) provision to fill the Medicaid “coverage gap” by expanding ACA marketplace eligibility and financial assistance to those under 138 percent of the federal poverty level. This study examines the potential impact of this policy on hospital finances.

What it Finds

• Based on the author’s projection that 5.8 million people will enroll in the coverage gap program, the author estimated that in coverage gap states, hospital margins would improve by a net amount of $11.9 billion in 2023 if the BBB provision is enacted, while a federal Medicaid plan—included in an earlier proposal—would have improve hospital margins by $3.6 billion, as the federal plan would likely pay significantly less than marketplace plans.
• Hospitals will be paid for services they already provide but don’t get paid for, namely emergency care. Based on estimates of what marketplace insurers would pay hospitals for these services, the author predicts a $12.9 billion increase in hospital margins from reductions in uncompensated care under the BBB proposal.
• As more people gain coverage through marketplace expansion, hospital utilization will likely increase, generating an estimated $2.2 billion in new profits.
• While the author projects that the BBB’s coverage gap program would have a net positive impact on hospital finances, it would also decrease certain revenue sources:
  • Some people may switch from higher-paying private insurance plans, such as employer plans, to marketplace plans to take advantage of lower premiums; the author predicts hospitals could see a decrease in revenue of around $1.5 billion from these changes.
  • Another potential revenue loss for hospitals where the coverage gap solution would take effect is a $1.7 billion decrease in Medicare disproportionate hospital share (DHS) payments currently used to reimburse hospitals for portions of uncompensated care costs (because payments are calculated by the uninsured rate and uncompensated care costs, which would decrease under the BBB proposal). In contrast, states that have already expanded Medicaid would see a $0.7 billion increase in DSH payments (based on a lower share of uncompensated care being provided in non-expansion states).

Why it Matters

This analysis prompts us to think through the downstream effects of (much needed) health policy changes, like filling the coverage gap. Hospital finances impact the rates paid by insurers, and higher rates are ultimately reflected in higher coverage costs for patients. Private insurers generally pay higher rates for hospital services than public programs. As the BBB proceeds through Congress, the author points out that policymakers have leeway to redistribute some of the money projected to flow into hospital budgets under the proposed coverage gap solution to further improve the affordability and accessibility of the marketplace coverage gap program, without leaving hospitals worse off than before.