Which Health Exchanges Have the Lowest Premiums?
Some states run their own insurance exchanges, while others leave it up to the federal government. A new study shows which model is cheapest for consumers.
The way states run the health exchanges where they sell insurance policies under the Affordable Care Act have varied widely since the start, raising questions about whether a particular model would eventually overtake the others. A new study from the journal Health Affairs argues that one type consistently has the lowest premiums.
The journal found that states operating their own exchanges but taking a hands-off approach had lower premiums for 2015 than other state-based exchanges and those operated by the federal government.
There are essentially four types of health exchanges, two of which are directed by states and two of which leave the federal government in control.
1. Active Purchaser: A state-based exchange that directly negotiates with insurers over premiums, doctor networks, benefits and other aspects of plans sold in the marketplace.By Health Affairs’ count (it differs from other sources), active-purchaser states include California, Connecticut, Kentucky, Maryland, Massachusetts, Nevada, New York, Oregon, Rhode Island and Vermont.
2. Clearinghouse: A state-based exchange that establishes basic criteria and allows any plan that meets those benchmarks to be sold in the marketplace. Six states and the District of Columbia operate a state-based clearinghouse, including Colorado, D.C., Idaho, Hawaii, Minnesota, New Mexico and Washington.
3. Federal Partnership Exchange: The federal government runs the web site where people buy insurance, but the state exercises some control over plan management or consumer outreach, the same way state-based exchanges do. This includes 15 states, though some don't have official partnership status with HHS.
4. Federally Facilitated Exchange: The federal government operates all major functions of the exchange. This includes 19 states.
Using publicly available premium data and other sources, Health Affairs found state-based clearinghouse models had lower premiums compared with active-purchaser states, partnership states and federally-facilitated states. The journal found no difference between federally faciliated exchanges and federal partnership exchanges.
Policies from all exchanges come in four levels, with the lower ones costing less in monthly premiums with higher cost-sharing when someone seeks medical care. The lowest is bronze, followed by silver, gold and platinum, which Health Affairs didn’t score because of inconsistencies in availability. The premiums collected by the journal were based on a 29-year-old non-smoker who earns too much to be eligible for subsidies that offset the cost of premiums.
The lowest-cost bronze plans in state-based clearinghouses average $157.53 per month versus $179.49 in active-purchaser states; $196.92 compared with $225.37 for the lowest-cost silver plans; $205.30 versus $245.27 for the second lowest silver plan; and $233.96 compared with $266.91 for the lowest-cost gold plan.
Looking at differences between clearinghouse states and federal exchange states, the lowest-cost silver plan was $196.92 compared with $229.87 in partnership exchanges and $224.02 in federally facilitated exchanges.
The study’s authors acknowledged some limitations in their work. While they used state-level economic, demographic and market data as control variables, they didn’t fully account for minute differences across the multitude of insurance rating areas in states. They also used a specific, 29-year-old age group for consistency, though they maintain that the data can be generalized for other populations.