A Comparison of Health Risk and Costs Across Private Insurance Markets

Abstract

Background: The Patient Protection and Affordable Care Act (PPACA) established new parameters for the individual and small group health insurance markets starting in 2014. We study these 2 reformed markets by comparing health risk and costs to the more mature large employer market. Study Data: For 2017, claims data for all enrollees in PPACA-compliant individual and small group market plans as well as claims data from a sample of large employer market enrollees. Variables and Methodology: Risk scores and total (unadjusted and risk-adjusted) per-member-per-month (PMPM) allowed charges. Differences across markets in enrollment duration, age, and geographic distribution are addressed. The analysis is descriptive. Results: Compared with large employer market enrollees, health risk was 3% lower among PPACA small group market enrollees and 20% higher among PPACA individual market enrollees. After adjusting for differences in health risk, enrollees in the PPACA individual market had 27% lower PMPM allowed charges than enrollees in the large employer market and enrollees in the PPACA small group market had 12% lower PMPM allowed charges than enrollees in the large employer market. Conclusions: On average, the PPACA individual market enrolls sicker individuals than the 2 group markets. But this does not translate to higher health costs; in fact, enrollees in the PPACA individual market accumulate lower allowed charges than enrollees in the large employer market. Lower-income enrollees particularly accumulate lower allowed charges. Narrower networks and increased enrollee cost-sharing among individual market plans, though they may reduce the value of coverage, likely significantly reduce allowed charges.

How price and quantity factors drive spending in nongroup and employer health plans

“…We extend those studies by analyzing a broader set of services and comparing across all nongroup market segments. Another study by Lissenden et al that compared spending in the employer and nongroup markets showed that nongroup enrollees have greater health risk than enrollees in employer markets 14 . We show that the greater health risk in the nongroup market is driven by on‐exchange enrollees and isolate the contribution of prices, plan generosity, health risk, and other factors to spending differences in more granular nongroup and employer market segments.…”

“…Another study by Lissenden et al that compared spending in the employer and nongroup markets showed that nongroup enrollees have greater health risk than enrollees in employer markets. 14 We show that the greater health risk in the nongroup market is driven by on-exchange enrollees and isolate the contribution of prices, plan gen- Other work consistently finds very small price differences between private Medicare Advantage plans and the Medicare fee-forservice program. 16,17 Researchers generally attribute those small differences to regulations that cap out-of-network prices in Medicare Advantage plans at Medicare fee-for-service prices while prohibiting balance billing and to the presence of Medicare fee-for-service as a viable alternative to Medicare Advantage.…”

Drivers of Individual and Regional Variation in CMS Hierarchical Condition Categories Among Florida Beneficiaries

“…Operationally, optimizing electronic medical record functions and educating providers leads to more accurate condition coding and, subsequently, more appropriate compensation for quality care. 5 , 8 , 22 , 23 Consistent, accurate coding should reduce individual-level variation in HCC risk scores, particularly for lifetime and clinically manageable preventable conditions. While risk scores are likely to vary with treatable condition diagnoses, variation driven by those treatable conditions that are preventable or HCCs that indicate worsening or persistent severity point to opportunities for improved care.…”

“…CMS HCC risk scores can range from 0 to 20; the values in our study were between 0.28 and 16.93. 1 Prior research explored the limitations of the HCC risk score, including the model's reliance on provider coding, [5][6][7][8][9] low predictability of actual expenditures, [10][11][12][13][14] and susceptibility to increasing overall CMS cost if beneficiaries join Medicare Advantage (MA) plans. [15][16][17] Studies note that significant variation exists in HCC risk scores at the individual and regional levels.…”

How does health spending among demographic groups compare to Affordable Care Act premium regulations?

“…For example, mounting evidence, based on more limited claims data or simulation models, suggests that lowering the age of Medicare eligibility might increase nongroup premiums (Blue Cross Blue Shield Association, 2021; Eibner et al, 2019;Kotecki & Westrom, 2020), contrary to expectation before the ACA (Yamamoto, 2013). Moreover, prior research has found that nongroup enrollees tended to be at higher risk for medical spending compared with other private market enrollees yet spent less conditional on their risk score (Lissenden et al, 2020;Pelech & Stockley, 2022), and that, within the nongroup market, high-risk recipients of CSRs have relatively low spending (Treasure et al, 2023).…”