Insurance Market Reform

A number of states have recently released information on what premiums will be in the individual insurance market in 2014, when significant changes in that market take effect due to the Affordable Care Act (ACA). However, these premiums are in effect “sticker prices” that many people will not pay because they will be eligible for federal tax credits under the ACA to offset the cost of insurance. In this data note, we explain how the tax credits will work and estimate how much premium assistance people now buying their own insurance will be eligible for in 2014.

On July 1, 2013, HHS issued final implementing regulations that specify which individuals may be eligible for exemptions from the Shared Responsibility penalty payment, a special tax established under the Affordable Care Act (ACA) that applies to non-exempt individuals who have access to affordable insurance but fail to purchase it. The final rule also explains the role of Exchanges in granting “certificates of exemption” from the penalty payments, and identifies the range of health benefits that the government will consider as satisfying the Act’s “minimum essential coverage” rule. The final rule shows some, but not a lot, of changes from its original proposed form. This update summarizes the highlights of the final rule.

A goal of the ACA is to increase competition and transparency in the markets for individual and small group insurance, leading to higher quality, more affordable products. To date, this proposition has largely been based on theory. However, information on proposed premiums in the individual and small group markets has recently been made available by selected states, and it is now possible to move from theoretical arguments to data-driven analysis. This research brief analyzes proposed rates in the individual market for 2014 in the eleven states that have made information available, and compares these rates to those estimated by the Congressional Budget Office (CBO). 

One of the objectives of the Affordable Care Act (ACA) reform of the nongroup insurance market, including new market and rating rules and reliance on public health insurance exchanges, is to enhance competition. More competing health plans increases consumer choice, as well as the market pressure on health plans to manage administrative costs, improve their service and contract with clinical providers at optimal rates. Especially in the context of health plans contracting selectively with providers in order to hold down payment rates, a choice of more health plans serves consumers well and signals a vibrant market. This brief, prepared by Wakely Consulting Group, provides an early indicator of the level of competition among health insurers that market reforms and state-based exchanges are generating.

Beginning in 2014, the Affordable Care Act (ACA) introduces major reforms, including the start of a new advance payment Premium Tax Credit designed to lower the cost of coverage for qualified families purchasing in the new Health Insurance Marketplaces (exchanges).  While employer-provided coverage receives significant tax preferences, tax credits for individual or non-group health insurance have not been used in a broad way. What’s more, the advanceable and refundable nature of these new tax credits introduce new elements that most consumers have not previously encountered. Taken together, these facts raise the possibility that consumer confusion might be a barrier to using this new program to enroll in affordable coverage.