The reason for high premiums in Obamacare is simple: There wasn't enough carrier participation.
Economists Leemore Dafny, Jonathan Gruber and Christopher Ody draw that conclusion in a paper for the National Bureau of Economic Research.
For example, had UnitedHealthcare, the country's largest carrier, participated and offered plans through the federal exchange—and more in other exchanges—prices would have been a great deal less. Researchers calculated that if UnitedHealth participated in markets where it already sold individual policies, premiums for silver plans would have been 5.4 percent less.
And if all carriers who sold individual insurance policies in 2011 had participated in all ratings areas in that state's exchange, average premiums for silver plans would have been 11.1 percent less.
That competition also would have saved taxpayers $1.7 billion in federal subsidies.
Overall, “these results suggest that additional competitors can have a large impact on premiums and federal subsidies for HIM plans,” the report said.
The economists focused on silver plans, which are important as they determine the size of premium tax credits available in each area. They also are the most popular plan among enrollees.
Big-name carriers—including UnitedHealth, Aetna, Cigna and Humana—proceeded with caution on the exchanges in their first year of operation, limiting their participation. Their leeriness was only exacerbated by the exchanges' faulty launch in the fall.
But more carriers said they plan to increase participate in 2015, which, researchers say, could keep premiums in check.
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