While the Affordable Care Act has been denounced by its opponents as a radical transformation of the U.S. health care system, the landmark health law largely mirrored existing programs.
In addition to expanding Medicaid, the ACA set up the Obamacare marketplace, where people can purchase subsidized private health plans, just as seniors have been able to do through the Medicare Advantage marketplace for years.
However, the Medicare Advantage marketplace has been far less controversial and has functioned far better than its ACA counterpart. Premiums have not grown as quickly and participation by insurers has been stabler.
While premiums for the Obamacare marketplace have risen more than 20 percent since 2014, MA premiums have only gone up about half as much.
Why has the MA marketplace performed better? That’s a question that the Robert Wood Johnson Foundation examined in a recently-released study.
For starters, MA beneficiaries are far less “price-sensitive” than Obamacare enrollees, the study authors write. That’s because Medicare plans are more heavily subsidized and because Medicare beneficiaries come from every income segment, whereas ACA enrollees are disproportionately low-income.
“Thus, (MA) insurers do not have to be one of the two lowest-premium options to gain significant market share,” says the study.
The MA market is also much bigger, representing 19 million enrollees, more than twice the ACA marketplace enrollment of roughly 9 million. The potential for the MA market to grow is enormous, since it only currently accounts for one-third of the overall Medicare population.
Furthermore, MA premiums are based on per capita spending benchmarks established by the traditional Medicare program.
“Medicare Advantage plans know the benchmark before they submit their bids to the program, so these insurers can easily set their premiums low enough to command some market share,” says the study. “The ACA links its premium tax credits to the premium of the second-lowest-cost silver plan available in the area, introducing much more uncertainty about the benchmark premium year over year and forcing insurers to compete aggressively on price in order to earn enough market share to make participation worthwhile.”
Medicare Advantage plans also benefit from the fact that seniors are far less likely to forgo insurance completely than the non-seniors that ACA plans are competing for. That’s due to the simple fact that as people age, their medical needs increase.
Finally, Medicare’s risk-adjustment program is far more favorable to MA insurers than the ACA’s program has been to Obamacare plans. That was true even before the ACA risk adjustment corridor program was gutted in a provision authored by Sen. Marco Rubio, R-Fla, that was included in a 2015 Congressional budget deal.
Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.
Your access to unlimited BenefitsPRO content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking benefits news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
