Consumers find incentive to switch plans when net premiums change

A greater fraction of marketplace enrollees on a county-wide scale switched plans in 2016 when average premiums increased, as well as individually switched when the net premium of their 2015 plan increased by more than the benchmark premium. The results suggested that consumer primarily responded to net premiums, rather than to gross premiums, when making plan selections in 2016, according to an HHS Office of the Assistant Secretary for Planning and Evaluation (ASPE) research brief. To explore whether consumers responded to changes in net or gross premiums when making health plan choices in the 2016 ACA marketplaces, the ASPE conducted two sets of analyses, one based on comparing counties and one based on comparing individuals.

Previous modeling by the ASPE had assumed that consumers make their plan choices based on their expected premiums net of tax credits. However, the ASPE noted that with public reporting of premium growth, especially via mass media, the reporting usually failed to take into account premium tax credits. As a result, it was possible that increases in gross premiums could have an effect on consumers’ eventual plan choice.

Counties. There were large variations in rates of premium growth between 2015 and 2016, both in average premiums and benchmark premiums. According to the ASPE brief, the county-level switching rate was highly sensitive to changes in average premiums and was sensitive only to a small degree to changes in average premiums net of changes in benchmark premiums in 2016.

For instance, in 2016, the average county-level switching rate was 21.5 percent. The switching rate was substantially higher, in counties in which average premiums increased by $50 but benchmark premiums did not change—about 9.8 percentage points higher. In contrast, the switching rate was only 3.0 percentage points higher in counties in which both average and benchmark premiums increased by $50.

Consumers. Consumers also had large variation in how much the gross premium of their 2015 plan increased in 2016 and in how much the premium, net of tax credits, of their 2015 selected plan increased in 2016. What the ASPE found was that consumers switched plans in 2016 based on changes in net premiums and not on changes in gross premiums. In 2016, the average individual-level switching rate was 21.5 percent. The results show that the switching rate was substantially higher—7.4 percentage points higher—among individuals whose net premiums increased by $50, but not higher among those whose gross premiums increased but whose net premiums did not change.

SOURCE: ASPE Brief, January 18, 2017

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