Association for Public Policy Analysis & Management

This paper analyzes issuer incentives and decisions regarding benefit design among the 2014, 2015, and 2016 plans sold through the Affordable Care Act's (ACA) Federally-facilitated Marketplace. The ACA provisions regarding private health insurance market reforms predominantly affect health insurance offered in the nongroup and small group markets. These reforms establish minimum requirements with respect to access to coverage, premiums, benefits, and cost-sharing - collectively health insurance plan benefit design. For example, health insurance plans offered in the ACA Marketplaces are required to cover a core package of health care services, known as the essential health benefits. The ACA also imposes limits on cost sharing and prohibits plans from applying lifetime and annual dollar limits. Moreover, plans offered in the Marketplaces must meet minimum actuarial values which are indicated by four metal tiers: bronze, silver, gold, and platinum.

The market reforms as well as the metal tiers are designed to enable consumers to make apples-to-apples comparisons among their health insurance plan options. Nevertheless, insurers offering plans in the Marketplaces are experimenting with benefit designs. While the ACA does prohibit discrimination through plan design, insurers may utilize various benefit design features to signal value or incentivize positive behaviors. These features include cost-sharing, network size and scope, visit limits, and benefits substitution. Accordingly, while consumers are able to compare plans among the metal tiers, the plan benefit design within the metal tier may greatly vary from plan to plan.

We first examine key plan design features of the plans offered in the Marketplaces, focusing on deductibles and provider networks, using publicly available information on plan characteristics from the HealthCare.gov plan landscape files as well as provider network information submitted by plans to the Centers for Medicare & Medicaid Services. We analyze how benefits have changed over time and how insurer decisions regarding these changes vary with local market conditions, geographic area, and plan actuarial value. Additionally, by examining actual enrollment in these plans based on HHS administrative data, we determine whether certain benefit designs attract certain types of consumers. Finally, we use this administrative data to assess consumer plan choice and willingness to pay for benefits such as lower deductibles and broader provider networks.