The Impacts of the Affordable Care Act on the Individual Health Insurance Market

The passing of the Affordable Care Act in 2012 has revolutionized the health insurance industry in a number of ways and even its impacts have been vast. This Act shook up the individual health insurance marketplace and its impact is still felt in the health insurance marketplace. The Act was intended to reshape a dysfunctional healthcare system, as it included incentives for insurers to fairly handle risk and competition, irrespective of an individual’s income or medical history.

Due to the changes in the administration and policy, there was fluctuation in premium rates, enrollment, and insurer participation. It is mainly because the individual market serves as a protection for about 17 million Americans who are either heading for early retirements, are between jobs, or underinsured, then accessibility of these plans becomes important for them.

According to a market evolution analysis published, the policymakers were encouraged to continue to expand accessibility to ensure comprehensive coverage for patients and financial success for payers. With the passage of the Affordable Care Act, several new health insurers have forayed into the market. Even plans like Medicaid expanded their coverage to the individual market with the hope that lower premiums would enable them to grow their market share. For-profit national health insurers set the premium rates higher than competitors to avoid providing coverage to high-risk enrollees.

Due to the new entrants in the market, average premium rates were lower than expected. With some initial success, rates later on increased because grand-mothered plans and policies around risk-corridor programs were eliminated. Some plans had a higher risk-adjusted payment. Health plans were able to make much informed decision with data and knowledge growing, and the rates increased to account for carrying out additional analysis. Health insurers in urban areas had to keep premium rates low to stay competitive and health plans with smaller network providers had less negotiating power.

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Most of the health insurers reduced their network of participating providers to contain the costs. This created little threat to urban areas and a risk to people in rural areas already having a limited access to healthcare providers. However, the investment analysts said that the increase in premium rates was beneficial for the market because it allows to stabilize towards an equilibrium.

With the threat of ACA repeal, health insurers raise the premium amount in anticipation of lower enrollment. Till the year 2018, a very few health plans were active in the individual health marketplace due to the fear. Since the ACA was not repealed, participation, premium, and enrollment rates started to balance out again in 2019 and it further resettled in 2020.

The study also revealed that national statistics often hide the state-by-state impact of the changing policies. Some of the states regulate their own marketplace resulting in a slower rate of premium growth compared to federally run marketplaces.

However, the data of the individual market states that expanded coverage led to over 20 million people receiving care, among which many are low-income earners. The supplemental policies have allowed low-income people to be more financially stable and individuals with pre-existing conditions are no longer excluded from coverage.

Due to stable enrollment, participation has been maintained in the individual market, which means that several areas are exceeding the required enrollees numbers because of the financial success shown by them. The analysis also stated that challenges to affordability for people who do not qualify for a subsidy restrict access to individuals. This problem should be overcome by the state or federal-wide policy intervention that restrict the sale of short-term plans, expands subsidies, and encourage reinsurance to expand coverage options for individuals. This will also allow individual insurer to broaden their risk pool and promote financial success.

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