Currently Viewing:
The American Journal of Managed Care February 2018
Community Navigators Reduce Hospital Utilization in Super-Utilizers
Michael P. Thompson, PhD; Pradeep S.B. Podila, MS, MHA; Chip Clay, MDiv, BCC; Joy Sharp, BS; Sandra Bailey-DeLeeuw, MSHS; Armika J. Berkley, MPH; Bobby G. Baker, DMin, BCC; and Teresa M. Waters, PhD
Cost-Effectiveness of Collaborative Care for Depression and PTSD in Military Personnel
Tara A. Lavelle, PhD; Mallika Kommareddi, MPH; Lisa H. Jaycox, PhD; Bradley Belsher, PhD; Michael C. Freed, PhD; and Charles C. Engel, MD, MPH
Data Breach Locations, Types, and Associated Characteristics Among US Hospitals
Meghan Hufstader Gabriel, PhD; Alice Noblin, PhD, RHIA, CCS; Ashley Rutherford, PhD, MPH; Amanda Walden, MSHSA, RHIA, CHDA; and Kendall Cortelyou-Ward, PhD
Currently Reading
ACA Marketplace Premiums and Competition Among Hospitals and Physician Practices
Maria Polyakova, PhD; M. Kate Bundorf, PhD, MBA, MPH; Daniel P. Kessler, JD, PhD; and Laurence C. Baker, PhD
Leveraging Benefit Design for Better Diabetes Self-Management and A1C Control
Abiy Agiro, PhD; Yiqiong Xie, PhD; Kevin Bowman, MD; and Andrea DeVries, PhD
Development of a Tailored Survey to Evaluate a Patient-Centered Initiative
Marcy Winget, PhD; Farnoosh Haji-Sheikhi, MS; and Steve M. Asch, MD, MPH
Claims-Based Risk Model for First Severe COPD Exacerbation
Richard H. Stanford, PharmD, MS; Arpita Nag, PhD, MBA, MS; Douglas W. Mapel, MD; Todd A. Lee, PhD; Richard Rosiello, MD; Michael Schatz, MD; Francis Vekeman, MS; Marjolaine Gauthier-Loiselle, PhD; J.F. Philip Merrigan, PhD; and Mei Sheng Duh, ScD
Impact of Telephonic Comprehensive Medication Reviews on Patient Outcomes
Evan A. DeZeeuw, PharmD; Ashley M. Coleman, PharmD; and Milap C. Nahata, PharmD, MS
Variation in Markups on Outpatient Oncology Services in the United States
Angela Park; Tim Xu, MD, MPP; Michael Poku, MD, MBA; James Taylor, MBBChir, MPH, MRCS(Eng); and Martin A. Makary, MD, MPH

ACA Marketplace Premiums and Competition Among Hospitals and Physician Practices

Maria Polyakova, PhD; M. Kate Bundorf, PhD, MBA, MPH; Daniel P. Kessler, JD, PhD; and Laurence C. Baker, PhD
Premiums in federally facilitated Affordable Care Act Health Insurance Marketplaces are higher in geographic areas with more concentrated hospitals and physician practices and fewer insurers.
ABSTRACT

Objectives: To examine the association between annual premiums for health plans available in Federally Facilitated Marketplaces (FFMs) and the extent of competition and integration among physicians and hospitals, as well as the number of insurers.

Study Design: We used observational data from the Center for Consumer Information and Insurance Oversight on the annual premiums and other characteristics of plans, matched to measures of physician, hospital, and insurer market competitiveness and other characteristics of 411 rating areas in the 37 FFMs.

Methods: We estimated multivariate models of the relationship between annual premiums and Herfindahl-Hirschman indices of hospitals and physician practices, controlling for the number of insurers, the extent of physician–hospital integration, and other plan and rating area characteristics.

Results: Premiums for Marketplace plans were higher in rating areas in which physician, hospital, and insurance markets were less competitive. An increase from the 10th to the 90th percentile of physician concentration and hospital concentration was associated with increases of $393 and $189, respectively, in annual premiums for the Silver plan with the second lowest cost. A similar increase in the number of insurers was associated with a $421 decrease in premiums. Physician–hospital integration was not significantly associated with premiums.

Conclusions: Premiums for FFM plans were higher in markets with greater concentrations of hospitals and physicians but fewer insurers. Higher premiums make health insurance less affordable for people purchasing unsubsidized coverage and raise the cost of Marketplace premium tax credits to the government.

Am J Manag Care. 2018;24(2):85-90
Takeaway Points

Do insurers pass on higher prices to health plan customers for the services of more consolidated providers? There is little empirical evidence on this issue in the context of the Health Insurance Marketplaces established by the Affordable Care Act (ACA). We provide evidence consistent with the idea that provider market power may be an important driver of plan costs in ACA markets. Moreover, our results suggest that the role of provider market power in the price of health insurance may be more important than the degree of competition among insurance companies, which has received more attention.
  • ACA health plans were more expensive in areas with concentrated providers.
  • Provider concentration may be as predictive of health plan prices as insurer competition.
Premiums for health insurance offered through the Affordable Care Act (ACA)’s Health Insurance Marketplaces (HIMs) vary substantially across the country.1-4 Differences in health insurance premiums throughout geographic areas affect not only the affordability of coverage for individuals, but also the cost of ACA coverage to the government because government subsidies for relatively low-income families are linked to premiums.

Researchers have documented that premiums are lower in marketplaces with greater competition among insurers.5-8 The effect of competition among healthcare providers on premiums for Marketplace plans, however, has received less attention. Increasing consolidation among and integration between physicians and hospitals have led to higher prices for physician and hospital services.9-12 If insurers pass on these higher prices to consumers in the form of higher premiums, greater concentration in provider markets could lead to higher premiums in the Marketplaces. Although a recent case study of Marketplaces in New York and California provided preliminary evidence that hospital competition may be related to Marketplace premiums,13 there is no systematic evidence on whether differences in the structure of provider markets contribute to geographic variances nationwide in the premiums for Marketplace plans. This market is an important new setting in which to examine the relationship between provider concentration and plan premiums due to the relatively widespread offering of narrow network plans.14

In this paper, we examined whether the concentration of local hospital and physician markets, the degree of physician–hospital integration, and the number of insurers were related to the premiums for 2015 plans sold on the Federally Facilitated Marketplaces (FFMs).

METHODS

Data on Marketplace Premiums

We used publicly available data from the Center for Consumer Information and Insurance Oversight (CCIIO) on annual premiums for each plan available in 2015 on the FFMs.15 All plans on the Marketplaces are classified according to their metal level (Bronze, Silver, Gold, or Platinum), which corresponds to the actuarial value of the plan. We focused our analysis on the premiums of the second-lowest-cost Silver plan (SLCSP) and of the overall lowest-cost plan (LCP) of any metal level (excluding Catastrophic plans) in each rating area. Within a demographic group, insurers must charge the same premium for a given plan within a rating area. Rating areas are typically a collection of counties defined by states. We included all 411 rating areas for the FFMs in 37 states. The premiums in our sample did not include any means-tested subsidies or tax credits.

The SLCSP, the benchmark for setting federal subsidies for insurance purchases, is likely to be a focus of many consumers. The LCP is also likely to attract many consumers; research on the choice of health insurance plans shows that individuals tend to place too much emphasis on the role of premiums relative to other plan characteristics and disproportionately enroll in the lowest-premium plans.16 Although plans may vary premiums by enrollee age, family structure, and smoking status, we limited our analysis to 1 rate category for each plan: a 50-year-old nonsmoker buying individual, rather than family, coverage.

Measures of Provider Competition and Vertical Integration

For each rating area, we developed measures of hospital and physician competition and the degree of vertical integration between physicians and hospitals. Following previous work, we computed a Herfindahl-Hirschman Index (HHI) for hospitals and physicians.10,11 The HHI is a standard measure used by the Federal Trade Commission (FTC) and Department of Justice (DOJ) to assess competition.17-19 HHIs range from near 0 to 1. They are low in markets served by many providers, signaling a more competitive market, and reach the maximum of 1 in a monopoly market served by a single provider.

To develop a rating area–level measure of hospital HHI, we first calculated for each hospital an admission-weighted average of the HHIs of the patient zip codes that it serves, based on Medicare claims and enrollment data for a 100% sample of traditional Medicare beneficiaries in 2011. Using the same data, we then identified the set of hospitals used by patients in each rating area and computed an admission-weighted average of the HHIs of the hospitals serving a rating area. Our hospital competition measures did not, at any point in their construction, assume that patients residing in a given rating area use only hospitals in that rating area. We accounted for hospital system structures when constructing the HHI measure by assuming that hospitals within a system bargain jointly; in addition, we controlled for the differences in the prevalence of hospital systems across rating areas in the regression specifications.

We used an analogous approach for creating measures of physician competition.11,20 We defined physician practices as sets of physicians reporting the same specialty who billed Medicare under the same tax ID, meaning that they are part of the same financially integrated organization.11,20-24 For each practice–specialty combination, we calculated a Medicare payment–weighted average of the HHIs of the patient zip codes it serves based on patient flows observed in Medicare data. To derive a single physician HHI at the rating area level, we computed the Medicare payment–weighted average of the specialty-specific HHIs of all practices used by patients in each rating area.

We constructed a rating area–level measure of vertical integration between physicians and hospitals using data from the American Hospital Association’s 2011 survey of hospitals, in which hospitals reported information about their relationships with physicians.10 We identified hospitals that reported participating in fully integrated physician organizations, closed physician–hospital organizations, open physician–hospital organizations, and independent practice associations. For each hospital, we constructed an admission-weighted average of the patient zip code–level market shares held by hospitals of each type using the Medicare claims and enrollment data described above. Using these same data, we then computed for each rating area an admission-weighted average of the density of each type of vertical integration facing each hospital serving the area. For analysis, we summed the shares of the 4 types of integration to construct 1 summary measure of the prevalence of vertical integration in the markets of hospitals used by patients residing in each rating area. This measure varied from 0% to 100%, increasing with the prevalence of patients using hospitals participating in vertically integrated arrangements. Greater detail on each measure is available in other studies.10,11

Statistical Analysis

To examine the relationship between Marketplace premiums and provider market power, we estimated cross-sectional regressions in which each observation was a plan/rating area combination. The dependent variable was the premium for either the SLCSP or the LCP as defined above. The independent variables of interest included hospital and physician HHIs, number of insurers, and degree of vertical integration between physicians and hospitals. The models included continuous measures of these variables. We found no important differences from using less parametric specifications of market structure.

The models also included controls for other characteristics of the health plans and rating areas. The health plan controls included measures of plan type, cost sharing, provider coverage, and offering of chronic condition management.15 (The eAppendix [available at ajmc.com] includes a complete list of these variables.) We used Medicare claims and the American Hospital Association 2011 survey of hospitals to construct other rating area measures of hospital market characteristics in the same way that we constructed rating area densities of vertical integration. We used county-level Area Resource File data to calculate rating area population characteristics and controlled for variations in practice costs using the Medicare geographic practice cost index. Finally, we used the information about FFM health insurance plans released by CCIIO to calculate the number of insurance companies and issuers (see eAppendix for details of how insurance company was defined) competing in the Marketplaces in each rating area. The models also included state indicators in order to control for other characteristics of the states, such as the regulatory climate, insurance market features, and any state-specific provider and population characteristics.

We used the estimated coefficients from the multivariate models to compute the predicted changes in premiums that would result from moving from the 10th to the 90th percentile of hospital and physician HHI, the number of insurers, and the extent of vertical integration. For statistical inference, we used standard errors clustered at the plan level to allow for unobserved differences within plans across rating areas. The eAppendix reports several robustness checks, including results from models that include the average premium of all plans offered in each rating area, metropolitan and nonmetropolitan rating areas, and Marketplaces from all states, rather than only FFMs, but with fewer controls for plan characteristics. The Stanford University Review Board reviewed the study protocol and granted a waiver of consent.

RESULTS

The average annual premium (for a nonsmoking individual aged 50 years) across all 4580 plans in the dataset was $5378 (SD = $1443). The average premium was $4718 (SD = $784) for the SLCSP and $3651 (SD = $656) for the LCP.

The markets for both hospital and physician services were, on average, relatively highly concentrated in the geographic areas that we studied. The average hospital HHI across the 411 rating areas was 0.56 (SD = 0.14), and the average physician practice HHI was 0.41 (SD = 0.09). The FTC and DOJ typically consider markets with HHIs above 0.25 to exhibit a high degree of concentration. The average of our vertical integration measure was 0.56 (SD = 0.28), indicating that, on average, 56% of patients used hospitals that participated in vertically integrated arrangements.

Although relatively high on average, the extent of provider market concentration varied across rating areas (Table). The hospital HHI averaged 0.38 at the 10th percentile and 0.70 at the 90th percentile rating area. The physician HHI measure was slightly less variable: 0.27 and 0.50, respectively. The extent of vertical integration was highly variable across markets, ranging from 0.06 at the 10th percentile to 0.89 at the 90th percentile.

 
Copyright AJMC 2006-2018 Clinical Care Targeted Communications Group, LLC. All Rights Reserved.
x
Welcome the the new and improved AJMC.com, the premier managed market network. Tell us about yourself so that we can serve you better.
Sign Up
×

Sign In

Not a member? Sign up now!