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.
Premiums for exchange plans were higher in rating areas with more concentrated provider markets (Table). The average annual premium for the SLCSP was $4330 in the rating areas with the least concentrated hospital markets (10th percentile), $5014 in areas with the most concentrated hospital markets (90th percentile), $4461 in the rating areas with the least concentrated physician markets, and $4873 in areas with the most concentrated physician markets. The patterns were similar for the relationship between premiums for the LCP and physician and hospital concentration. These differences are highly statistically significant. In unadjusted analyses, vertical integration was not statistically significantly associated with premiums.

Premiums for exchange plans and provider market concentration were positively correlated even after adjusting for an extensive set of plan- and market-level control variables. Figure 1 and Figure 2 present the predicted change in premiums from moving from the 10th to the 90th percentile of the respective market power measures, based on the coefficient estimates from the regression. A change from the 10th to the 90th percentile in the physician HHI was associated with a $393 increase in the annual premium for the SLCSP and a $386 increase in the annual premium for the LCP (P <.001). These changes were also economically significant, corresponding to about an 8% increase relative to the average premium for the SLCSP and a 10% increase relative to the average premium for the LCP. Hospital market power had a similar association with premiums, although the magnitude was approximately half as large. We did not find a statistically or economically significant relationship between premiums and the extent of vertical integration.

To provide context for the estimated premium changes associated with provider concentration, Figures 1 and 2 also report the adjusted association between the number of insurers participating in the rating area and premiums. Our point estimates were quite close to the estimates of insurer effects that have been reported in the previous literature.5-7 A change from the 10th to 90th percentile in the number of insurers participating in the rating area was associated with a $421 decrease in the annual premium for the SLCSP (P <.01) and a $449 decrease in the annual premium for the LCP (P <.001). These associations for insurers were comparable to the associations we observed for provider concentration. The association we observed for physician market concentration, in particular, is nearly as large as that for the number of insurers participating in the market.

DISCUSSION

Our study findings demonstrate that premiums for health plans in the ACA HIMs are higher in rating areas with less competition among physicians, hospitals, and insurers. These findings are consistent with research demonstrating that prices for hospital and physician services are higher in more concentrated markets. The findings suggest that insurers pass on these higher prices for healthcare services to consumers in the form of higher premiums for coverage.

Our results provide 1 potential explanation for the prevalence of narrow network plans on the insurance Marketplaces: the use of selective contracting to limit the impact of provider concentration on premiums by avoiding providers with the most market power. Our results suggest, however, that even if narrow networks were set up to limit the impact of provider market power, they were not sufficient to eliminate the association between provider market structure and premiums. Regulatory requirements to cover certain types of providers and services may have limited insurers’ ability to avoid costly providers. At the same time, beneficiaries’ muted price sensitivity due to the subsidization of Marketplace premiums may have limited insurers’ incentive to avoid costly providers. It is also possible that the development of narrow networks was more effective in negotiating lower prices for hospital than for physician services in concentrated markets, explaining the difference we observed in the effect of market concentration in the 2 sectors.

Although other studies have found that prices for hospital services are higher in markets with greater levels of physician–hospital integration, we did not find evidence that health plan premiums were higher in more integrated markets. We speculate that narrow networks may have been reasonably effective at avoiding or negotiating with vertically integrated providers and would provide 1 reason for why we do not find a strong association between premiums and vertical integration.

Limitations

Our study has several limitations. Our analyses are cross-sectional, and our estimates could be biased if unobserved characteristics of plans or rating areas correlated with both market competitiveness and premiums. For example, our controls did not include detailed measures of provider network breadth due to data limitations. In rating areas with higher provider concentration, insurers may be more likely to offer narrow networks, which would induce a downward pressure on premiums, biasing our estimates toward 0. Our models included an extensive set of control variables, including state fixed effects, but the possibility of bias due to omitted variables remains.

In addition, our measures of provider market structure were derived from 2011 Medicare claims data. The premiums we studied were largely set by summer 2014, leaving a lag of more than a year between the HHIs and the premiums and creating the possibility that our measures inaccurately characterized the market conditions in place when the premiums were set. Although market conditions evolve slowly, perhaps to the point that any bias from this lag would be small, we cannot rule out that measurement error from this source would cause us to underestimate the relationship between market characteristics and premiums. In particular, it is conceivable that the measurement error from the lag was more important for the vertical integration measure, which could be another reason for why our estimates of the effect of vertical integration were small and statistically insignificant.

The HHIs and vertical integration measures we used rely on patient flows observed in Medicare data. Medicare is one of the few sources of sufficiently detailed data to construct these types of measures, but these data may not represent the patient flows relevant to the non-Medicare market. We do expect that Medicare data will represent the majority of hospitals serving the under-65 market. Medicare claims also reflect care delivered by a very large share of active physicians, and the set of physicians who billed traditional Medicare should substantially overlap with the set of physicians providing services to privately insured patients. Nonetheless, this may also be a source of measurement error that could have caused us to understate the strength of the association between market characteristics and premiums.

CONCLUSIONS

Premiums for insurance offered in the FFMs were higher in markets with greater concentrations of hospitals and physicians and smaller numbers of insurers. Health insurance is less affordable for people purchasing unsubsidized coverage in these areas and is costlier to the government through subsidies in the form of Marketplace premium tax credits. To the extent that policy initiatives to promote coordinated care encourage the consolidation of providers or insurers, they may also have the unintended effects of making health insurance less affordable for consumers.

Acknowledgments

The authors thank Alan Jaske for outstanding research assistance.

Author Affiliations: Stanford University (MP, MKB, DPK, LCB), Stanford, CA; National Bureau of Economic Research (MP, MKB, DPK, LCB), Cambridge, MA.

Source of Funding: None.

Author Disclosures: Dr Kessler has provided expert testimony for insurers and hospitals and has received lecture fees for integrated delivery system executive education. The remaining authors report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

Authorship Information: Concept and design (MP, MKB, DPK, LCB); acquisition of data (MP, DPK, LCB); analysis and interpretation of data (MP, MKB, DPK, LCB); drafting of the manuscript (MP, MKB, DPK); critical revision of the manuscript for important intellectual content (MP, MKB, LCB); statistical analysis (MP); and supervision (MP).

Address Correspondence to: Maria Polyakova, PhD, Stanford University, Redwood Bldg, Rm T111, 150 Governor’s Ln, Stanford, CA 94305. Email: maria.polyakova@stanford.edu.
REFERENCES

1. Gabel JR, Whitmore H, Call A, Green M, Oran R, Stromberg S. Modest changes in 2016 health insurance marketplace premiums and insurer participation. The Commonwealth Fund website. commonwealthfund.org/publications/blog/2016/jan/2016-health-insurance-marketplace-premiums. Published January 27, 2016. Accessed January 10, 2018.

2. Sheingold S, Nguyen N, Chappel A. Competition and choice in the health insurance marketplaces, 2014-2015: impact on premiums. Office of the Assistant Secretary for Planning and Evaluation website. aspe.hhs.gov/basic-report/competition-and-choice-health-insurance-marketplaces-2014-2015-impact-premiums. Published July 30, 2015. Accessed January 10, 2018.

3. Burke A, Misra A, Sheingold S. Premium affordability, competition, and choice in the health insurance marketplace, 2014. Office of the Assistant Secretary for Planning and Evaluation website. aspe.hhs.gov/report/premium-affordability-competition-and-choice-health-insurance-marketplace-2014. Published June 18, 2014. Accessed January 10, 2018.

4. Graetz I, Kaplan CM, Kaplan EK, Bailey JE, Waters TM. The U.S. health insurance marketplace: are premiums truly affordable? Ann Intern Med. 2014;161(8):599-604. doi: 10.7326/M14-0757.

5. Dafny L, Gruber J, Ody C. More insurers lower premiums: evidence from initial pricing in the health insurance marketplaces. Am J Health Econ. 2015;1(1):53-81. doi: 10.1162/AJHE_a_00003.

6. Jacobs PD, Banthin JS, Trachtman S. Insurer competition in federally run marketplaces is associated with lower premiums. Health Aff (Millwood). 2015;34(12):2027-2035. doi: 10.1377/hlthaff.2015.0548.

7. Gabel JR, Whitmore H, Green M, Stromberg ST, Weinstein DS, Oran R. In second year of Marketplaces, new entrants, ACA “co-ops,” and Medicaid plans restrain average premium growth rates. Health Aff (Millwood). 2015;34(12):2020-2026. doi: 10.1377/hlthaff.2015.0738.

8. Trish EE, Herring BJ. How do health insurer market concentration and bargaining power with hospitals affect health insurance premiums? J Health Econ. 2015;42:104-114. doi: 10.1016/j.jhealeco.2015.03.009.

9. Gaynor M, Town RJ. Competition in health care markets. In: Pauly MV, Mcguire TG, Barros PP, eds. Handbook of Health Economics. Vol 2. Amsterdam, The Netherlands: Elsevier North-Holland; 2012:499-637.

10. Baker LC, Bundorf MK, Kessler DP. Vertical integration: hospital ownership of physician practices is associated with higher prices and spending. Health Aff (Millwood). 2014;33(5):756-763. doi: 10.1377/hlthaff.2013.1279.

11. Baker LC, Bundorf MK, Royalty AB, Levin Z. Physician practice competition and prices paid by private insurers for office visits. JAMA. 2014;312(16):1653-1662. doi: 10.1001/jama.2014.10921.

12. Dunn A, Shapiro AH. Do physicians possess market power? J Law Econ. 2014;57(1):159-193. doi: 10.1086/674407.

13. Scheffler RM, Arnold DR, Fulton BD, Glied SA. Differing impacts of market concentration on Affordable Care Act Marketplace premiums. Health Aff (Millwood). 2016;35(5):880-888. doi: 10.1377/hlthaff.2015.1229.

14. Polsky D, Weiner J. State variation in narrow networks on the ACA Marketplaces. Robert Wood Johnson Foundation website. rwjf.org/en/library/research/2015/08/state-variation-in-narrow-networks-on-the-aca-marketplaces.html. Published August 2015. Accessed January 10, 2018.

15. The Center for Consumer Information & Insurance Oversight. Health Insurance Exchange Public Use Files (Exchange PUFs). CMS website. cms.gov/cciio/resources/data-resources/marketplace-puf.html. Published 2015. Updated November 8, 2017. Accessed January 10, 2018.

16. Abaluck J, Gruber J. Choice inconsistencies among the elderly: evidence from plan choice in the Medicare Part D program. Am Econ Rev. 2011;101(4):1180-1210. doi: 10.1257/aer.101.4.1180.

17. U.S. Department of Justice and the Federal Trade Commission. Statements of Antitrust Enforcement Policy in Health Care. Washington, DC: U.S. Department of Justice and the Federal Trade Commission; 1996. justice.gov/sites/default/files/atr/legacy/2007/08/15/1791.pdf. Accessed January 10, 2018.

18. U.S. Department of Justice and the Federal Trade Commission. Horizontal Merger Guidelines. Washington, DC: U.S. Department of Justice and the Federal Trade Commission; 2010. justice.gov/sites/default/files/atr/legacy/2010/08/19/hmg-2010.pdf. Accessed January 10, 2018.

19. Viscusi WK, Vernon JM, Harrington JE. Economics of Regulation and Antitrust. 4th ed. Cambridge, MA: MIT Press; 2005.

20. Federal Trade Commission/Department of Justice. Statement of antitrust enforcement policy regarding accountable care organizations participating in the Medicare Shared Savings Program. Government Publishing Office website. gpo.gov/fdsys/pkg/FR-2011-10-28/pdf/2011-27944.pdf. Published October 28, 2011. Accessed January 10, 2018.

21. Welch WP, Cuellar AE, Stearns SC, Bindman AB. Proportion of physicians in large group practices continued to grow in 2009-11. Health Aff (Millwood). 2013;32(9):1659-1666. doi: 10.1377/hlthaff.2012.1256.

22. Pham HH, Schrag D, O’Malley AS, Wu B, Bach PB. Care patterns in Medicare and their implications for pay for performance. N Engl J Med. 2007;356(11):1130-1139. doi: 10.1056/NEJMsa063979.

23. Kleiner SA, Lyons S, White W. Provider concentration in markets for physician services for patients with traditional Medicare. Health Management, Policy, and Innovation. 2012;1(1):3-18. papers.ssrn.com/sol3/
papers.cfm?abstract_id=2187981. Published December 12, 2012.

24. CMS. Physician Group Practice Transition Demonstration design overview. CMS website. innovation.cms.gov/Files/x/PGP-Transition-Design-Summary.pdf. Published July 14, 2011. Accessed January 10, 2018.
PDF
 
Copyright AJMC 2006-2019 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