The Pricing Impact of the Decreasing Competitiveness of the Health Insurance Market

The Affordable Care Act created the national insurance exchanges of qualified health plans to encourage a higher insured rate, larger risk pools, and lower prices for quality health coverage. Consolidation of insurers can have opposing effects. The insurers’ risk pools will grow, allowing insurers to better hedge for risk. However, consolidation decreases the prevalence of competition in the market, and past research shows that insurer consolidation decreases market competition and increases prices.

I examine how the number of plans offered in a set market, pricing components, and county health variables impact the monthly premium pricing of plans sold on the individual market as well as how effective the exchanges are at keeping insurance prices low. Based on my findings, I conclude that the top three influential variables on premium price are the presence of a maximum out of pocket, the rate of excess drinking, and the unemployment rate. I also conclude that more plans in a market are associated with lower premium prices.