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Promoting Value for Consumers: Comparing Individual Health Insurance Markets Inside and Outside the ACA's Exchanges

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The new health insurance exchanges are the core of the Affordable Care Act’s (ACA) insurance reforms, but insurance markets beyond the exchanges also are affected by the reforms. This issue brief compares the markets for individual coverage on and off of the exchanges, using insurers’ most recent projections for ACA-compliant policies. In 2016, insurers expect that less than one-fifth of ACA-compliant coverage will be sold outside of the exchanges. Insurers that sell mostly through exchanges devote a greater portion of their premium dollars to medical care than do insurers selling only off of the exchanges, because exchange insurers project lower administrative costs and lower profit margins. Premium increases on exchange plans are less than those for off-exchange plans, in large part because exchange enrollment is projected to shift to closed-network plans. Finally, initial concerns that insurers might seek to segregate higher-risk subscribers on the exchanges have not been realized.


1 States could, if they chose to, make use of the exchanges mandatory in the individual and small-group markets, but so far only Washington, D.C., has done so.

2 These data do not include grandfathered or other noncompliant plans in which people have renewed their enrollment from 2014. In 2015, such plans accounted for only 16 percent of individual market enrollment, which is half the level of the previous year. L. Hamel, M. Norton, L. Levitt et al., Survey of Non-Group Health Insurance Enrollees, Wave 2 (Henry J. Kaiser Family Foundation, May 2015).

3 As explained in the About This Study box, however, plans sold predominantly on exchanges also can have some off-exchange enrollment. Therefore, these projected percentages are not precise market shares.

4 These are simple, unadjusted loss ratios that do not take account of several factors allowed by the ACA’s minimum loss ratio regulation.

5 S. J. Dash, J. Giovannelli, K. Lucia et al., “State Marketplace Approaches to Financing and Sustainability,” To the Point (Commonwealth Fund blog), Nov. 6, 2014.

6 We identified 6,627 plans with premium rate increase data in 2016, of which 3,755 are sold on exchanges, consisting of 2,158 HMO and EPO plans and 1,597 PPO and POS plans. An additional 2,872 plans are sold off of the exchanges, consisting of 1,279 HMO and EPO plans, 1,547 PPO and POS plans, and 46 indemnity plans.

7 States often regulate HMOs and PPOs under different sets of insurance laws. These separate regulatory regimes have given rise to the alternative terms, EPO and POS, when insurers established under one regulatory regime decide to offer a plan that is structured like those in the other regime. Thus, EPOs are essentially the same as HMOs but are sold by companies that are regulated as PPOs. Likewise, POS networks are structured like PPO networks but are sold by insurers regulated as HMOs. Regardless of the state regulatory regime, the key distinction, for our purpose, is whether the plan limits coverage to a contracted provider network (HMO and EPO) or covers care provided out of network (PPO and POS).

8 See also J. Appleby and J. Rau, “As HMOs Dominate, Alternatives Become More Expensive,” Kaiser Health News, Nov. 25, 2015.

9 See also K. Hempstead, Burnt Offerings? PPOs Decline in Marketplace Plans (Robert Wood Johnson Foundation, Nov. 3, 2015).

10 Also, one likely reason that exchanges have a much greater proportion of their enrollment at the silver level (62% versus 36%) is that lower-income people who are eligible for reduced out-of-pocket cost-sharing must choose a silver plan to receive the full benefit of that subsidy.

11 S. F. Haeder, D. L. Weimer, and D. B. Mukamel, “Narrow Networks and the Affordable Care Act,” Journal of the American Medical Association, Aug. 18, 2015 314(7):669–70.

Publication Details



Michael J. McCue, Professor Emeritus, Department of Health Administration, College of Health Professions, Virginia Commonwealth University

[email protected]


M. J. McCue and M. A. Hall, Promoting Value for Consumers: Comparing Individual Health Insurance Markets Inside and Outside the ACA’s Exchanges, The Commonwealth Fund, June 2016.