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Consumers Buy Lower-Cost Plans on Covered California, Suggesting Exposure to Premium Increases Is Less Than Commonly Reported

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This analysis of health plan premium growth in California’s insurance marketplaces, focusing on the policies that consumers actually purchased, finds that the average price paid for plans selected in 2014 was 11.6 percent less than the average price of all plans offered by insurers. Similar differences were observed in 2015 and 2016, suggesting that consumers are choosing to purchase lower-cost plans. Even small increases in plans’ premiums appear to significantly reduce the probability that consumers will select those plans.

The Issue

"Small increases in premiums lead to significant declines in the probability of selection, and thus market share."

The Affordable Care Act played a significant and often contentious role in the 2016 presidential campaign. Marketplace plan premium increases of 22 percent or more in 2017 were commonly cited as an illustration of the failure of the ACA. But increases in 2016 were much lower. The U.S. Department of Health and Human Services, for instance, calculated an average premium increase of 7.5 percent for states using the federal marketplace, while researchers at NORC at the University of Chicago estimated premium increases of 6 percent. All these estimates, though, share a major shortcoming: they are calculated based on plans offered by insurers rather than plans purchased by consumers. To better understand consumers’ behavior, Commonwealth Fund–supported researchers tracked premium trends based on plans purchased in Covered California, the state’s health insurance marketplace.

Key Findings

  • For every plan metal tier (bronze, silver, gold, and platinum), average purchase prices were lower than average offer prices for the years 2014 to 2016. In 2014, the average purchase price for all plans was 11.6 percent less than the average offer price; in 2015, it was 13.2 percent less; and in 2016, it was 15.2 percent less.
  • Over the 2014–15 period, premium increases were 3.9 percent when measured as average offer price and 2 percent when measured as average purchase price. Over 2015–16, premium increases were 5.4 percent when measured as offer price and 3 percent when measured as purchase price.
  • Consumers responded to price increases by shifting to lower-cost plans. In 2016, 62 percent of new enrollees and 56 percent of continuing enrollees chose the lowest- or second-lowest-price plans available.
  • Small increases in premiums lead to significant declines in the probability of a plan being selected and ultimately a reduction in that plan’s market share. For example, a 5.4 percent increase in premiums would reduce the market share by 3 percent.

The Big Picture

Much of the discrepancy between purchase and offer prices is attributable to more enrollees’ buying lower-cost bronze and silver plans and fewer gold and platinum plans. These findings suggest that the marketplaces are helping to moderate cost growth. “Covered California demonstrates—straight out of Economics 101—that if consumers have easy-to-understand, transparent information without being overwhelmed with too many choices, they will buy lower-premium products available on their tier,” the researchers write.

About the Study

The researchers obtained individual plan enrollment data from Covered California. The data set included more than 3.6 million enrollees, representing all active enrollment for each of the marketplace’s first three years. Eleven insurance carriers offered coverage in 2014, 10 in 2015, and 12 in 2016. Three carriers—Blue Shield, Anthem, and Kaiser Permanente—accounted for 78 percent of total enrollment.

The Bottom Line

Consumers purchased lower-priced plans in California’s health insurance marketplace, suggesting that enrollees’ exposure to premium increases is less than what has been commonly cited.

Publication Details



Mary Mahon, Former Vice President, Public Information, The Commonwealth Fund

[email protected]


J. R. Gabel, D. R. Arnold, B. D. Fulton et al., “Consumers Buy Lower-Cost Plans on Covered California, Suggesting Exposure to Premium Increases Is Less Than Commonly Reported,” Health Affairs, Jan. 2017 36(1):8–15.