Competition and insurance premiums

Amid the public discussion of health insurance costs and the Affordable Care Act’s impact on these costs, N.C. State University economist Mike Walden considers the role of competition in containing costs.

“Well, fortunately we have a brand new study from the National Bureau of Economic Research, which is a private think tank, that looks at health insurance policy premiums since the implementation of the Affordable Care Act.

“And it was focused on answering this specific question: If you look at the various states and those that have health insurance exchanges, do we see in states where there are more providers competing for business of households … that premiums have gone up at a slower rate when you control for all the other factors that are factored in or not?

“And so this study compiled data …, again, since the implementation of the Affordable Care Act, and the result was they found, yes, competition – which … economists emphasize – works here. That is, … they found that … states that had more providers – more health insurance companies – competing for consumers’ businesses had slower increases in premiums.

“And, you get a double-barrel benefit there from the Affordable Care Act: One, of course, you have consumers paying less out of their pocket. But also for those consumers (who) are getting health subsidies from the federal government, their subsidies are going to be lower if premiums go up at a slower rate.