CHILDREN AND FAMILIES The RAND Corporation is a nonprofit institution that helps improve policy and EDUCATION AND THE ARTS decisionmaking through research and analysis. ENERGY AND ENVIRONMENT HEALTH AND HEALTH CARE This electronic document was made available from www.rand.org as a public service INFRASTRUCTURE AND of the RAND Corporation. TRANSPORTATION INTERNATIONAL AFFAIRS LAW AND BUSINESS Skip all front matter: Jump to Page 16 NATIONAL SECURITY POPULATION AND AGING PUBLIC SAFETY Support RAND SCIENCE AND TECHNOLOGY Browse Reports & Bookstore TERRORISM AND Make a charitable contribution HOMELAND SECURITY For More Information Visit RAND at www.rand.org Explore the RAND Corporation View document details Limited Electronic Distribution Rights This document and trademark(s) contained herein are protected by law as indicated in a notice appearing later in this work. This electronic representation of RAND intellectual property is provided for non- commercial use only. Unauthorized posting of RAND electronic documents to a non-RAND website is prohibited. RAND electronic documents are protected under copyright law. Permission is required from RAND to reproduce, or reuse in another form, any of our research documents for commercial use. For information on reprint and linking permissions, please see RAND Permissions. This report is part of the RAND Corporation research report series. RAND reports present research findings and objective analysis that address the challenges facing the public and private sectors. All RAND reports undergo rigorous peer review to ensure high standards for research quality and objectivity. The Affordable Care Act and Health Insurance Markets Simulating the Effects of Regulation Christine Eibner • Amado Cordova • Sarah A. Nowak • Carter C. Price Evan Saltzman • Dulani Woods Prepared for the U.S. Department of Health and Human Services C O R P O R A T I O N The research described in this report was sponsored by the U.S. Department of Health and Human Services. The work was conducted in RAND Health, a division of the RAND Corporation. The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND’s publications do not necessarily reflect the opinions of its research clients and sponsors. Support RAND—make a tax-deductible charitable contribution at www.rand.org/giving/ contribute.html R® is a registered trademark. © Copyright 2013 RAND Corporation This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of RAND documents to a non-RAND website is prohibited. RAND documents are protected under copyright law. Permission is given to duplicate this document for personal use only, as long as it is unaltered and complete. Permission is required from RAND to reproduce, or reuse in another form, any of our research documents for commercial use. For information on reprint and linking permissions, please see the RAND permissions page (http://www.rand.org/pubs/permissions.html). RAND OFFICES SANTA MONICA, CA • WASHINGTON, DC PITTSBURGH, PA • NEW ORLEANS, LA • JACKSON, MS • BOSTON, MA DOHA, QA • CAMBRIDGE, UK • BRUSSELS, BE Preface The Affordable Care Act changes the rating regulations governing the small nongroup and group markets while simultaneously encouraging enrollment through a combination of subsidies, tax credits, and tax penalties. Policymakers and other stakeholders sted are intere in understanding how these changes might affect health insurance enrollment, , premiums and other outcomes to inform exchange implementation and n pla ning. In this report, we estimate the effects of the Affordable Care Act on health insurance enrollment and premiums ten for states (Florida, Kansas, Louisiana, Minnesota, New Mexico, North Dakota, Ohio, Pennsylvania, South Carolina, ) and Texas and for the nation overall, with a focus on outcomes in the nongroup and small group markets. This analysis was sponsored by the Center for Consumer Information and Insurance CCIIO, Oversight ( a division of the Centers & for Medicare Medicaid Services [CMS]) through an interagency agreement with U.S. the Department of Health and Human Services (HHS), Assistant Secretary for Planning and Evaluation (ASPE). However, the views, opinions, and findings presented here are those of the authors and should not be construed as official government positions unless so designated by other documents. The research was conducted by RAND Health, a division of the RAND Corporation. Questions may be addressed to Christine [email protected] Eibner ( ; (703) 413-­‐1100, ext. 5913). A profile of RAND Health, abstracts of its publications, and ordering information http://w can be found at ww.rand.org/health. iii Contents Preface ........................................................................................................................................................ iii Summary ..................................................................................................................................................... vi Results: Number of Uninsured Individuals............................................................................................. vii Results: Nongroup Market Enrollment ................................................................................................. viii Results: Nongroup Premiums ................................................................................................................ viii Results: Small Group Market Enrollment................................................................................................ ix Results: Small Group Premiums .............................................................................................................. ix Conclusions .............................................................................................................................................. x Acknowledgments ....................................................................................................................................... xi I. Introduction ............................................................................................................................................... 1 II. The Affordable Care Act and the Nongroup and Small Group Markets................................................... 3 III. COMPARE Background ............................................................................................................................ 6 Individual Choices ..................................................................................................................................... 6 Firm Choices ............................................................................................................................................. 7 Premiums ................................................................................................................................................. 8 Medical Loss Ratio .................................................................................................................................. 10 Uncertainty in Premiums ........................................................................................................................ 11 Calibration .............................................................................................................................................. 12 State Reweighting .................................................................................................................................. 12 Nongroup Market Adjustments ............................................................................................................. 13 Small Group Market Adjustments .......................................................................................................... 14 Exchange Enrollment .............................................................................................................................. 15 Updates .................................................................................................................................................. 15 iv Limitations .............................................................................................................................................. 16 Comparison to Other Models................................................................................................................. 18 IV. Results ................................................................................................................................................... 20 Uninsurance ........................................................................................................................................... 20 Nongroup Outcomes .............................................................................................................................. 21 Small Group Market ............................................................................................................................... 25 V. Sensitivity Analysis ................................................................................................................................ 28 Risk Pool Construction ............................................................................................................................ 28 Medicaid Expansion ..............................................................................................................................