Low Cost Carriers in ACA: Insights from the 2018-2021 Market Experience

1332 state innovation waivers have been in place for a number of years and allow states to implement programs that increase access and affordability of healthcare coverage. While nearly all waiver programs in effect in 2021 employ a reinsurance program, a number of states have been exploring other ways to structure a waiver program, including an introduction of a public plan option in ACA individual market.

A public option plan aims to further increase access to coverage and affordability by offering a new qualified health plan, typically with a lower premium relative to existing plans. Wakely looked at states where a new issuer entered a market as a low cost plan, to better understand plan enrollment migration (how many members switch to the low cost carrier), competitors’ reactions, and the reduction in premium needed to incentivize members to take up coverage. This market dynamic closely mimics the effect of a public option plan that offers lower premiums. The analysis showed mixed effects of a low cost plan introduction in ACA markets, with minimal impact on the uninsured, but with improved affordability, particularly for the unsubsidized. The detailed observations from the analysis are discussed in this paper.