Should-Read: Craig Garthwaite and John A. Graves: Success and Failure in the Insurance Exchanges

Should-Read: Craig Garthwaite and John A. Graves: Success and Failure in the Insurance Exchanges: “President Donald Trump and large fractions of the Republican majority… campaigned on an explicit pledge to repeal and replace the ACA…

…At least part of the impetus for these promises is a general belief that the ACA’s state-based insurance marketplaces are unworkable and are resulting in higher prices and fewer choices. In 2016, the ACA marketplaces facilitated coverage purchases for approximately 13 million people nationwide. But many prominent national insurers have struggled… UnitedHealth… Aetna….

Smaller and more focused insurers are earning profits in the new market and are aggressively entering new geographic areas…. Centene and Molina have both had financial success in the ACA marketplaces…. These two insurers have historically operated in the Medicaid managed-care market….

New plans had substantially lower premiums than their local competitors… were more likely to have experience with Medicaid managed care but less likely to have direct experience in the markets they entered. This finding is consistent with the existence of a functioning market in which firms that were initially successful are moving into new geographic areas….

The available data reveal patterns of market entry and exit that are consistent with natural competitive processes separating out firms that are best suited to adapt to a new market. We be- lieve that efforts to reform or re- place the ACA should therefore proceed with the knowledge that highly publicized market exits are
a poor and probably inaccurate signal of a failing market.