The Affordable Care Act (ACA), also known as Obamacare, was enacted in 2010 with the overarching goal of expanding access to affordable healthcare for Americans. It aimed to address longstanding issues within the healthcare system by implementing comprehensive reforms. The ACA sought to increase the number of Americans with health insurance coverage through measures such as the expansion of Medicaid, the establishment of health insurance marketplaces, and the provision of subsidies to make insurance more affordable. Additionally, the ACA included essential consumer protections, such as prohibiting insurance companies from denying coverage based on preexisting conditions and allowing young adults to stay on their parents’ insurance plans until the age of 26. The overarching intent was to enhance the quality of healthcare, improve preventive care, and reduce the financial burden on individuals and families facing medical expenses.

The health insurance marketplaces that were created as a result of the ACA have played a crucial role in transforming the healthcare landscape in the United States. The marketplaces provide a centralized and transparent place for individuals and families to compare various health insurance plans. This accessibility makes it easier for people to find coverage that suits their needs and budget. The marketplaces also offer standardized categories of coverage, making it easier for consumers to compare plans based on essential benefits and cost-sharing structures, which simplifies the decision-making process for individuals and promotes transparency in the insurance market. The ACA also established subsidies and tax credits to make health insurance more affordable for those with lower incomes. Through the marketplaces, individuals can determine if they qualify for financial assistance, making coverage within reach for a broader segment of the population. In states that expanded Medicaid under the ACA, the marketplaces serve as a gateway for individuals with low incomes to enroll in Medicaid. This expansion has significantly increased the number of people eligible for Medicaid coverage. By creating a marketplace where various insurance providers compete for consumers, the ACA aims to promote competition, which can lead to improved quality of plans and more competitive pricing.¹

In October 2023, the Rockefeller Institute hosted the “Symposium on the Evaluation of ACA Marketplace Experience” to coincide with the tenth anniversary of open enrollment on the marketplaces. The symposium was designed to follow up on the Rockefeller Institute’s 2017 reports entitled, “A Decade of the Affordable Care Act” and “Five-State Study of ACA Marketplace Competition.” In the former, authors Richard Nathan and John Kaelin traced the evolution of the health exchanges established by the ACA and documented their success as measured by choice of plans, premium stability, and competition—all goals of the original law.

At the symposium, researchers from a wide variety of institutions presented papers, and two panels were convened to connect these metrics with what is happening on the ground. Key trends identified and symposium highlights are presented below.

1. Marketplaces Continue to Show Signs of Stabilizing

Participants in the symposium considered a variety of evidence that suggests insurer participation in the marketplaces has been quite volatile in the 10 years since the establishment of the marketplaces in 2014. Professor Patty Born (Florida State University) presented ongoing research using the data from the Centers for Medicare and Medicaid Services on health insurer participation—i.e., insurers that offered health insurance coverage—in state exchanges. She explained that early experience in the exchanges was marked by high losses because insurers did not anticipate costs associated with pent-up demand and consequently reported high losses that prompted many insurers to leave the markets by 2018. Moreover, Professor Born explained that the financial performance of small carriers entering the market experienced favorable selection but were subsequently hurt after risk adjustment. Risk adjustment is a mechanism within the ACA designed to address the challenge of varying health risks among individuals enrolled in health insurance plans through the ACA marketplaces. Insurers with a higher-than-average number of individuals with significant health risks receive payments from insurers with a lower-than-average risk pool. Presenters noted that while this process helps to level the playing field, plans with favorable experience may have been unprepared when they needed to make additional payments at the end of the year. More recent evidence, however, shows that plans are achieving profitability.

Additional evidence provided by Professor Born shows that insurers are maintaining stable portfolios of plan offerings across levels of coverage, namely in the most popular bronze, silver, and gold metal levels. Moreover, consistent with the findings of Nathan and Kaelin in “A Decade of the Affordable Care Act,” she shows that the average number of insurers providing coverage in each geographic area (referred to as a rating area) has generally increased and there are fewer rating areas in 2022–23 with only one insurance company. Consequently, premiums appear to be stabilizing as a result of that competition.

Enrollment numbers have continued to increase in some markets and likely reflect states that did not elect to expand Medicaid eligibility. In these states, the ACA provides financial assistance to individuals with incomes between 100 percent and 400 percent of the federal poverty level to make coverage on the marketplaces more affordable. Born noted that Florida did not expand Medicaid eligibility and, therefore, continues to see increasing enrollment in the state marketplace. The marketplace is the next affordable option for individuals whose income exceeds the Medicaid eligibility threshold but who may still qualify for a subsidy on the exchange. Professor Mark Hall (Wake Forest University) discussed how a key component of the stability—one that remains a challenge in some areas—is insurers’ ability to develop adequate and efficient networks of providers and hospitals across rating areas where there are dominant hospital systems or an insufficient number of providers. He noted that it remains unclear how further efforts to expand Medicaid eligibility will affect the marketplaces.

With 10 years of experience to draw on, insurers appear committed to the future of the marketplaces. According to Professor Bo Shi (Morehead State University) and Adam Block (New York Medical College), some roadblocks to insurer participation remain challenging, such as establishing comprehensive provider networks. Participants in the symposium agreed that the stability of health insurance coverage is crucial for maintaining and improving overall health outcomes for individuals and communities. Professor Shi noted that stable access to health insurance results in more stable access to preventive services and more timely and adequate medical care. She noted that this is especially important for individuals with chronic conditions who require ongoing medical care and management. Stable health insurance, according to Professor Shi, ensures consistent access to medications, treatments, and specialists necessary for managing chronic conditions, helping to prevent complications and improve quality of life.

2. Various Forms of Enrollment Friction Continue to Persist, But Some New Approaches Are Promising

Professor Adrianna McIntyre (Harvard University) presented research on the link between affordability and the demand for health insurance coverage. She explained that subsidies offered to eligible enrollees significantly reduce the financial hurdle to purchasing coverage, but even when the cost is reduced to zero, eligible populations may not seek coverage. She suggested that a lack of accessible and accurate information may prevent those eligible from enrolling in marketplace plans. While one proposed solution is automatic enrollment, it is difficult to adopt. In the absence of automatic enrollment, symposium participants discussed how information interventions in the form of advertising, letters, emails, or text messages should be considered. Results from Professor McIntyre’s study in Massachusetts suggested take-up rates increase when consumers receive a streamlined letter with plan comparison enrollment instructions. Further, targeting those eligible for zero-premium plans—plans in which available subsidies cover the entire premium cost—was most effective in improving take-up. This study suggests that simple innovations can help improve enrollment frictions.

Since the implementation of the marketplaces, many states have received sizable federal grants for supporting navigator programs. Professor Rebecca Myerson (University of Wisconsin) explained that navigator programs have been credited with increasing enrollment in those states. Her research showed that an 80 percent cut to navigator programs under the Trump administration was associated with decreased marketplace coverage and total insurance coverage among lower-income adults, adults under age 45, Hispanic adults, and adults who speak a language other than English at home. Myerson’s findings support the suggestion that navigators play a significant role in helping underserved consumers obtain health insurance coverage.

3. The New York Experience Provides a Model of Success

One of the panels provided perspectives on the role of the marketplace in New York. The panel included Courtney Burke (Sachs Policy Group and Rockefeller Institute of Government), Danielle Holahan (New York State of Health), Amir Bassiri (New York State Department of Health), and Troy Oechsner (Medical Society of the State of New York). Before the ACA, New York required pure community rating in the individual market—whereby every individual must be charged the same premium for coverage. Panel participants suggested that the New York health insurance market was, consequently, experiencing a death spiral with increasing premiums, limited competition, and a significant number of individuals without health insurance coverage. A death spiral occurs when premiums increase, and healthy individuals become less willing to pay for coverage. As healthy individuals leave the market, the premiums must rise to reflect the less healthy risk pool.

The implementation of the New York marketplace—New York State of Health—presented a number of challenges. One challenge discussed at the symposium was the standardization of contracts for healthcare coverage, which required that all health plans offer the same benefits. This was not required by the ACA but was intended to facilitate consumer comparison shopping. The panelists agreed that New York State is now a model of success due to effective collaboration and coordination across all stakeholder groups including consumers, providers, bipartisan legislators, carriers, and chambers of commerce.

In 2015, New York established the “Essential Plan” to provide coverage to individuals not eligible for Medicaid with incomes up to 200 percent of the federal poverty level. This option was made available under the ACA. There is no premium for coverage and 12 months of coverage are guaranteed with no tax reconciliation if the individual’s income changes during the policy period. The state will expand eligibility to 250 percent FPL in 2024 through a federal 1332 waiver.

New York also developed a single enrollment system for both public and private health insurance options. This system is now proving valuable in smoothing the transition to qualified (or private) health plans or the New York Essential Plan for individuals affected by the unwinding of Medicaid coverage provided during the three-year COVID-19 window. In March 2020, Congress enacted the Families First Coronavirus Response Act (FFCRA), which prevented states from removing Medicaid participants from the program without regard to eligibility. This provision expired in April 2023, leaving many individuals at risk of losing Medicaid coverage. The New York single enrollment system helps individuals determine their eligibility for Medicaid and, subsequently, apply for the appropriate form of coverage.

4. Health Reimbursement Arrangements: A Promising New Option For Small Employers

In 2020, the federal government expanded the use of health reimbursement arrangements by introducing the Individual Coverage Health Reimbursement Arrangements (ICHRAs). In a panel focused on new opportunities for the marketplaces, panelists—including John Kaelin (Centene and Rockefeller Institute of Government), Andrew Egan (Massachusetts Health Connector), Aleka Gurel (HealthSherpa), and Harold Iselin (New York Health Plan Association)—discussed the possibility that ICHRAs could provide a new tool for employers who desire better control of their health benefit costs. An ICHRA allows an employer to provide nontaxed reimbursements to their employees for qualified medical expenses, which include premiums for non-group coverage and out-of-pocket costs. (Employees who enroll in marketplace coverage and pay their premium with ICHRA dollars, however, will be taxed on those dollars, in accordance with the ICHRA law.) The panelists agreed that employers looking to offer greater plan choices and more flexibility for their employees may put pressure on exchanges to expand to meet the increased demand for coverage, but that employers should carefully consider whether an ICHRA best serves the needs of its employees before offering one.

5. Unintended Impact On Premiums For the Unsubsidized

Community rating is a method used in health insurance to determine premium rates based on the characteristics of a broader community or group rather than individual factors such as age, health status, or preexisting conditions. In a community-rated health insurance system, everyone within a specific geographic area or community pays the same premium rate for a particular health insurance plan, regardless of individual health factors. Professor Meghan Esson (University of Iowa) discussed evidence from her research that suggests the effect of certain subsidies combined with community rating could potentially unravel the marketplaces, causing a dramatic reduction in enrollment. Her analysis shows that out-of-pocket subsidies to low-income consumers result in higher costs to insurers through moral hazard, whereby these individuals use more healthcare services because they are less conscious of costs. This, in turn, leads to higher premiums. Her research suggests the effect of these subsidies has an unintended consequence of lowering enrollment among the unsubsidized enrollees by 7 percent.

6. The ACA Marketplace Affects Entrepreneurship “Lock”

A prospective entrepreneur who is considering leaving regular employment must consider how to manage healthcare expenses when group insurance coverage is lost. According to presenter Professor Margaret Blume-Kohout, 25 percent of Americans under age 64 currently have a medical condition that could result in a denial of coverage or higher premiums if they were to individually purchase health insurance outside of an employer or other group policy. This potential denial of coverage on the individual market is a disincentive to entrepreneurship.

Professor Blume-Kohout finds that the ACA expansion of non-employer-based coverage has had a significant positive effect on the number of individuals that were self-employed between 2015–16. ACA marketplaces provided individuals who wanted to start their own businesses a low-cost option for obtaining coverage. However, Blume-Kohout noted at the symposium that the number of self-employed individuals returned to pre-ACA levels with the political uncertainty of the long-term viability of the ACA provisions in 2018. As the marketplace continues to become a more stable component of the US healthcare system, entrepreneurship opportunities will likely look more promising.

Conclusion

The ACA marketplaces have shown notable strides toward increased stability in recent years, with initiatives aimed at expanding coverage, enhancing consumer protections, and fostering competition among insurers. Efforts such as risk adjustment mechanisms, cost-sharing reduction subsidies, and Medicaid expansion have contributed to a more balanced risk pool and improved access to healthcare for millions of Americans. However, challenges persist. Affordability remains a concern for some individuals, even with premium subsidies, as out-of-pocket costs continue to impact healthcare decisions and administrative barriers prevent some individuals who are eligible for zero-cost coverage from enrolling. The symposium discussions highlighted how continuing policy changes, legal challenges, and fluctuations in insurer participation contribute to current uncertainties. Despite progress, the journey toward a fully stable and accessible healthcare marketplace is an ongoing endeavor.

Note: This post has been updated to reflect more accurate information about Individual Coverage Health Reimbursement Arrangements (ICHRAs).

ABOUT THE AUTHORS

Patricia Born is a Richard P. Nathan public policy fellow at the Rockefeller Institute of Government and Midyette Eminent Scholar in Risk Management and Insurance in the Department of Risk Management/Insurance, Real Estate and Legal Studies at Florida State University’s College of Business.

John Kaelin is a fellow at the Rockefeller Institute of Government and senior vice president at Centene Corporation.

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[1] For more details on the role of the marketplaces and the effect of marketplace competition on pricing see Nathan and Kaelin’s 2017 Rockefeller report, “A Decade of the Affordable Care Act.”