Three's a Crowd? The Effect of Insurer Participation on Premiums and Cost-Sharing Parameters in the Initial Years of the ACA Marketplaces

I examine insurer entry in the states with health insurance marketplaces run through healthcare.gov. Because insurers offer plans with horizontally differentiated cost-sharing parameters, I use outcomes that measure "premium plus cost-sharing" parameters, a patient's premium plus cost-sharing as a function of their medical utilization. To address the potential endogeneity of insurer entry, I use an instrumental variables approach. In the first year of the marketplaces, I find that an additional insurer decreased premium plus cost-sharing parameters by 5 percent or more. In the second year of the marketplaces, two national insurers entered many of the marketplaces for the first time. Except for inpatient services, I find that a new insurer had no average effect on premium plus cost-sharing parameters. However, new insurer entry was more likely to lower premium plus cost-sharing parameters in counties with fewer incumbent insurers. In counties with three or more incumbent insurers, a new insurer actually increased cost-sharing parameters for emergency room services. The increases may be related to new insurers shifting bargaining power to be more in favor of emergency departments when negotiating costs of medical services.