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Tuesday, October 11, 2016

Age composition of state exchange health insurance markets

Differences between state-exchange and employer-sponsored health insurance

The affordable care act created state health exchanges a market place where many working-age people can obtain health insurance.  This post describes differences between the size of the state-exchange market and the age composition of the state-exchange markets compared to private employment-based insurance.

Questions:  How many people obtain health insurance through state exchanges?   How many people obtain health insurance through their employer?

How does the age composition of the people insured in state exchanges differ from the age composition of people who obtain health insurance through their employer?

What are the policy implications of these differences between the two markets?

Short Answer:  The post presents and discusses fourth findings.

The first finding is that the employer sponsored health insurance market is much larger than the newly formed state exchanges.   As a consequence of this size differential it is quite easy for major insurers to leave the state exchanges and concentrate on the employer-sponsored sector of the industry if they perceive the state exchange sector as unprofitable.

The second finding presented here indicates that the share of people insured on state exchanges, that are 26 or under, is lower than the share of people in employers-sponsored plans that are 26 or younger.  The higher percent of young adults in the employment-based market is partially a consequence of a provision of the ACA that allows young adults to remain on their parent’s health plan.  

Third, the percent of people with private insurance who obtain their health insurance from an exchange plan is larger for the 55 to 65 year old age group than any other age group.

Fourth, when consideration is given only to people over age 26 the older-person share of the market is larger for people with employment-based plans than for people with state exchange plans.

The results suggest that participants in state exchange markets are older than participants in employer-based markets but this result is not a consequence of plan selection by workers.  Rather it is a consequence of the fact that workers with employer-based plans have more dependents and more young adults who remain eligible for their parent's health insurance.

Data:   The data used in this study was obtained from the PERSONX file for 2015 from the National Health Interview Survey.   I look at the relationship between two variables on the interviews.   The first question involves whether a person with private health insurance obtained the private health plan from a state exchange or some other source, presumably the person’s employer.   This question was only asked of people with private insurance.

Since I was interested in people with households where the head of household was working age I only considered people less than or equal to age 65.   (Most people over age 65 get their primary insurance through Medicare.   Some of these people may also have private Medigap plans but this market is not the focus of the ACA issues studied here.)

The second variable is age category.   I use the age variable to create age categories  -- less than or equal to age 21, 21<age<=26, 26<age<=35, 35<age<=45, 45<age<=55, and 55<age<=65.

There are 3,392 people in the sample obtaining private insurance from state exchanges and 57,579 people in the sample obtaining private health insurance from some other venue, primarily their employer.

A weighting variable WTFA was used to translate these sample numbers to estimates of age category by insurance type for the entire country.

The analysis in this post involves evaluating the relationships between these age categories and the two types of insurance.

Results:   The age patterns of people with private health insurance obtained on state exchanges and private health insurance obtained from some other source are presented below.


Number of People with Private Insurance from State Exchanges and From Other Source (Primarily Employer)
age_cat
Exchange Plan
Not Exchange Plan
Total
<=21
1,999,788
48,204,273
50,204,061
21<age<=26
697,760
13,419,295
14,117,055
26<age<=35
1,544,447
23,290,719
24,835,166
35<age<=45
1,665,307
26,388,265
28,053,572
45<age<=55
2,090,070
28,775,752
30,865,822
55<age<=65
2,220,015
25,602,310
27,822,325
Total
10,217,387
165,680,614
175,898,001
Percent of people with private insurance by market source
age_cat
Exchange Plan
Not Exchange Plan
Total
<=21
4.0%
96.0%
100.0%
21<age<=26
4.9%
95.1%
100.0%
26<age<=35
6.2%
93.8%
100.0%
35<age<=45
5.9%
94.1%
100.0%
45<age<=55
6.8%
93.2%
100.0%
55<age<=65
8.0%
92.0%
100.0%
Total
5.8%
94.2%
100.0%
Age Composition of Health Insurance Markets
age_cat
Exchange Plan
Not Exchange Plan
Both Markets
<=21
19.6%
29.1%
28.5%
21<age<=26
6.8%
8.1%
8.0%
26<age<=35
15.1%
14.1%
14.1%
35<age<=45
16.3%
15.9%
15.9%
45<age<=55
20.5%
17.4%
17.5%
55<age<=65
21.7%
15.5%
15.8%
Total
100.0%
100.0%
100.0%


Below I present data on age of insured for people over age 26.   I look separately at the over age 26 crowd because people in the 26 and under plan are often on their parent's plan and do not actively choose their own insurance.


Age Distribution of Insurance Plans by Venue
for People Over 26
Exchange Plans
Non-Exchange Plans (Primarily ESI)
27 to 35
20.3%
18.7%
36 to 45
21.9%
21.2%
46 to 55
27.5%
23.1%
56 to 65
30.3%
37.0%
100.0%
100.0%



Observations:

Observation One: The estimates reveal that a little over 10.2 million people get private health insurance from state exchanges compared to 165.7 million from other sources.   This is a 16.2 to 1 ratio.

Comment on Observation:  In many states, the state exchange share of private policies sold is even smaller than indicated by the national average.   In these states most major insurance firms are exiting the state exchange markets.

Observation Two: The share of state exchange market less than or equal to 21 years old is 19.6% much less than the 29.1% share for insured that are not sold on state exchanges.  The share of state exchange participants who are young adults (age 21 to 26) is 6.8%.   By contrast, this share is 8.1% for people who get their private insurance through their employer.

 Comment on observation:  The higher proportion of younger people (minors and young adults) covered through employment-based insurance is not a consequence of choice by the covered person because most of these young people get their coverage based on their parent’s plan.    One of the reasons that there are so many young adults in the employment-based market is that the ACA allows young adults to stay on their parent’s plan until age 26..  This provision has helped sharply reduce the uninsured rate among young adults but it has had the side effect of increasing the age composition and the risk of the state-exchange market.

Observation Three:  The share of the exchange plan sector that is 55 to 65 years of age is 21.7%.   The share for employment-based insurance sector is 15.5%  These observations are based on the entire population of insured people in the two markets.

Observation Four:  The share of people 55 to 65 in the 26 to 35 age group is 37.0% for employer-based insurance and 30.3% for state-exchange markets.

Comment on observations three and four:  When one considers the entire population of insured people it is clear that the state-exchange market is a lot older than the employer-based market.  However, for the population over age 26 the employer-based market is older than the state-exchange market.

Final Thoughts: The employer-based market remains a lot larger than state exchanges.   This is the result of two factors.   First, most employers pay a large share of premiums for employer-based insurance.   Second, eligibility for tax credits on state exchanges is limited to low-income households that do not have access to employer-based insurance.

Many major insurers are no longer participating in state exchanges because of their view that this market is not profitable.   it would be harder for insurance firms to withdraw from state exchanges if the state exchanges had a larger share of the insurance market.

The age comparisons presented here suggest that participants in state exchange markets are older than participants in employer-based markets but this result is not a consequence of plan selection by workers.  Rather it is a consequence of the fact that workers with employer-based plans have more dependents and more young adults who remain eligible for their parent's health insurance.

One of the most popular features of the ACA is the rule allowing young adults to stay on their parent's plan until age 26.  Ironically, one of the side effects of this popular ACA provision is that it weakens the new state exchanges.

I looked at a different aspect of the age composition of the two insurance markets in my math blog post on two-way association tests.
http://dailymathproblem.blogspot.com/2016/10/unweighted-two-way-association-tests.html








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