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 three 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.
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% |
Observations:
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.
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.
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%
Comment on observation: The membership p of the state exchange market is a lot older than the membership of the employment-based market. Premiums in the state exchange market are age rated. A comparison of the age-rate premiums to age-associated health expenditures will have a large impact on the viability of the state exchanger markets.
Final Thoughts: The differences in the age composition of the two markets suggests that many people will get a better insurance buy in employment based markets than state exchange markets. People who get a job with employment based insurance will drop their exchange plan for the new plan from their employer. (In fact, they have to drops their state exchange insurance because insurance on state exchanges is only available to people that do not have offers of qualified employment-based insurance.)
The rules defining eligibility for state exchanges insure that these markets will be the poor cousins of employment-based insurance. The withdrawal of major insurers from state exchanges is the latest evidence that state exchanges are under great financial stress. This financial stress cannot be alleviated without changes in eligibility rules and financial incentives that lead to the expansion of state exchanges.