The study, described in a working paper published by the National Bureau of Economic Research, found consumers were more likely to choose insurance with lower deductibles after the state in 2010 limited the ways that health plans could vary out-of-pocket costs. Market share also shifted significantly among insurers competing in Massachusetts, as consumers paid more attention to out-of-pocket costs, alongside premium and brand names.
Fewer options in Massachusetts “makes it easier for consumers to shop and therefore increases competition,” said Deborah Chollet, a senior fellow with the policy research firm Mathematica. “The more uniformity, the more apples to apples comparison consumers can make.” That's not what health insurance shoppers find now outside of Massachusetts. “In the current market, everything varies.”
The Affordable Care Act did not go as far as Massachusetts did in regulating the insurance market. The U.S. health reform law created benefit standards and new coverage tiers that require insurers to pay a minimum percentage of the benefit costs, known as the actuarial value. But the Affordable Care Act does not regulate out-of-pocket variation across tiers, as Massachusetts does.
That means shoppers outside Massachusetts must do thorough homework to avoid unexpected costs from high deductibles or co-insurance, said Lisa Clemans-Cope, a health economist with the Urban Institute. “Consumers have to be super careful to check out what each plan will mean.”
However, under the Affordable Care Act, states may separately regulate new markets as Massachusetts did. “This suggests that the decision is important and it's going to change what people pay attention to,” said Keith Marzilli Ericson, one of the study's authors and an assistant professor of markets, public policy and law at Boston University.
The study looked not just at the range of consumer options, but how the choices were presented online, which also affected consumer choice. That means states can still influence consumer choice without regulating market options, said Amanda Starc, an assistant professor of healthcare management at the University of Pennsylvania and the paper's co-author.
“If you're a state running an exchange, there's a lot of latitude and you have to make a choice,” about how to present information, Starc said. “Given that you have to make a choice, you might as well make a choice that helps the consumer weigh options in the most efficient way.”