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Why Does Medicare Advantage Work Better Than Marketplaces?

by Erik Wengle; John Holahan; Laura Skopec; Linda J. Blumberg

Jan 30, 2018

Medicare Advantage (MA) markets are significantly more robust, with higher private insurer participation and lower average premium growth than the Affordable Care Act (ACA) marketplaces. The programs differ in insurer participation, the risk-adjustment system, and provider payments.

Key Findings

Based on MA's success relative to the ACA marketplaces in terms of marketplace strength and long-term stability, there are five policies that could be useful for the ACA marketplaces:

Raise enrollment in marketplace plans by increasing premium and cost-sharing subsidies and eliminating short-term plans;

Cap provider payment rates at Medicare rates or a fixed percentage above them;

Standardize cost-sharing within metal tiers, or limit the number of plan designs available;

Lift the budget neutrality requirement for risk adjustment in the marketplaces; and

Use a higher benchmark than the second-lowest-cost silver plan for calculating premium tax credits. 

Conclusion

MA's success lays out a possible model for the ACA marketplaces. By adopting policies geared towards increasing enrollment in marketplace plans as well as insurer participation, the ACA marketplaces could become stronger and more stable.