The Society of Actuaries went through the Health Care Cost Institute data recently and produced an amazing graphic:
In the individual market, utilization of inpatient services increased dramatically in 2014 and 2015, while the average cost per inpatient procedure went down. pic.twitter.com/2KCDFQDNVM
— HCCI (@HealthCostInst) July 17, 2019
This graph shows the number of inpatient days per 1,000 covered life years.
It shows a few things. First, small group and large group utilization tend to move in parallel to each other with large groups having slightly sicker or higher utilizing populations. This makes sense as small groups are less likely to offer insurance and that offer or not offer decision is non-random; a small group will avoid offering insurance if they know they are extremely likely to have horrendous premiums due to very high expected utilization. People in the job market know that as well so someone who knows that they are likely to be in the hospital a lot will try to stick with a large group employer.
The far more interesting thing is that the discontinuity in the individual market. Pre-ACA market reforms of guaranteed issue, community rating and subsidization, the individual market had perhaps a third of the hospitalization rate of large group and forty percent the utilization rate of small group. As soon as the ACA market reforms went into effect on January 1, 2014, utilization sky rocketed.
This shows the effect of underwriting. Underwritten policies from 2009-2013 were pretty good at identifying and avoiding people with predictable healthcare costs. There is still hospitalizations of people getting hit by buses and being told that they have cancer during a routine check-up but these are mostly random events. As soon as explicit underwriting is banned, utilization sky rockets as people who had been kept out of the individual market moved into it and got services that they needed.