Abstract
- Issue: In 2017, five states — Alabama, Alaska, Oklahoma, South Carolina, and Wyoming — had only one issuer participating in their health care marketplaces, limiting consumer choice and competition among insurers.
- Goal: Examine the history of participation in the individual market from 2010 (before the Affordable Care Act was enacted) to 2017, and analyze premium changes among marketplace plans.
- Methods: Robert Wood Johnson Foundation’s HIX Compare, which provides national data on the marketplaces from 2014 to 2017.
- Findings and Conclusions: In 2010, the individual insurance market was already concentrated in the five study states, with Blue Cross and Blue Shield (BCBS) plans covering the majority of enrollees. By 2015, with the marketplaces in full swing, more issuers were competing in the five states. But by 2016, co-ops were facing bankruptcy and left the marketplaces in these states; and in 2017, citing large financial losses, national issuers UnitedHealthcare, Aetna, and Humana also exited, leaving only a single BCBS plan in each state. Three of the five states experienced substantially higher annual premium increases than the national average. Policy options with bipartisan support, such as resuming cost-sharing reduction payments and reestablishing reinsurance and risk corridors, could help attract new or returning issuers to marketplaces in these states.
Background
Uncertainty over the Trump administration’s approach to the Affordable Care Act marketplaces and the repeal of the individual mandate penalties has increased fears of insurers exiting the marketplaces. This action would in turn create a lack of competition and, potentially, an increase in premiums because of adverse selection. In 2017, while some states had just one insurer participating, others had more than 10. Similarly, some states experienced large premium increases while others saw small increases and, in some cases, even decreases.
This issue brief examines the five states — Alabama, Alaska, Oklahoma, South Carolina, and Wyoming — that had only one insurer participating in the marketplaces in 2017. Understanding the experiences of competition and consumer choice in these states may help policymakers strengthen and improve the stability of markets going forward.1 We look at the history of the individual market in these five largely rural states beginning in 2010, before the passage of the ACA, and then track the entry and exit of issuers from the marketplaces from 2014 to 2017. Our analysis also examines how premiums changed over this time period as the number of issuers declined.
Findings
Marketplace Entries and Exits
In 2010, before the law was passed, the individual markets were relatively concentrated in the five study states. Blue Cross and Blue Shield (BCBS) plans held more than 50 percent of the market in each state; Blue Cross and Blue Shield of Alabama held an 86 percent market share.2 Assurant and HealthMarkets competed in the individual markets in four states (Exhibit 1), but both have since left the individual market nationwide.3,4
When the marketplaces became operational in 2014, Alabama, Alaska, and Wyoming each had just two issuers participating (Exhibit 2). Four issuers competed in South Carolina (two were Blue Cross corporate entities) and six competed in Oklahoma.5 Newly established co-ops competed in Oklahoma, South Carolina, and Wyoming.6 These plans originated in the ACA’s Consumer Operated and Oriented Plan Program, intended to encourage the creation of qualified nonprofit health insurers to compete in the individual and small-group markets.
Co-ops had the largest 2014 enrollment in South Carolina and Wyoming (Consumers’ Choice Health Plan and WINhealth Partners, respectively) and a Medicaid managed care plan, Moda Health, had the largest enrollment in Alaska (Exhibit 3). Two of these three plans also had the lowest premiums for silver plans, and Consumers’ Choice was within a few dollars of the least expensive option. In 2015, Moda and Consumers’ Choice retained the largest market shares in their states; WINhealth Partners held a 41 percent market share in Wyoming. In South Carolina and Wyoming, the co-op underpriced the BCBS plans by 13 percent and 15 percent, respectively. In Alaska in 2014, Moda underpriced BCBS by 10 percent. In Alabama and Oklahoma, BCBS was price-competitive with the other issuers that year, and retained a dominant market share.
In 2015, the number of issuers competing in each state changed little, but in 2016, participation declined (Exhibit 2). Co-ops went out of business in Oklahoma, South Carolina, and Wyoming. In most states throughout the country, co-ops lacked the capital to sustain financial losses from a sicker-than-expected enrollee population. Legislation passed by Congress required that the law’s risk-corridor program (which was designed to help protect insurers against very large financial losses) be budget neutral. This left issuers with less than one-third of the funds they had expected to be available.7 In South Carolina, Coventry was acquired by Aetna.8 UnitedHealthcare entered the Oklahoma and South Carolina marketplaces.
In 2017, participation declined even further. National commercial issuers UnitedHealthcare, Aetna, and Humana exited the marketplaces in the study states (as well as in other states across the nation). Specifically, UnitedHealthcare left Alabama, Oklahoma, and South Carolina; Aetna exited from South Carolina; and Humana departed from Alabama. In Alaska, Moda Health left the marketplace after the state insurance department restricted its ability to sell insurance because of solvency concerns.9
Trends in Premiums
The average annual premium increases from 2014 to 2017 in three of five study states substantially outpaced the national average (Exhibit 4). Alabama averaged 21 percent annual increases, and Alaska and Oklahoma had 27 percent and 26 percent increases, respectively. The average annual premium increase nationwide was 11 percent. Wyoming was the sole single-issuer state with annual premium increase growth (7%) below the national average, while South Carolina was nearly the same as the national average. Premium increases were particularly large from 2016 to 2017 in Alabama (43%) and Oklahoma (58%).10 In these two states, BCBS controlled overwhelming shares of the market for all study years.
Conclusions and Next Steps
The five study states, which were all left with a single issuer by 2017, experienced similar cycles from 2014 to 2017. In 2010, before passage of the ACA, the individual insurance market was already concentrated in all five states. By 2014, two insurers, Assurant and HealthMarkets, which each had a presence in four states, left the health insurance business. In 2015, participation held steady in four of the five states. In 2016, co-ops, facing bankruptcy, left the marketplaces in these states. In 2017, citing large financial losses, large national issuers UnitedHealthcare, Aetna, and Humana exited these marketplaces. Despite the withdrawal of these three large insurers, a 2017 report from Standard & Poor’s observed trends towards stabilization in the individual health insurance market, but noted that these markets still need more time to mature.11
From 2014 to 2017, three of the five single-issuer states experienced substantially higher rates of annual premium increases than the federally facilitated marketplace average. The other two states had rates comparable to the nationwide figure. Limited competition was a likely factor behind the higher premium increases.12,13 In addition, the elimination of many lower-cost options, with co-ops exiting the market, also contributed to larger premium increases. Moreover, none of these states opted to expand Medicaid, so they may have experienced adverse selection as individuals with incomes between 100 percent and 138 percent of poverty enrolled in the marketplaces. States that did not expand Medicaid had marketplace premiums that were 7 percent higher than states that did.14 Generally speaking, lower-income people have poorer health status than moderate- and high-income people.15
Historically, competition among issuers in the five single-issuer states — and in rural states generally — has been limited. In these states, marketplace enrollees have less choice, and, in many cases, the approximately 20 percent of enrollees who are not eligible for premium tax credits have higher premium costs. But the experience and policies of other states offer insights and ideas that could help. For example, Minnesota recently enacted its own reinsurance program, and state officials and issuers there have stated that premiums for 2018 are 20 percent lower as a result.16 Federal programs to reestablish risk corridors, or reimburse issuers for previous losses under the program, could also reduce premiums and make market entry more appealing.17 And resuming cost-sharing reduction payments to issuers also could help to encourage participation and foster lower premiums.18 Many of these proposals have bipartisan support in Congress.19
The measures Congress legislated to ensure issuer participation in the Medicare Part D prescription drug program could be extended to the marketplaces, as some have also suggested.20 Under such a plan, if no issuers participate in a county, the U.S. Department of Health and Human Services would contract with an issuer to administer a plan. Alternatively, the two largest insurers participating in the Federal Employees Health Benefits (FEHB) Program in the county could be required to offer a silver plan. This participation would be a requirement for the plans to be included in the FEHB Program.21 Insurers regard FEHB as providing high value, given the program’s very large enrollment; in fact, every U.S. county has at least one participating plan.
In 2017 and 2018, the Trump administration and Congress took a number of actions to scale back the ACA that could also potentially affect the stability of the marketplaces. These include: 1) repealing the individual mandate penalties, which is projected to increase the number of uninsured Americans by 13 million by 2027; 2) ending funding for cost-sharing reduction payments; and 3) proposing new rules that would increase the proliferation of association health plans and short-term insurance policies that do not meet many ACA requirements, such as essential health benefits.22 The effect of these changes on issuer participation and premiums likely will be the focus of future research. Measures to increase choice and market competition, or to reduce premiums, will require legislative or administrative changes, or both. States also could take steps — as Alaska, Minnesota, and Oregon have done — to establish reinsurance programs to stabilize the individual market.23,24
