Skip to main content

Advanced Search

Advanced Search

Current Filters

Filter your query

Publication Types



Newsletter Article


Health Law Delivers Mixed Results Spurring Insurer Competition, Study Finds

By John Reichard, CQ HealthBeat Editor

March 17, 2014 -- Competition in insurance markets has increased in some states under the health law but fallen off in others, according to early data from a limited study of the subject.

California and New York “appear to be noticeably more competitive than their 2012 individual markets as a whole,” according to the study released  last Monday by the Kaiser Family Foundation. It noted that insurance exchanges in Connecticut and Washington state saw a drop-off from 2012.

The authors of the study said the findings aren’t representative of the nation. All seven of the states examined set up their own insurance exchanges in the individual market, while most others did not. The seven states are California, Connecticut, Minnesota, Nevada, New York, Rhode Island, and Washington.

The study found New York’s exchange market is the most competitive when measured against the other states and also compared to the state of play before the law was enacted. The state’s individual market was moderately concentrated, but its exchange market is now considered unconcentrated, the study found.

The authors of the study are Cynthia Cox, Rosa Ma, Gary Claxton, and Larry Levitt.

The health law (PL 111-148, PL 111-152) has brought an influx of new insurers into some states’ individual markets but has prompted existing plans to avoid participating in some exchanges. The latter was especially noteworthy in Connecticut, where insurers with deep pockets such as Aetna, United HealthGroup, and Cigna all declined to participate despite various provisions in the law to buffer against early losses in the exchange market.

Newcomers include co-op plans and Medicaid HMOs, the study noted. While the number of competitors can signal greater competition, one payer may continue to have dominant market share so consumers may not benefit. But in a number of cases, insurers charging low premiums have been able to pick up sizeable early market shares.

“New York’s exchange acts as an active purchaser, meaning the state selectively contracts with plans, rather than allowing any qualified insurer to participate,” the study noted. “Even so, the state has 16 parent companies offering plans in the exchange in various parts of the state, seven of which hold market shares greater than 5 percent.”

The other success story in the study was California. Its exchange “is shaping up to be more competitive than its 2012 individual market,” according to the study. Indicators included the market share of the largest insurer and the number of insurers with greater than 5 percent market share. The study found California’s market, deemed highly concentrated in 2012, was now moderately concentrated.

In Connecticut only three insurers participate in the state’s exchange. But its products are attractive.

“Exceeding the state’s own expectations, it is currently ranked second in the nation of states that have enrolled the largest portion of their potential exchange enrollees,” the analysts noted, adding Vermont No. 1. Connecticut’s success could be attributed in part to its usage of Apple-inspired storefronts in enrolling residents through the exchange. Patrons get extensive individual help to guide them through the enrollment process in those venues.

In the state of Washington, the exchange is shaping up to be as highly concentrated as its individual market was before the exchange was launched. One notable aspect of the market is the entry of a Called Coordinated Care, a subsidiary of Centene. The company offers a Medicaid HMO but through the coordinated care plan, it is able to offer coverage that lessens disruptions in access to providers when enrollees switch back and forth between Medicaid and exchange coverage because of fluctuating incomes. It has picked up substantial market share and offers the lowest premiums in the “silver” tier of coverage, the most popular nationwide of the tiers denoting levels of coverage.

Minnesota’s exchange market also is notable because of the popularity of a narrow network plan called Preferred One.

“With some of the lowest exchange premiums in the country, PreferredOne was able to seize a significant portion of the exchange market and has clearly had a noticeable effect on the competitive landscape in the state,” the study said. “PreferredOne currently controls more than half (58 percent) of the exchange market, whereas it held just 3 percent of the 2012 individual market.”

It’s still too early to draw final conclusions on the long-term effects of competition, the analysts cautioned.

“With the first open enrollment period not yet completed, it is too soon to tell how well the exchanges will work to improve competition in the individual insurance market, which historically has been highly concentrated and dominated by a small number of insurers in most states,” the authors wrote. “Exchange enrollment will certainly change – especially during this last month of open enrollment, but also throughout the year as enrollees gain and lose eligibility. . . it will be several years before we can truly evaluate the success of the new markets.”

John Reichard can be reached at [email protected].

Publication Details