Increasingly, U.S. consumers may have fewer insurance options under Obamacare.
The latest evidence comes in a study from consulting firm Avalere Health, which examined areas, known as rating regions, that insurers use to set premiums and decide where to offer plans to individuals under the Affordable Care Act.
According to Avalere, 36 percent of the approximately 500 rating regions in the U.S. may have just one health insurer when the 2017 signup season starts on Nov. 1. Another 19 percent could have just two carriers. There was far more competition this year, with about two-thirds of rating areas having three or more health insurers vying for customers’ business, according to Avalere.
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People joked for a while about how insurers were pulling out of Obamacare markets so fast we might end up with areas in which there were no insurers at all. It’s no joke anymore: with Aetna’s massive withdrawal yesterday from the Affordable Care Act marketplace, Pinal County, Arizona, the third most populated county in that state, currently has no insurers selling policies on the Exchange. The issue isn’t so much whether people will be subject to the individual mandate tax of up to 2.5% of their income when there are no policies available; an administration that has no difficulty calling a utility shutoff notice a hardship that excuses one from the individual mandate (whether or not the utility was actually shut off) should have no difficulty declaring the non-existence of any insurance to be grounds for an exemption. The issue is that Pinal County, although a bit of an outlier for now, is a harbinger for fundamental problems with the ACA now manifesting themselves with greater clarity across the country. When an insurer covering over 7% of those in the Exchanges and previously hoping to expand instead drops out, we better look at what is going on.
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So much for choice. In many parts of the country, Obamacare customers will be down to one insurer when they go to sign up for coverage next year on the public exchanges.
A central tenet of the federal health law was to offer a range of affordable health plans through competition among private insurers. But a wave of insurer failures and the recent decision by several of the largest companies, including Aetna, to exit markets are leaving large portions of the country with functional monopolies for next year.
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Tennessee’s insurance regulator approved hefty rate increases for the three carriers on the Obamacare exchange in an attempt to stabilize the already-limited number of insurers in the state.
The rate approvals, while a tough decision, were necessary to ensure that consumers around the state had options when open enrollment begins in November, said Julie Mix McPeak, commissioner of the Tennessee Department of Commerce and Insurance. BlueCross BlueShield of Tennessee is the only insurer to sell statewide and there was the possibility that Cigna and Humana would reduce their footprints or leave the market altogether.
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All but the most hardened partisans understand that the Affordable Care Act’s insurance exchanges are in serious trouble. In 2010, the Congressional Budget Office predicted that 21 million people would have exchange-based coverage in 2016; the real number was about 12 million. As insurers head for the exits, the gap between initial hype and final reality will widen.
The tragedy is that this was entirely avoidable. The ACA’s exchanges were fundamentally flawed in their design, something that private-sector experts tried to point out at the time. In October 2009, PricewaterhouseCoopers published a report projecting that by 2016, the ACA would cumulatively increase individual-market health insurance premiums by 47 percent.
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When Aetna decided last week to drop 70% of its health plans in the Affordable Care Act markets, CEO Mark Bertolini publicly blamed the exits on the poor risk pool, as well as “the current inadequate risk-adjustment mechanism.”
The federal government’s decision to block Aetna’s acquisition of Humana also factored heavily into Aetna’s exchange exodus, as Bertolini warned in a July letter that was obtained by the Huffington Post.
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An Arizona county is poised to become an Obamacare ghost town because no insurer wants to sell exchange plans there.
Aetna’s recent announcement that it would exit most of the states where it offers Obamacare plans leaves residents of Pinal County, Arizona, without any options to get subsidized health coverage next year, unless regulators scramble to find a carrier to fill the void between now and early October.
About 9,700 people in Pinal signed up for Obamacare plans this year, according to administration data.
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Some of the Affordable Care Act’s insurance marketplaces are in turmoil as the fourth open enrollment season approaches this fall, but what’s ahead for consumers very much depends on where they live.
Competition on these exchanges will be diminished next year when three of the nation’s largest health insurers — Aetna, UnitedHealthcare and Humana — will sell individual plans in many fewer markets. So too will several Blue Cross and Blue Shield plans in various states. That’s on top of the 16 nonprofit co-ops that have closed since January 2015.
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Aetna’s decision to pull back from ObamaCare is fueling new questions about the long-term viability of the Affordable Care Act (ACA).
When UnitedHealthcare announced in April that it was leaving most ObamaCare marketplaces in 2017, supporters of the law argued against drawing broad conclusions, calling it one company’s decision.
But since then two other large insurers, Humana and Aetna, have said they are slashing ObamaCare offerings due to heavy financial losses from the plans.
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Increasingly, there are two ObamaCares.
There’s the one in coastal and northern areas, where the marketplaces include multiple insurers and plans. And there’s the one in southern and rural areas, where there is often little competition, a situation that can lead to higher premiums.
“There’s really two kind of stories that are playing out,” said Cynthia Cox, who studies insurer competition at the Kaiser Family Foundation (KFF).
The trend is likely to be accelerated by the departure of Aetna and UnitedHealthcare from ObamaCare marketplaces in 2017. The loss of those insurers won’t affect all parts of the country equally, experts say.
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