Health Insurers’ Pullback Threatens to Create Monopolies

Analysis suggests ACA exchanges are likely to offer just one coverage option in 31% of U.S. counties

http://www.wsj.com/articles/health-insurers-pullback-threatens-to-create-monopolies-1472408338?mod=e2fb

Nearly a third of the nation’s counties look likely to have just a single insurer offering health plans on the Affordable Care Act’s exchanges next year, according to a new analysis, an industry pullback that poses a major challenge to the health law.

The new study, by the Kaiser Family Foundation, suggests there could be just one option for coverage in 31% of counties in 2017, and there may be only two in another 31%. That would give exchange customers in large swaths of the U.S. far less choice than they had this year, when 7% of counties had one insurer and 29% had two.

At least one county—Pinal in Arizona—is at risk of having no insurers offering marketplace plans next year, despite talks between regulators and insurers aimed at filling the void.

The Kaiser study is the most comprehensive look at competition in the ACA marketplaces since several big insurers announced withdrawals from at least some of the exchanges. In many places, the retreats threaten to undermine the premise of the marketplaces, which were supposed to foster competition among insurers, holding down prices and expanding the offerings available to consumers buying their own health plans; the government subsidizes premiums for many of those individuals.

“It is essential for there to be a robust marketplace with multiple competitors offering different products,” said Leemore Dafny, a professor at Harvard Business School. “The whole thing was framed around it.”

Research by Dr. Dafny and others has shown that premiums tend to be lower when there are more insurers competing.

Insurance-industry executives say premiums reflect the cost of enrollees’ care, but in some markets they worry about a cycle of rising prices that might encourage the consumers who need health care least to opt out. Dr. Dafny says federal subsidies will blunt the impact of premium increases for many consumers.

Most of the likely one-insurer counties are predominantly rural, according to the Kaiser analysis, which updates one it did in May, But several urban areas, such as Charlotte, N.C., Philadelphia and Oklahoma City, also face a lack of competition. The analysis suggests that about 19% of current exchange enrollees could have just one option next year, while another 19% would have two.

“It’s terribly concerning,” said Julie Mix McPeak, Tennessee’s commissioner of insurance. “I feel like we don’t have enough choices in the market.” In most of her state, there will likely be just one exchange insurer next year, after the withdrawal of UnitedHealth Group Inc. ; consumers throughout the state had at least two options in 2016.

The number of counties with limited competition is likely to change between now and late September, when insurers have to lock in their plans, and in some states exact insurer footprints aren’t yet available, so the analysis includes estimates. Since Aetna Inc. said earlier this month that it would withdraw from 11 of the 14 state exchanges where it markets plans, other insurers have been reassessing their situation, worried they will get stuck with more of the sickest enrollees.

“All the other carriers say, ‘what does that mean for me?’ ” said Paul Rooney, a vice president at eHealth Inc., a major seller of individual plans.

“A number of steps remain before the full picture of this year’s marketplace competition is known, but the ACA has greatly expanded the insurance options available to consumers in the individual marketplace,” said Marjorie Connolly, a spokeswoman for the Department of Health and Human Services.

President Barack Obama has called for the creation of a new public insurance option to bolster competition in areas where it is limited.

States including Alabama, Alaska, Missouri, Arizona, Florida, North Carolina, Mississippi, Oklahoma and Tennessee are likely to move next year to having one insurer in all or a majority of counties, Kaiser’s analysis found. Regulators in those states confirmed the findings, except in Florida and Missouri, where officials said they didn’t yet have counts.

In many states, the decline in exchange competition stems largely from the pullbacks of UnitedHealth, Aetna and Humana Inc., which have all said they are seeking to stem growing losses on their ACA business. Some states that lost insurers, like Kansas and North Carolina, were able to attract new ones.

Next year will bring “a major shift in insurer participation,” the biggest decrease since the start of the exchanges in 2014, said Cynthia Cox, an associate director at the Kaiser foundation.

In some markets, the high-profile withdrawals of big companies come atop the retreat of smaller insurers, including the closure of 16 of the 23 nonprofit cooperatives that launched operations under the health law.

UnitedHealth’s planned withdrawal from Oklahoma came after two regional insurers bowed out, according to the state’s regulator. Aetna, meanwhile, canceled plans to join the state’s exchange.

The upshot: Only one remaining exchange insurer statewide. “Let’s face it, there’s no competition,” said Mike Rhoads, Oklahoma’s deputy insurance commissioner.

Joseph Devoy, a 31-year-old construction worker who lives in Arizona’s Pinal County, said he had to switch insurers to UnitedHealth this year after his previous provider, the co-op Meritus, stopped selling plans. Now, with UnitedHealth leaving Arizona, Mr. Devoy, who has to purchase coverage through the ACA marketplace to qualify for a federal subsidy, isn’t sure if any insurer will be offering a plan he can buy for next year. Without coverage, he fears he could face a penalty under the law.

“I don’t know what to do now,” Mr. Devoy said. Even if an insurer does come into Pinal, “at that point, it’s a monopoly.”

Write to Anna Wilde Mathews at anna.mathews@wsj.com and Stephanie Armour at stephanie.armour@wsj.com

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