One of the selling points of the Affordable Care Act was its potential to increase competition among insurers, which would then lead to lower prices and more choice for consumers.
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But a new report shows that isn’t always the case.
As the ACA draws near its year-one enrollment deadline on March 31, a report from the Kaiser Family Foundation (KFF) shows competition in state's insurance markets varies.
Kaiser analyzed insurer market share on seven states operating on their own exchanges and found two states have a more competitive insurance industry, two are now less competitive and three held steady.
The KFF study does not include off-exchange plans, nor does it take into account the 36 states operating on the federal exchange. The study compared early enrollment across insurers in these states to market data from 2012, before the ACA was fully implemented.
When health-care reform was signed into law in March 2010, a single insurer had at least half of the individual market in 30 states and the District of Columbia, Kaiser concludes.
Larger states California and New York have experienced increased competition compared to their 2012 individual markets, while smaller states like Connecticut, where two major insurance companies decided not to participate on the exchange, and Washington are seeing less competition compared to 2012’s markets.
Rhode Island and Nevada were both similar to their levels of competitiveness pre-ACA, Kaiser reports.
Cynthia Cox, senior policy analyst on health-care reform at the Henry J. Kaiser Foundation, says she would be curious to find out if large states on the federal exchange were seeing increased competition.
“It’s hard to say, these states had significant funding and see more enrollment marketing, which is a factor,” Cox says. “In some of the states that are seeing less competition, like Connecticut, the exchanges have still been tremendously successful.”
Connecticut’s exchange has seen such enrollment success the state’s government is considering marketing its expertise to other states that have struggled to enroll residents, its chief executive Kevin Counihan told FOXBusiness.com, confirming a meeting with Maryland officials just last week.
Under the ACA, insurers can no longer deny enrollees for having pre-existing conditions, and older and sicker people can be charged at a ratio of 3 to 1, compared to what young and healthy enrollees are charged. In the past the ratio was higher, at a rate of 5 to 1.
The law mandates that every individual in the country have insurance by the end of open enrollment period or they will face a fine of $95 a year or 1% of their annual income for failing to comply. The Department of Health and Human Services reported Monday that 5 million Americans had selected plans on both state and federal exchanges, but it is not yet clear how many of these enrollees have paid their first month’s premiums.
Cox points out that if an insurer is the only company listed on a state’s exchange, the company may not have incentive to offer competitive pricing. This is the case in more rural areas in the country including West Virginia, Alabama, as well as some parts of North Carolina, Florida Mississippi and Arkansas, as listings go by region and rating area.
“If an insurance company is dominating the market, they may be able to act differently and leverage their market share and negotiate,” Cox says. “But it’s not clear if they pass those savings onto consumers.”
The price points listed this year are still very much in flux, Cox says, and will be subject to change as the law continues to be implemented.
“If insurers find out in two or three years that they still aren’t bringing in enough revenue to cover the cost of enrollees, they may have to raise premiums later on,” she says.