One of the goals of the Affordable Care Act is to create more competitive markets for individual health policies. The number of people who bought private health plans on their own was relatively small before Obamacare, and in many areas buyers had very few insurers to choose among. The evidence so far shows more competitive markets lead to lower premiums for consumers. The new Obamacare exchange marketplaces, where people with modest incomes can get subsidies to buy coverage, are intended to draw more insurers and give consumers more choices. So are they more competitive than the old markets?
A new report from the Kaiser Family Foundation says the answer is yes in some states, including New York and California, while in others the experience has been the opposite. Seven states so far have published enrollment data that show which insurance companies people selected, and Kaiser analyzed this data to see whether the new marketplaces were more concentrated, or less, than they were before.
An important caveat: Kaiser looks only at competition on the exchanges. Insurers are selling private health plans off the exchanges as well (although consumers can’t use subsidies to purchase them), so the numbers aren’t a complete reflection of the individual market in each state. Still, here’s what researchers found:
• New York and California, the largest states that have released detailed enrollment data, saw more competitive markets. California’s WellPoint plans, which include Anthem Blue Cross, had 47 percent of the market for private health plans in 2012, a share that dropped to 30 percent in the exchange marketplace. Also, more companies are offering individual coverage in the state. New York had a thoroughly broken market for individual insurance before Obamacare, because insurers had to sell coverage to everyone, regardless of how sick they were, but there was no mandate for healthy people to buy coverage. That led to sky-high premiums and little incentive for new companies to enter the market. WellPoint (WLP) (parent of Empire BlueCross BlueShield) was the biggest of these, with 28 percent of the market in 2012. That has dropped to 18 percent on the exchange this year. Seven insurers now hold at least 5 percent of the market, compared with five companies before.
• Connecticut and Washington state had the opposite experience, with new exchanges that are less competitive than the old markets. In Connecticut, large insurers, including Aetna (AET) and UnitedHealthcare, are staying out of the exchange marketplace. Just three companies are offering plans on the exchange, and WellPoint has 60 percent of the market. EmblemHealth has 37 percent, leaving the third insurer, HealthyCT, just 3 percent. That’s more market concentration than in 2012, when Emblem had 45 percent of the market. In Washington state, Premera Blue Cross health plans won 62 percent of the exchange enrollment, compared with 40 percent of the individual market in 2012.
• In the other states Kaiser looked at—Minnesota, Nevada, and Rhode Island—competition in the exchanges looks similar to the prereform markets. Enrollment isn’t over until March 31, and it’s probably too soon to draw firm conclusions, especially from just a handful of states. But it looks as if the exchanges are increasing competition in some places and hindering it in others.