UnitedHealth Group Inc. (UNH), once leery of Obamacare’s new health insurance exchanges, is starting new plans in at least two states as competition grows stiffer in the government-run marketplaces.
In Washington state, four insurers plan to sell for the first time on the exchange next year, including UnitedHealth. In Virginia, a local health plan owned by a hospital and physicians in Lynchburg has proposed to join Aetna Inc., Kaiser Permanente and WellPoint Inc. in 2015. And in Indiana, the health exchange’s offerings may double to eight companies.
While the three states offer the first glimpse of a movement by insurers to embrace the exchanges, the heightened competition may not be enjoyed everywhere. Exchanges in West Virginia, Alabama and Mississippi offer plans from only one or two companies this year, for example. About 8 million people signed up for private plans using the marketplaces created by the Patient Protection and Affordable Care Act in 2014, beating projections, and at least 13 million are expected next year.
“There was a lot of anxiety about how things were going to go the first year and about how many people were going to enroll, particularly after the wobbly launch,” said Timothy Jost, a law professor at Washington & Lee University in Lexington, Virginia. “I think the insurers are feeling like this is a gamble worth betting on.”
UnitedHealth sells health plans in just five exchanges now, and its executives previously have said they expected to expand their offerings in 2015. In addition to Washington, the company anticipates it will offer coverage under its Allsavers brand in Indiana next year, according to the Indiana Department of Insurance.
“We have stated that moving into 2015 we do have a bias to increase our exchange participation as we view the size of the overall markets as positive and see long-term growth opportunities,” Tyler Mason, a spokesman for UnitedHealth, said in an e-mail. “We are continuing to evaluate each exchange on a state-by-state basis to assess how best to serve people as exchanges continue to mature and develop.”
Jost, who is a consumer representative to the National Association of Insurance Commissioners, said new competition should mean lower premiums for consumers, or at least more moderate increases. In Washington state, Molina Healthcare Inc. (MOH), which offered relatively expensive plans this year, has proposed an average 6.8 percent reduction in its 2015 premiums.
“Consumers benefit from competition,” Karen Ignagni, the president and chief executive officer of America’s Health Insurance Plans, the industry’s Washington lobby group, said in an interview. “The most important thing is getting folks on the playing field offering different products to consumers so they can make the decisions that are best for them.”
Among all the plans selling to individuals in Washington state, the proposed rate increases average about 8.25 percent, said Mike Kreidler, the state’s insurance commissioner. That’s the lowest requested increase in seven years, he said; final rates may be lower.
Within Washington, competition will vary. While the new entrants would bring the number of companies on the state’s exchange to 12, they aren’t required to sell their plans statewide. UnitedHealth plans to sell coverage across the state, Richard Onizuka, the CEO of the Washington Health Benefit Exchange, said in a phone interview.
“Some of them are very small and in only a few counties,” Onizuka said in a phone interview. “I think we did really well last year in that all the counties had at least two plans. I assume it’s just going to get better.”
Insurers that sat out the exchanges in 2014 and plan to enter next year may benefit because customers in the second year of Obamacare are expected to be younger and healthier, relative to the first year. Sicker Americans are thought to have been the first to sign up this year, and the U.S. tax penalty for not carrying insurance will double next year, to as much as 2 percent of annual income.
“There’s the so-called second mover advantage,” Jay Angoff, a former Missouri insurance commissioner and Obama administration official, said in a telephone interview. “The second year, new carriers come in because they conclude that people in the worst health are going to stay with their existing plans and therefore they’re going to get a better mix of risk.”
The benefits for consumers and insurers may not be seen equally across the country. In West Virginia, for example, only Highmark Inc., a nonprofit Blue Cross Blue Shield company based in Pittsburgh, sold plans on the exchange this year, according to ValuePenguin, which tracks exchange offerings. With an older and sicker population than the nation as a whole, West Virginia presents a higher risk for competitors.
“There are some states where there’s no competition at all,” Jost said. “For those states, it’s really important that we get competitors.”
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