Health care expert envisions only one or two insurers per state
Insurer participation in Obamacare will continue its steep decline next year, according to an expert who tracks the issue.
Participation by insurers in the Obamacare exchanges has already declined by 27 percent since the law took effect. In 2013, just before Obamacare took effect, 395 insurers offered individual market coverage. In 2016, that number dropped to 287, according to an analysis by Ed Haislmaier, a senior research fellow at the Heritage Foundation.
Haislmaier projects that next year there will be roughly 45 fewer insurers participating in the Obamacare exchanges, a 15 percent decline from the previous year. Haislmaier, who tracks the numbers daily, says the picture will become more clear when insurance arrangements are solidified around the end of October.
On Monday, Aetna announced that it would exit 11 of the 15 states where it offers health care coverage on the Obamacare exchanges, citing $430 million in losses since January 2014.
Haislmaier says that Aetna’s exit is one reason to believe the insurance market is headed to a place where there will only be one or two insurers operating in every state.
“Aetna, of the larger insurers, has probably taken the most disciplined approach to [Obamacare] meaning that they weren’t going to rush into it, they weren’t going to have rose colored glasses, they were going to take a hard look,” Haislmaier said. “They had interestingly enough offered in more states than any other in the first year. They were in 15 states in 2014 but in the run up to the exchanges opening in the fall of 2013 they withdrew their application in several states where they didn’t get the premiums they felt they needed.”
“So that suggested to me a company that was taking the attitude of we’re willing to try it but we want to be cautious and we’re not going to rush in, we’ll accept the risk that maybe we priced higher than our competitors and don’t get as much business but we’ll accept the risk of losing a lot of money,” he said.
Haislmaier said that while a $400 million loss for Aetna is substantial, their losses have not been nearly as bad as other insurers.
“The fact that Aetna is now throwing in the towel in most of this, indicates to me that we’re headed for a market where you really have only one or two insurers per state, and they will probably be locally based in most cases,” he said.
Other large insurers like Humana and UnitedHealth have said they are cutting participation in the exchanges. Companies like Anthem and Cigna have announced major losses.
“The key to this really is you have a very price insensitive group of people because they’re heavily subsidized,” Haislmaier said.
“The issue on the exchange is going to be you’ll have very few choices, one insurer maybe two,” he said. “The issue off the exchange is you will still have choices, you will still have Aetna and United and some of these others, but because the regulations are applied to both markets, you’re going to be paying higher premiums, higher deductibles, things like that.”
“Insurers have to decide now if they are going to keep pursuing this heavily regulated market, where they are losing money, or just exit,” Haislmaier said. “The problem is that the subsidized exchange market has become a magnet for expensive patients and it allows people to game the system.”
Kevin Counihan, the official in charge of Healthcare.gov, said in a statement that the future of the Obamacare marketplace is strong despite Aetna’s exit.
“Aetna’s decision to alter its Marketplace participation does not change the fundamental fact that the Health Insurance Marketplace will continue to bring quality coverage to millions of Americans next year and every year after that,” Counihan said. “It’s no surprise that companies are adapting at different rates to a market where they compete for business on cost and quality rather than by denying coverage to people with preexisting conditions.”
“But the ACA Marketplace is serving more than 11 million people and has helped America reach the lowest uninsured rate on record,” he said. “With high consumer satisfaction, more people getting care, and an improving risk pool, incoming data continue to show that the future of the Marketplace is strong.”