Changing Aspects of ACA Exchanges Could Improve Competition

With more than half of rating regions having 2 or less insurers for next year, reform is needed.

With the recent withdrawal of Aetna from most Affordable Care Act (ACA) exchanges, health experts are predicting that competition will suffer as a result.

An analysis from Avalere Health found that 36% of rating regions will only have a single insurer selling plans for 2017, meaning that there will be no competition in these regions. Rating regions are areas used to set insurance premiums and determine which plans consumers can purchase, according to Avalere.

Arkansas, Alaska, Kansas, North Carolina, Oklahoma, South Carolina, and Wyoming will all only have a single insurer selling plan in each of the states’ rating regions. Assuming no new insurers sell plans, they also found that a significant 55% of rating regions may have 2 or less insurers selling plans.

The researchers compared insurers who offered plans in 2016 to those who announced their withdrawal from some or all exchanges in 2017, such as Aetna, Humana, UnitedHealth Group, and co-ops.

“Depending on where consumers live, their choice of insurance plans may decrease for 2017,” said Elizabeth Carpenter, senior vice president at Avalere. “Some exchange enrollees may need to choose another insurance plan in order to maintain coverage.”

Researchers found that only 4% of rating regions had 1 or no insurers selling plans in 2016, and 33% had 2 or less selling plans during this time.

“Lower-than-expected enrollment, a high cost population, and troubled risk mitigation programs have led to decreased plan participation for 2017,” said Dan Mendelson, president of Avalere. “Congress and the Administration can choose to stabilize these markets and re-establish competition—but only through a consensus process that brings in a broader swath of the uninsured.”

A lack of competition can cause prices to increase, and could pose significant financial risks to insurers selling the plans, since they must offer care for all enrollees. However, these effects can be diminished by implementing a national or state policy designed to promote market stability, according to Avalere.

The policy solutions should work to create enhanced mitigation programs and change the risk adjustment formula that many insurers believed to be unfair. These policies should also include permanent reinsurance.

Enrollment rules should also be changed to minimize adverse selection, Avalere states. They believe that stricter special enrollment period standards should be implemented, as well as lock-out periods for consumers who have been delaying enrolling.

The 90-day grace period for enrollees receiving federal subsidies should also be improved, and the government should implement incentives for enrollees who maintain continuous health coverage, according to the study. Additional funding would provide extra outreach and enhanced subsidies, which could grow the risk pool by enrolling additional healthy consumers in plans.

New, lower-cost plan options, changing the age rating provisions, or expanding Medicare and Medicaid could also make exchanges more attractive for younger consumers who are typically healthier, according to Avalere.

By making thoughtful changes to the marketplace, competition will likely increase.