National commercial insurers are a dying breed on ACA exchanges

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The makeup of insurers that sell plans on the ACA exchanges has changed in the years since the law as first enacted.

National commercial insurers, which once dominated the individual market, are now nearly extinct on the Affordable Care Act exchanges.

Insurers like Aetna, Cigna and UnitedHealth comprise less than 2% of ACA exchange offerings in U.S. counties, according to a recent post from Robert Wood Johnson Foundation Senior Adviser Katherine Hempstead. Next year, she says, their presence will be “truly negligible.”

That’s a marked difference from back in 2013, when national commercial insurers and limited coverage specialists together accounted for 70% of individual market insurers, per a similar report that RWJF published in June. For national carriers specifically, many exited the market with the onset of the ACA, then re-entered in 2015, but again exited by 2017.

“It appears thus far that, at least comparatively speaking, the ACA individual marketplace has not been a favorable environment for this group of insurers,” Hempstead writes.

But why was this the case?

When it decided to pull back from all but a few markets this year, UnitedHealth cited a smaller market size, more customer churn and more high-risk enrollees than it expected. Those large insurers that have announced planned exits in 2018, meanwhile, have pointed to policy uncertainty as a driving factor.

It may, however, be more instructive to consider why other types of insurers stayed in the exchanges rather than why national carriers got out.

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Exchange participation from provider-sponsored plans, Medicaid managed care organizations, regional plans and Blue Cross Blue Shield carriers has increased in recent years, Hempstead writes—and this may be simply because locally based plans tend to have a greater commitment to their exchange populations.

In other words, since they are insuring their own communities, such plans are less likely to jump ship when the going gets rough. The going was indeed rough in the first couple years of the ACA, a previous analysis found, but in 2016 and the first quarter of 2017, things are looking up for individual market insurers, profitability-wise.

Still, there will very likely be less competition on the exchanges next year, Hempstead notes in her post. She predicts that the share of counties with just one insurer will rise from about one-third in 2017 to closer to 45% in 2018. And while currently 31% of counties have three or more insurers to choose from, that will be more like 25% next year.