Federal vs. state marketplaces: Insurer participation, competition

How did states' approach to Affordable Care Act implementation influence insurer participation, competition and premiums? To find out, a new Robert Wood Johnson Foundation brief compared five actively pro-reform states with three states that have taken only a limited approach to or have not participated in the healthcare reform law.

The actively pro-reform states included Colorado, Maryland, Minnesota, New York and Oregon, which created state-based marketplaces (SBM). Alabama, Michigan and Virginia are home to strong ACA opposition and rely on federally-facilitated marketplaces (FFM).

But whether a marketplace is run by a state or the federal government doesn't affect market competition, according to the RWJF.

The SBM states, which took more action to encourage plan participation, has a substantial number of participating insurers--with 17 in New York, 11 in Oregon and 10 in Colorado offering plans in several markets. Many of the leading insurers in the existing individual market also are participating in the individual marketplace in these states, RWJF noted.

Similarly for FFM states, a robust list of 10 insurers has joined the individual marketplace in Michigan and nine in Virginia. However, Alabama has only two participating insurers, including Blue Cross Blue Shield of Alabama with about 90 percent of the market.

RWJF found the strong incentives for insurers to bid low in marketplaces led to "surprising outcomes" in both SBM and FFM states. For example, Blue Cross–affiliated plans more often priced way above the second-cheapest plans, while Aetna's high premiums has rendered it uncompetitive in most markets. And UnitedHealthcare has submitted very high premiums in the few markets where it's selling exchange plans, such as New York.

In addition to big-name insurers, local commercial plans represent a strong presence in several SBM states--Colorado, Minnesota and Oregon--as well as in FFM state of Michigan. What's more, many of those regional plans have competitive pricing. For example, Total Healthcare USA offers lower-cost silver plans than Blue Cross Blue Shield in Detroit.

Increased competition in the state and federal marketplaces brought about more narrow network plans, the RWJF noted. The competitive pressures to negotiate lower provider payments and include fewer providers in their commercial products have led to lower premiums, but may have threated the adequacy of those networks.

For more:
- here's the RWJF brief (.pdf)

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