What it takes to create exchange competition, lower prices

Although the Obama administration has touted the claim that 95 percent of consumers live in areas with at least two insurers offering plans on the health insurance exchanges, a new analysis shows two insurers might not create enough competition, especially in rural areas.

Consumers in small towns must choose from some of the highest-priced plans sold on the federal marketplace. Of the roughly 2,500 counties covered by the federal exchange, 58 percent only have one or two insurers selling plans. And about 530 counties have only one insurer offering coverage, according to a review by The New York Times.

That's largely because insurers have hesitated to enter smaller markets that often have high medical costs, existing dominant insurers and powerful hospital systems. What's more, it's challenging for insurers new to rural areas to develop relationships with scattered providers and few consumers.

Without competition among more than two insurers, experts say premiums can't decrease. "There's nothing in the structure of the Affordable Care Act which really deals with that problem," John Holahan, a fellow at the Urban Institute, told the Times. "I think that all else being equal, premiums will clearly be higher when there's not that competition."

In Wyoming, for example, two insurers are selling plans on the exchange. Both of their premiums are higher than prices in Montana, which has three insurers participating on the exchange.

A new CO-OP selling plans on the exchange in Montana has likely altered that market. Now, Blue Cross Blue Shield of Montana and PacificSource have new competition from Montana Health CO-OP.

"Adding that third competitor really changes the landscape vastly," Montana Health CO-OP CEO Jerry Dworak told the Times. Although Blue Cross and PacificSource predicted a 25 percent increase in premiums, those raises never happened. "It was amazing how close the rates were," he said.

Another analysis by the Robert Wood Johnson Foundation also concluded that increased competition in exchanges leads to lower premiums, at least after the first year of operation, FierceHealthPayer previously reported.

To learn more:
- read The New York Times article

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