Many state health insurance exchanges will show a high level of plan competition and attract multiple insurers, based on the experience of six states, according to a new report released Friday by the Robert Wood Johnson Foundation (RWJF).
The competitive nature of the exchanges should lead to reasonably priced premiums for consumers who purchase individual coverage in the new marketplaces, said the report authors from the Urban Institute and Georgetown University's Health Policy Institute in a news release. Exchanges are scheduled to be able to start enrollment in October under the Affordable Care Act.
The findings were based on an analysis of the exchange plans in six states – Colorado, Maryland, New York, Oregon, Rhode Island and Virginia.
The report cited several factors for the anticipated robust plan competition, including states incentivizing multiple insurers to participate and generally letting the resulting competitive market determine rates rather than negotiating premiums.
For example, Colorado will have 10 insurers selling individual plans and six in the small business health option program, or SHOP; Maryland has six insurers in the individual and six in the SHOP; and Oregon has 11 insurers in the individual and nine in the SHOP, the report said.
The competitive environment should result in lower-than-expected premiums for individuals who do not qualify for subsidies in the exchange, as well as lower costs to the federal government for exchange shoppers who do.
"For insurance exchanges to truly benefit consumers' pocketbooks, there needs to be adequate competition among participating insurers to keep prices reasonable," said Andy Hyman, who leads coverage programs at the RWJF, in the release. "Fortunately, the early tea leaves suggest that insurers are eager to participate by providing high-quality, reasonably priced plans in the new insurance marketplaces."
The study took place in March when the states were still in the process of certifying insurers and reviewing rates, so the final outcomes won't be known until later in the summer, the authors noted.
Three of the states have publicly released rate filings for carriers participating on and off the exchange but are not finalized yet. For example, the monthly individual premium rates for a silver plan or a 40-year old nonsmoker in Denver, Colo., ranged from $245 to $454, while in Multnomah County, Ore., the rates ranged from $221 to $486, according to data in the report.
Insurers somewhat blindly submitted rates and didn't know until the deadline had passed the degree of variation, and some were not available yet for the analysis. "The variation in the rates indicates that some insurers have been cautious, others more aggressive," the report said. "What is less clear, perhaps, is whether and how much they will change when there is an opportunity to rebid."
However, early observations about plan competition were clear, including:
• The six states have been very accommodating to insurers, such as in network adequacy and service areas, and deferring to the existing rate review process and market determine the rates.
• Most of the states expect most commercial insurers to participate in the exchange, except Rhode Island. Two of the three commercial plans will not participate in the individual market but will in the small group program.
• Markets will be fairly competitive, with strong incentives to be the second-lowest cost plan, which is a basis for the premium tax credits, and should lead to reasonably priced premiums. As a result, payment rates may range somewhere between commercial and Medicaid rates and more limited provider networks.
• There is uncertainty about how to set premiums, with new requirements around essential health benefits, guaranteed issue, actuarial value tiers and rating rules, and lack of familiarity with the health status of enrollees.
The authors cautioned that six states in the study may not be representative of the nation. Some states have a dominant Blue Cross plan and little competition is expected from new entrants or Medicaid plans.
The authors were John Holahan, director, and Rebecca Peters, a research assistant, both of the Urban Institute Health Policy Center; and Kevin Lucia, research professor, and Christine Monahan, senior health policy analyst, both of the Georgetown University Health Policy Institute's Center on Health Insurance Reform.