The changes may be part of a trend favoring traditional Medicaid managed care carriers, including provider-sponsored plans.

March 14—The number of insurers offering coverage through the government-run health insurance marketplaces declined in 2016 amid calls for increased competition to improve the affordability of such coverage.

The Affordable Care Act (ACA) marketplaces include 287 insurers in 2016, a decline from 307 in 2015, according to a new analysisby the right-leaning Heritage Foundation. Twenty-two states and the District of Columbia had fewer insurers offering 2016 coverage, compared with 2015, and 10 states had more insurers.

The number of carriers offering marketplace coverage in at least one state declined from 154 in 2014 and 155 in 2015 to 137 in 2016.

Edmund F. Haislmaier, senior research fellow at Heritage and author of the analysis, said in an interview that the insurer decline was the latest evidence of an evolution of the marketplaces toward “a niche market” dominated by plans with Medicaid managed care experience and provider-sponsored plans.

The findings came in contrast to insurer calculations touted in recent months by the U.S. Department of Health and Human Services (HHS). An October 2015 reportconcluded that the number of issuers participating in the marketplaces in 2016 was “stable,” with an average of 10 insurers per state, up from nine in 2015 and eight in 2014. 

Among the 45 insurers exiting the marketplaces in 2016, according to the Heritage analysis, were 11 not-for-profit CO-OPs, which collapsed after many offered too-low premiums based on their expectation of subsidies that ultimately were not provided. Many of the remaining 11 CO-OPs are still suffering steep losses, according to a report by the HHS Office of Inspector General.

Among the 31 “voluntary” exits, seven were by insurers reducing the number of states in which they offered coverage, 21 were complete withdrawals from the ACA marketplaces, and three were due to acquisitions by other insurers.

Among the 25 marketplace entrants in 2016, four were insurers that began offering marketplace coverage for the first time and the remaining 21 were insurers that already offered marketplace coverage in another state and expanded their presence into additional states.

The insurer reduction is likely to continue next year for a variety of reasons, according to Haislmaier, especially given the public complaints of several large carriers about steep losses. For instance, UnitedHealth Group, which extended its marketplace coverage to 11 additional states in 2016, said its losses will force it to reassess the extent of its participation later this year.

“I can think of reasons why we probably will have fewer carriers participating next year; I really can’t think of a reason why we would have more jump in,” Haislmaier said.

Another factor that could fuel further declines in insurer participation is the expiration after this year of two ACA insurer support programs, including the reinsurance program, which provided $20 billion through the first three years to marketplace plans with higher-cost enrollees via redistributions from all health insurers and self-insured employer plans.

The expected decline runs counter to calls by many ACA supporters for increased competition in the marketplaces to increase the affordability of plans, which many enrollees say they cannot afford to use because of high deductibles.

For instance, during a CNN town hall Sunday night, Democratic presidential candidate Hillary Clinton said, "We've got to get more nonprofits that are capable of selling insurance back into the insurance market."

Trends Continue

The marketplace insurer declines followed reports of positive financial results by many traditional Medicaid managed care insurers—such as Centene, Molina, and Wellmark—that sell plans in the marketplaces. Such insurers represent about 20 percent of marketplace carriers, according to Haislmaier, and also include local provider-sponsored plans.

A recent analysis of 81 rating regions found that traditionally Medicaid-focused insurers—along with Blue Cross-affiliated insurers and provider-sponsored plans—most frequently had the lowest-cost plans in their respective 2016 marketplaces.

Among plans with Medicaid coverage experience, Haislmaier says provider-sponsored plans are most likely to expand their marketplace presence—either through existing plans that move into the marketplaces or from hospitals launching first-time plans.

“There is this continuing trend, which we’ve seen in the insurance marketplace for years, of hospital systems offering plans,” Haislmaier said.

Such provider-sponsored and Medicaid managed care plans narrowly avoided a potentially serious financial impact recently, when the Obama administration proposed and then backed off of major expansions in ACA provider network requirements. Both types of plans generally rely on narrow networks to provide lower-cost premiums.

“Clearly, there were carriers telling the administration that if you expand the required provider networks, you are probably going to get fewer carriers,” Haislmaier said.

Enrollee Decline

The analysis followed the Obama administration’s recent release of datathat showed a decline in 2015 marketplace enrollment of nearly 25 percent, from 11.7 million applicants initially selecting plans to less than 8.8 million active enrollees at the end of the year. That followed a 21 percent decline in 2014, and would leave the marketplaces with 9.5 million to 10 million enrollees if a similar pattern occurs in 2016, according to Haislmaier.

Many of those dropouts were due to an increase in “data-matching issues” such as discrepancies in citizenship, immigration status, or household income application information, according to an HHS release. Process changes at the Centers for Medicare & Medicaid Services should help consumers avoid and address data-matching issues, and stay covered all year, according to HHS.

Coverage was terminated for about 500,000 consumers with citizenship or immigration data-matching issues. However, Haislmaier expects the steep enrollment drops to continue in 2016 because the marketplace rules emphasize enrollment and then verification.

“Their whole push is to have a big enrollment number, and it is very clear that if there is any uncertainty or any question they’re saying, ‘Just enroll them and we’ll worry about it later,’” Haislmaier said.

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Monday, March 14, 2016