Open enrollment in the Patient Protection and Affordable Care Act’s (PPACA’s) exchanges begins on October 1, 2013, with coverage taking effect on January 1, 2014. While the federal government has announced that it will not release official information on plan participation and premiums until September, some information has been released by the states.
Although the information is limited and each state is unique, there are several key considerations that are relevant in assessing the exchanges. Specifically:
- The number of health insurers participating in the exchanges,
- The scope of the insurer’s provider network,
- The change in premiums and cost sharing, and
- The degree of additional regulatory power exercised by the exchange.
Number of Health Insurers Participating in the Exchange
When assessing the exchanges, an important consideration is the number of insurers participating in the exchanges, as well as whether these plans are offering coverage statewide or regionally. For instance, in California, 12 insurers will be participating in the individual exchange. However, only two of the 12 will offer plans in all 19 regions of the state. Three regions (encompassing Los Angeles and San Diego) will each have six insurers that offer plans. In 11 other regions, there will be four or five insurers offering plans, and in the five remaining regions, only three insurers will offer plans.
In contrast, New Hampshire is expected to only have one issuer offering coverage in the exchange. In Iowa, six insurers will offer plans in that state’s exchange. But, only two will offer coverage statewide and two will only offer coverage to small businesses in the Small Business Health Insurance Options Program (SHOP).
Although no official information is being released until September in the 34 federally facilitated exchanges (FFE), some states have offered a glimpse at what the FFE may look like in their states.
Mississippi proves to be a spectacular example of the potential challenges in gaining insurer participation in the exchanges. The initial reports were that only two insurers applied to offer coverage in the Mississippi exchange, and that those insurers only planned to offer coverage in select regions of the state. Of Mississippi’s 82 counties, only 46 would have an insurer, 42 of which would only have one insurer to choose from, leaving 36 counties in Mississippi without an insurance plan in the exchange. A few weeks after the initial announcement, Humana, the insurer that originally planned to offer coverage in only four counties, agreed to offer plans in the remaining 36 counties. Thus, the Mississippi exchange will now have at least one plan in each county, with four counties having two plans to choose from.
Scope of the Provider Network
In addition to the number of participating insurers, another important consideration is the plans’ provider networks. Low reimbursements and limited provider networks are techniques employed by insurers to keep premium costs down, and a common feature in Medicaid managed care plans. But, such techniques are not without consequences. One of three primary care doctors will not accept new Medicaid patients, and Medicaid has a long and steady history of lacking quality care.
In Mississippi, the insurer that will offer coverage in a majority of the counties is Magnolia Health Plan, a Medicaid managed-care company. As reported, the Magnolia Health Plan “offerings would mimic Magnolia’s Medicaid plan in terms of allowed drugs and available physicians.” And in California, eight of the 12 insurers in the exchange also offer Medicaid coverage.
The limited networks have resulted in major hospitals being excluded in California’s exchange. UCLA Medical Center is only offered in one plan, and Cedars-Sinai is not included in the network of any exchange plan. The Los Angeles Times reports that “a major insurer in the state-run market, Blue Shield of California, said its exchange customers will be restricted to 36% of its regular physician network statewide.”
Change in Premiums and Cost Sharing
Another consideration is the premiums and cost-sharing arrangements in the exchange plans. Only a portion of the cost increase will be seen in premiums, the rest will be passed on to consumers in the form of increased cost sharing, such as co-payments and deductibles. While there is limited information on cost and premiums, some states have released preliminary estimates.
For example, Ohio announced that premiums in their exchange will increase on average by 41 percent compared to the premiums that Ohio companies reported at the end of 2012. In addition to premium projections, the Ohio Department of Insurance also provided a projection for the increase in the total cost of coverage, called the average index rate, which is projected to be a dramatic 83 percent increase.
In Oregon, the state rejected and reduced many insurers’ proposed premiums for the exchange. According to the Portland Business Journal, “Out of 13 rate proposals submitted from the Portland area, all were reduced by the Insurance Division, in some cases by more than 30 percent.”
Due to the severe reductions in requested rates, some of those insurers have decided to no longer offer individual policies in Oregon’s market. One plan, FamilyCare Health Plans, has decided not to offer individual coverage in the Oregon exchange. The state cut its proposed rate by 35 percent, from $422 a month to $274. Similarly, Aetna withdrew its application to participate in Maryland’s exchange because the state’s insurance department would not approve its proposed rates.
Degree of Additional Regulatory Power Exercised by the Exchange
States operating their own exchanges also have to determine the level of regulatory authority they wish to use in the exchanges. For instance, a state could be an “active purchaser” model or a state could operate a “clearinghouse” model.
Acting as an active purchaser gives the exchanges power to selectively contract and negotiate prices with insurers. Moreover, this exchange type enables state officials to influence the health care delivery system and payment arrangements at the provider level through the exchange contracts with health plans. For instance, an official with Blue Shield of California put it this way: “For those of us who are negotiating with providers, we might like to see an exchange putting requirements on plans that give us leverage in those negotiations.”
The clearinghouse exchange model contracts with all qualified health plans that are willing to participate.
Thus far, six states have chosen to be active purchasers: California, Massachusetts, New York, Oregon, Rhode Island, and Vermont. Nine others have chosen to act as a clearinghouse: Colorado, Connecticut, the District of Columbia, Hawaii, Idaho, Maryland, Minnesota, Nevada, and Washington, while two are still undecided: Kentucky and New Mexico.
More to Come
Despite open enrollment beginning on October 1, there is still much about the exchanges that is unknown. This uncertainty ranges from the cost of premiums to the degree of plan choice. But even if some exchanges do have multiple insurers, it remains to be seen if there will be any meaningful differences among the plans offered. As states and the federal government release more information regarding each state’s exchange, the aforementioned questions should be taken into consideration if a complete and accurate picture of the PPACA’s exchanges is to be understood.
—Alyene Senger is a Research Associate in the Center for Health Policy Studies at The Heritage Foundation.