Due to the higher-than-expected costs of new Obamacare enrollees, many health insurers were unable to turn a profit and thus left the Affordable Care Act (ACA) marketplace exchanges —- further increasing premiums for remaining enrollees —- according to a new five-state study from the Center for Health Policy at Brookings Institution and the Rockefeller Institute of Government of the State University of New York (SUNY). The study highlights the difficulties of meeting the ACA’s goals of competition and consumer choice, especially in rural areas and urban places with high concentration of providers. …
… Several factors caused a substantial shift toward narrower insurer networks that offered more health maintenance organization (HMO) plans than broad preferred provider organization (PPO) plans, the authors found. Enrollees with pre-existing conditions disproportionately joined PPOs in order to maintain access to their current doctors and specialists, increasing the cost of offering these plans. Insurers also faced hurdles, negotiating lower prices within PPOs because they could not trade higher patient volumes for lower prices as they could when negotiating with HMOs. By the third year of the ACA, insurers reduced the number of PPO plans they offered and many switched to offering only HMOs. In Texas, no insurer currently offers a PPO product in the individual market. Although the authors caution against generalizations from their five-state sample, they conclude that if policymakers craft an ACA replacement that continues to rely on insurer markets, they should bear in mind the large local differences that exist; there is uncertainty about adverse selection and risk; market competition is dependent on the local provider base; there is a tendency toward narrowing networks; and insurers adjust rapidly to recent experiences.
How has Obamacare impacted state health care marketplaces?
Source: Michael Morrisey, Richard P. Nathan, Alice M. Rivlin, and Mark Hall, Brookings Institution, February 9, 2017