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In every state so far, more insurers are asking to participate in Obamacare

June 12, 2014

    Dan Diamond, Managing Editor

    New Hampshire's first year on the Obamacare exchange was a roaring success…but also, a market failure.

    More than 40,000 state residents signed up for insurance through HealthCare.gov—about 5,000 more than the CBO anticipated—helping cut the state's uninsured rate by as much as one-third.

    But all 40,000 picked just one insurance company: Anthem Blue Cross and Blue Shield.

    Anthem was the only carrier that operated on New Hampshire's exchange in Obamacare's first enrollment period—a fact not lost on state residents, who groused about the lack of options, the plan's prices, and Anthem's narrow network, which excluded 10 of New Hampshire's 26 hospitals.

    Meanwhile, routing another 40,000 customers to Anthem wasn't ideal for state insurance officials, either. By some measures, New Hampshire was already the sixth-least-competitive insurance market in the nation, with Anthem controlling more than 90% of market share…and that was before Obamacare even launched.

    But the second year of Obamacare is bringing out more insurance carriers in New Hampshire. Not just one or two more—but four more.

    "New Hampshire residents have asked for options," state Insurance Commissioner Roger Sevigny said last month, announcing the five plans that will participate in this fall's enrollment period.

    "Choice is good for consumers and good for competition."

    States seeing jump in new insurers

    Sevigny may be the only state commissioner who gets to tout a 400% increase in the number of participating plans, but he's hardly alone in seeing a surge on his state's exchange.

    In every state that's shared details thusfar, it appears there will be more choices in Obamacare, year 2:

    • Michigan's exchange is going from 13 participating companies in 2013 to 18 this fall.
    • At least one additional carrier has filed to sell plans through Kentucky's exchange.
    • Several more insurers may join the plans participating in Virginia, Washington, and Indiana's exchanges.
    • United HealthCare may jump into Georgia's market.

    And the surge in carriers means that there will be many more actual options at the point of purchase, too. Peter Frost at the Chicago Tribune notes the number of companies competing on the Illinois exchange next year will inch up from six to eight—but the number of available policies will almost triple, from 165 to 504.

    Officials at HHS and the White House are thrilled by the growing turnout.

    "We are pleased to see an increase of insurers applying for state marketplaces," a senior administration official told the Daily Briefing. "Where insurers compete for business, consumers benefit."

    Why some plans waited

    Insurers sat out of the exchanges for different reasons in year one. Some were wary of the start-up risks. Others were openly taking a wait-and-see approach. Still more, it seems, didn’t want any part in the first year's batch of customers, who were expected to be older and sicker.

    (See this column on why United, Aetna, and Cigna sat out of California's market in 2013, for instance.)

    And while the technical problems associated with the exchanges have been legion, plans that participated have reported predictably higher revenue, if unclear profits. One million more consumers signed up than expected…and while they weren't as young and healthy as the insurance companies had hoped for, they were more customers.

    Now, more plans want their chance to chase those dollars. And with ACA enrollment expected to ramp up in the second year, Kaiser Family Foundation's Larry Levitt suggests that new market entrants can still reap significant gains. That's both by capturing new volumes from the pool of under- and uninsured—for example, more than 5.8 million potential marketplace enrollees remain between California, Florida, and Texas alone, Kaiser estimates—or competing on price to siphon customers away from rival plans.

    "Insurers continue to see this as a good opportunity," Levitt told Reed Abelson of the New York Times.

    "There's the so-called second mover advantage."

    "There’s the so-called second mover advantage," Jay Angoff told Bloomberg's Alex Wayne. (Angoff has served as a White House official and state insurance commissioner.) "The second year, new carriers come in because they conclude that people in the worst health are going to stay with their existing plans and therefore they’re going to get a better mix of risk."

    Choosing the right opportunities

    Ultimately, the jump in the number of insurance companies should benefit consumers. But when it comes to shopping for a health plan, there can be too much of a good thing.

    In a recent post, policy blogger Andrew Sprung points to a body of research that increasing the number of selections in the insurance market isn't always better for consumers. At Academy Health's blog, economist Austin Frakt discussed studies that seniors—when confronted with too many options—can end up making sub-optimal choices.

    "More plans means more competition on price," journalist Maggie Mahar tweeted, adding "but too many means we'll need more navigators."

    Still, Mahar and other experts generally hail the new insurance plans leaping into the ACA's marketplaces, a move that has been telegraphed for months.

    Even before New Hampshire had reached the halfway point of Obamacare's first enrollment period, the head of a Massachusetts co-op was eying the opportunity to participate in its second.

    "New Hampshire is a market crying out for competition," Minuteman Health CEO Thomas D. Policelli said in December. "We think we can deliver it."

    Go deeper: See how health reform is changing health care

    Our researchers have been tracking the ongoing effects of the Affordable Care Act, and how the law is changing hospital operations, health system strategy, and the underlying industry dynamics. Here's some of our latest analysis and resources, with a look at what the ACA means for providers:

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