The Widdershins

Is there competition in the Affordable Care Act?

Posted on: October 30, 2013

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One of the things the Affordable Care Act was supposed to do was to encourage “competition” among the health insurance companies.  It was believed that opening up the markets would cause more companies to enter into an area and compete for the business of (for now) individuals.  So how has that worked out?  Apparently not so well in rural or or smaller market areas.

In an article in the NY Times, evidence is coming forward showing that rural areas or smaller towns are not benefiting from the opportunity to have competition in the marketplace.

While competition is intense in many populous regions, rural areas and small towns have far fewer carriers offering plans in the law’s online exchanges. Those places, many of them poor, are being asked to choose from some of the highest-priced plans in the 34 states where the federal government is running the health insurance marketplaces…

In the counties that are using the federal exchanges, approximately 58 percent of them only offer plans from one or two insurers.  In 530 of those counties there is only one insurance company participating.  Experts say there are a number of reasons for this lack of companies participating in the exchanges:  medical costs are high, one company has “cornered” the market and hospital systems are resistant to efforts to lower prices.  John Holahan, a fellow at the Urban Institute said: “I think that all else being equal, premiums will clearly be higher when there’s not that competition.”  And that can be seen in two examples cited by the Times piece.

In Wyoming, two insurers are offering plans at prices that are higher than in neighboring Montana, where a third carrier is seen as a factor in keeping prices lower.

In an even more glaring example, the Times cites the issue in Florida:

In some cases, competition varies markedly across county lines. In Monroe County, Fla., which includes the Florida Keys, two insurers, Cigna and Florida Blue, offer plans on the federal exchanges. In neighboring Miami-Dade County, there are seven companies, including Aetna and Humana, two of the nation’s largest players.

I can also say that in the Jefferson County region of Alabama (Birmingham) there are only two companies participating in the federal exchange:  BCBS of Alabama and Humana.  Now when you go to healthcare.gov and enter in the information for Birmingham it give you a list of twelve health plans, but they are plans offered only by the two companies mentioned and the list includes the various Bronze/Silver/Gold/Platinum varieties of the four plans, five if you count the catastrophic plans limited to those under 30.  It also includes several types of plans including PPOs and HMOs, but again only by those two companies.  If there had been a 3rd company offering policies would that have affected any downward pressure on the costs?  Going by the example of Wyoming and Montana above, there’s a good chance it would.  The Times piece also points out that most of the counties with only one insurer are mostly concentrated in the South, although other states with scarce competition include Maine, West Virginia, North Carolina and Alaska.  There is a handy-dandy graphic of the breakdown that you can see here.    The Times piece also cited an example from Georgia:

In rural Baker County, Ga., where there is only one insurer, a 50-year-old shopping for a silver plan would pay at least $644.05 before federal subsidies. (Plans range in price and levels of coverage from bronze to platinum, with silver a middle option.) A 50-year-old in Atlanta, where there are four carriers, could pay $320.06 for a comparable plan. Federal subsidies could significantly reduce monthly premiums for people with low incomes.

Another area that the A.C.A. was going to attempt to lower costs for consumers was with the “multistate plans”.   The multistate plans were basically a sop to those on the left who wanted a single-payer option.  The multistate plans would be devised by O.P.M, the Office of Personnel Management and was meant to resemble the plans offered under the Federal Employees Health Program.  Under FEHBP there are probably anywhere from ten to twenty plans a Federal employee can choose from when you include local plans, HMOs and the like.  “The law created what are called multistate plans, in which a private carrier offers insurance in the marketplaces of multiple states under contract with the federal government.”  As you can see from the link above under multistate plans, not every state decided to offer those plans and where they did offer the plans they may not have made that big of a difference:

In Orange County, Ind., the silver plan offered through Anthem Blue Cross and Blue Shield’s multistate plan is the same price — $487.11 for a 50-year-old — as another Anthem silver plan offered in the marketplace.

Now the Times piece does not mention whether both of those plans offer the exact same benefits.  Hell, the plans aren’t even the same from state to state.  Here is the offering from BCBS in Louisiana:

Blue Cross and Blue Shield of Louisiana $1500, a Multi-State Plan

Blue Cross and Blue Shield of Louisiana $2000, a Multi-State Plan

And here are the multistate plans from Kentucky:

Anthem Blue Cross and Blue Shield Gold DirectAccess, a Multi-State Plan

Anthem Blue Cross and Blue Shield Silver DirectAccess, a Multi-State Plan

The Louisiana plans don’t even mention if they are a silver and gold plan or what.

For now, let’s call the competition aspect of the A.C.A. a work-in-progress.  We are only in the first year and after the insurance companies have a year under their belt the competition aspect of the Act may improve.

This is an open thread.

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10 Responses to "Is there competition in the Affordable Care Act?"

The Baker County problem sounds like a carve-out, and we are familiar with them in SoFla. As opposed to having a number of companies so that prices moderate, the insurers decided among themselves to carve out districts for each of them, offering substandard plans at inflated prices to consumers who then had no choice but to accept them. Tacky? Yes. Illegal? No.

chat@1: Well at least with these plans, they do have to meet a minimum standard for what they are required to offer and a consumer can basically expect that with a silver plan of whatever type they will have a 70/30 split.

Fredster, thanks for posting this because this is going to be a real “PR” problem for any real reform in healthcare. It is quite complicated, but oh so easy to demagogue and create nice little sound bites.

When you dig down into the community ratings for rural America you find a pretty ugly practice. Fewer people with remarkably similar illnesses going to barely functioning hospitals that have cobbled together a financing structure ill-suited for negotiation. It is a mess.

Attendant to this is the constant conservative cry: Nationwide marketing of policies. What would happen in a heartbeat is all the insurance companies would establish a NE or IA subsidiary where the requirements are next to nothing, flood the rural areas with meaningless junk policies, and call it good. The ACA thwarts that by taking the meaningful step of establishing a floor for policies and services. While you are going to hear the gnashing of teeth around the short-term consequences of this — long-term it might be the most important thing the ACA does. It builds a reasonable expectation on the part of people for what insurance policies must do — once that happens, bring on single-payer.

Prolix said: going to barely functioning hospitals that have cobbled together a financing structure ill-suited for negotiation

Exactly. These smaller hospitals are going to have to find themselves a big brother or sister to affiliate with. The smaller hospitals will find they have better purchasing power to buy everything from meds to beds to medications. Two community hospitals in Jefferson parish in metro nola are going through this. East Jefferson General Hospital was created in the 60s and West Jeff the late 50s, early 60s. West Jeff is across the Miss. River. It was created because there was no hospital on the West Bank of the river and patients had to be transported to New Orleans proper for treatment. They were created and funded by having medical districts and were built as community hospitals. Both are quite large now 300 to 400 beds but they don’t have the power of a larger system with multiple hospitals. Jefferson parish is now in the process of trying to find groups that will manage the hospitals. The parish does not want to sell them, just find a big partner to run them. Of course this is typical Louisiana; each hospital has its own board and the respective boards have split on who they want to manage them. 🙄

Oh my…where is Pat when we need her.

Kanye West Says He, Kim Kardashian More Influential Than Obamas

Kanye, lookie here..got a little sumpin’ sumpin’ for ya.

Yes, I have read here in GA that southwest GA has a real problem. First of all there is only one hospital that services the entire area and that BCBS is the only insurer writing policies for this area. I checked an in my area there are 39 plans from five insurers. So yeah, Metro Atlanta is going to make out like a bandit from this plan but the rural areas are going to have a harder time. I’m not even sure some of them are going to be able to afford the insurance with subsidies and then GA is not expanding Medicaid which is probably what the majority of these impoverished rural areas would qualify for. I’m left wondering if Medicaid was expanded if it would lower the prices for everybody else.

@6: Likely it would.

Ga6th: Good point and it probably would lower prices for others.

Glad to see ya, and thanks for the contribution to the discussion.

Fredster, thanks for digging up this info. Looks like the competition factor is woefully lacking for these less populated areas. Very unfair. They need to work on this.

annie@9: Yes, they’re going to have to do something to stimulate competition in some of these areas. Exactly how they can do that I have no idea.

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