Healthcare exchanges: Incredible shrinking options and what it means

Employer-sponsored health plans cover more than half of the non-elderly population of the U.S. according to the Kaiser Family Foundation, but millions of Americans will be shopping individually for 2017 coverage when open enrollment begins on November 1.

Many of these shoppers will be disappointed with their lack of choices as insurers are fleeing the public exchange market. For example, Aetna will be in four states instead of 15, UnitedHealth will be in three states instead of 34, and Humana has cut plans by 88 percent.

In fact, as of early October, there are five states with only one company offering health insurance through their Affordable Care Act (ACA) exchanges, according to Business Insider. They include South Carolina, Alabama, Alaska, Oklahoma and Wyoming. And they could be joined by others.

Large losses by major insurers account for the lack of choice: When Aetna dropped approximately 80 percent of exchange policies, the company linked the decision to a loss of $20 million in pretax dollars in the second quarter on its exchange plans. This is a common theme. Many insurance companies have struggled with enrollees who were sicker and older than expected, coupled with a dearth of young and healthy enrollees who could hypothetically offset the losses.

According to one estimate, exchange plans lost an average of $1,000 per enrollee.

Here’s what to expect in the weeks and months ahead:

  • More talk about a public option. The need for health coverage and the lack of choice is adding fuel to the fire on this topic.
  • Increased premiums. The complete numbers are not in yet, but the Kaiser Family Foundation reports that the cost of the second-lowest silver plan in major population areas will increase by a weighted average of 9% in 2017. (There’s a lot of premium variation across markets – from a 13 percent drop in some to a 25 percent increase in others.)
  • A brighter spotlight on subsidies. More than 85 percent of those buying coverage on the exchange are eligible for financial assistance, but another 2.5 million who shop outside the exchange are “leaving money on the table” according to a recent report from the Department of Health & Human Services.
  • Possible penalty forgiveness. A new bill was introduced in September 2017 that would exempt people from penalties if they live in a county with one or no options for coverage. If it passes, this bill could impact nearly one-third of U.S. counties in 2017.
  • Greater awareness of private exchanges. For businesses, private health insurance exchanges continue to grow, although not as quickly as forecasted. In 2016, approximately 8 million people were enrolled through private changes, according to Forbes. Recent growth has come primarily from mid-size companies with 100 to 2,500 employees, although some large employers including Walgreens and Sears have jumped on the bandwagon.

How do ACA exchange premiums compare with employer plans? A report released this fall by the Urban Institute claims that premiums in health insurance exchanges are lower than comparable premiums for employer-sponsored plans.

“We find that nationally, nongroup marketplace premiums are 10 percent lower than the average employee-sponsored insurance premium, after the adjustments …(with) more than ¾ of states and more than 80 percent of metropolitan areas having lower marketplace than employer premiums,” according to the report.

The devil is in the details. Critics say the report compares premiums for the second-lowest-cost silver plans to premiums for the more comprehensive, employer-sponsored insurance.

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