Obamacare Leaves Many With Fewer Choices and Higher Prices

Remember when Obamacare’s health insurance exchanges were supposed to work like buying a TV on Amazon?

In September 2013, just a few days before the exchanges created under the Affordable Care Act were set to go live, President Obama gave a speech in Largo, Maryland, describing what using those exchanges would be like:

“It’s a website where you can compare and purchase affordable health insurance plans, side-by-side, the same way you shop for a plane ticket on Kayak—same way you shop for a TV on Amazon,” he said. “You just go on and you start looking, and here are all the options. It’s buying insurance on the private market, but because now you’re part of a big group plan—everybody in Maryland is all logging in and taking a look at the prices—you’ve got new choices. Now you’ve got new competition, because insurers want your business. And that means you will have cheaper prices.”

The next month, the exchanges went online, sort of. For the first two months or so, the federal exchange system, which covers a majority of states, was essentially unusable.

Today, the exchanges function properly in a technical sense, at least on the front end that consumers deal with. But for many people they are still not providing the inexpensive, competition-rich experience that Obama promised.

When open enrollment, the period of time during which people are allowed to sign up for exchange-based coverage or switch plans under the law, begins later this year, about a third of the country will have just one option, according to a report from health policy consultancy Avalere Health. More than half of the country will have just two choices. In Pinas county in Arizona, there will be no insurance options available on the exchange at all. Close to 10,000 people in the county purchased coverage through exchange last year. “Depending on where consumers live, their choice of insurance plans may decrease for 2017,” Avalere Senior Vice President Elizabeth Carpenter said in a statement.

The exchanges are not fostering competition as promised. While the experience varies by county, it is clear that in many cases, insurers do not want to be in the exchange business.

Major insurers such as Aetna, Humana, and UnitedHealth have all reduced their participation in the health law’s exchanges. In Texas, reports indicate that more insurers may be on their way out.

Premiums for health coverage purchased under the exchanges, meanwhile, are set to rise in many places throughout the country, in some cases dramatically. In Tennessee, for example, two big insures, Cigna and Humana, recently filed revised premium increase with the state. In both cases, they were revised upwards by double digits, with Cigna proposing an average of increase of 46 percent, up from 23 percent, and Humana requesting a 44 percent increase, up from 29 percent. BlueCross BlueShield, which did not revise its June request, had already put in for a 62 percent increase.

Obamacare’s system of insurance exchanges was often described by its supporters as a kind of private market. But the system does not constitute a private marketplace in any meaningful sense. The exchanges are operated by states and the federal government, and although they facilitate the sale of private health insurance plans, the features of those plans, and the terms of sale, are heavily regulated, making it difficult for insurers to compete by differentiating their products. These are government-designed plans being sold through a government-run store. And while insurers may still sell policies off exchange, for the most part those policies must conform to the same regulations as plans sold through the system.

This design leaves insurers with few options regarding how to conduct their business, reducing the question into a binary choice of whether to participate or not. In many cases, we now see, they are choosing the latter.