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Why Health-Care Monopolies Shouldn't Worry Most Consumers

More than 30 percent of the country, up from 4 percent last year, could have just one carrier to choose from this fall.

It’s been a dramatic summer for health care.

In May, UnitedHealthcare announced it would stop offering insurance plans in "all but a handful" of state markets. In July, the federal government and 10 states filed a lawsuit to block Anthem from merging with Cigna and Aetna from merging with Humana. In August, Aetna and Humana said they would also drastically cut their coverage -- in Aetna's case, as payback for the lawsuit. Throughout the summer, several insurance co-ops, which were created by the Affordable Care Act, not only went out of business but decided to sue the federal government over the ACA's payment policies.

Insurance providers have struggled to profit because many of the people using the exchanges are the sickest and costliest patients. The wave of providers departing the market leaves about a third of the country with likely just one insurer option once open enrollment starts in November, according to an analysis by Avalere Health, a consulting firm. That's up from just 4 percent of places with monopolies last year.

But despite the gloomy outlook in many headlines and op-eds, the smaller marketplace isn't likely to be an issue for most consumers. 

Take Wyoming. It's no stranger to health insurance monopolies. After WINhealth went out of business in 2015, the state was left with just one insurer: Blue Cross Blue Shield of Wyoming. According to Denise Burke, senior policy and planning analyst with the Wyoming Department of Insurance, that hasn't had a negative impact.

“We just haven’t seen the problems that people have been anticipating as a result of lack of competition,” she said. 

A basic rule of economics is that the more competition in a market, the better. Monopolies can result in poor provider networks as well as increased prices. And if people are unhappy with their options, the fear is that they'll just choose not to get insurance.

That hasn't happened in Wyoming.

Wyoming has the second-highest premiums in the country. But that doesn't affect most consumers, said Burke, because 94 percent of marketplace users get a subsidy to pay those premiums. Nationwide, 86 percent of marketplace users receive health-care subsidies. The federal government's highly complicated formula offsets premium hikes to the higher income people on the marketplace who don't qualify for subsidies.

For their part, states have tools to keep premiums from rising too fast. Anytime an insurer proposes a premium hike of more than 10 percent, a state insurance official is required to review the "request" -- and in 37 states, they can reject it.

There are some drawbacks for consumers, though, regardless of whether they get subsidies.

This time last year, South Carolina had six insurers. Since then, a few major carriers left and its co-op collapsed, leaving just Blue Cross Blue Shield and one of its subsidiaries. That shouldn't impact consumers' coverage, said Ray Farmer, director of the state’s Department of Insurance, but it could hurt their options for care. 

“I’ve heard complaints from citizens who say their networks are pretty narrow -- they don’t always get to go to the providers they would prefer to go to,” he said.

Avalere’s study has recommendations for the feds that could keep insurers from leaving the marketplace, or bring some back. The most pressing is to change the risk adjustment program, which is what drove many of the ACA-created co-ops out of business and the center of their lawsuits.

The risk adjustment program made insurers with healthier members make payments to “sicker” insurers as a way to stabilize the markets. But insurers, particuarly the co-ops, have been criticizing the program for being unfair in what it deems a “healthy” insurer.  

“No one can say this market is stable," said Farmer. "At some point, someone at the federal level has to sit down and address these concerns. The states can offer advice, but ultimately the feds have to fix this."

The Obama administration seems to be hearing the criticism loud and clear. Last week, the Centers for Medicare and Medicaid Services proposed nearly 300 pages of new rules for the marketplace, with the most significant change proposed for the risk adjustment program.   

In the meantime, Elizabeth Carpenter, senior vice president at Avalere, isn't worried by the monopolies now -- but she may be if nothing changes.

“I think the carriers will keep coming and going. I think the important thing is to just make sure the downward trend doesn’t continue in 2018."

Mattie covers all things health for Governing.

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