The Affordable Care Act better known as Obamacare, has a lot of moving parts. One of the main aspects of Obamacare, insurance marketplaces, have hit a rough spot. The law’s online marketplaces — where people were supposed to be able to easily shop for health insurance — have been suffering from double digit premium increases and defections by big name insurers.
Three years in, many of the established, and known, insurers say they are seeing losses from selling individual plans. Many of the nonprofit Blue Cross plans and other known insurers are having trouble. Insurance co-ops created by the law have mostly gone out of business and one of the biggest insurance providers, United Health has exited most states where it once offered individual plans. In addition, Aetna has pulled out from 11 states. The defections are adding up and it appears there is something of a herd mentality taking place and no one insurer wants to be the last one participating.
When the marketplaces were established the thought was competition amongst insurers hoping to sign people up for their plans would help to keep premiums low. In addition to controlling cost, the marketplaces should also help to improve service. In theory that’s what competition does, decrease cost and improve service but now fewer options exist and it’s estimated that 17% of people eligible for the market will have no choice of carrier next year.
Health insurance is a business and insurance companies want to stay in business which means they can’t operate at a loss. One way to bring insurance providers back to the table is to increase the number of enrollees but they have to be the right types of enrollees. Premiums will continue to grow if heavy users of health care continue to shop on the marketplace and cost control goes out the window. Young, healthy people are the key to reducing costs in the marketplace. Healthy people consume fewer health care resources so they help to offset the cost of insurance for everyone covered by a plan. To date there are only half as many people as projected participating in the health insurance marketplace so enrollment has never grown to a critical mass.
There’s been talk about the government creating, and selling, an insurance product to compete with private insurers. As you can imagine, this approach is controversial and probably won’t receive enough bipartisan support to work. Tax incentives could be increased to help cover the cost of insurance for those who are shopping on the marketplace. While incentives may encourage more participation, it doesn’t seem like incentives will reduce cost. It’s kind of like moving money from one pocket to the other.
There’s no easy solution and there’s a lot of uncertainty in how to improve the market place. One thing is certain, a marketplace only exists when both a buyer and a seller are present. To date the health insurance marketplace doesn’t have enough buyers and there are fewer and fewer sellers.