Signs of Life in ACA Market

Susan Ladika

Competition in the health insurance market continues to fade with more markets dominated by one or two companies, according to a study by the American Medical Association. But a Robert Wood Johnson Foundation report suggests that the market for the ACA exchange plans may be an exception to trend toward less and less competition. The foundation says that after hitting bottom in 2018, the ACA exchange market is perking up with companies entering the market: “All signs point to growing stability as measured by moderate premium increases and increased participation by health plans.” 

Both reports came out in September 2019. The AMA study of commercial health insurance, not just ACA exchange plans, included nearly 400 metropolitan statistical areas (MSAs). The researchers in the AMA’s Division of Economic and Health Policy Research looked at the commercial market as of Jan. 1, 2018, and the ACA market six months later. The AMA researchers analyzed the commercial market by the type of product: HMO, preferred provider organization (PPO), and point of service (POS). Using the Herfindahl–Hirschman Index, a well-known formula for calculating market concentration, and the HHI thresholds used by federal antitrust regulators (an HHI score of 2,500 and above is deemed highly concentrated), they found that when they combined the different insurance products into one category, 75% (348 of 382) were highly concentrated. When they analyzed the markets just using market share, they found that in 48% (182 of 382) of the markets, one insurer had a market share of 50% or greater when HMO, PPO, POS, and exchange plans were lumped together. When they were considered separately, the POS and exchange plan markets were the ones with the highest percentage of MSAs with a dominant company: In 87% of the MSAs, one insurer had a market share of 50% or more in the exchange market and in 92%, one insurer had a market share of 50% or more in the POS market.

ACA participation by type of insurer, 2015–2020

Source: Robert Wood Johnson Foundation

When the AMA researchers analyzed competition at the state level, the 10 states with the least competition were Alabama, Alaska, Delaware, Hawaii, Illinois, Kentucky, Louisiana, Michigan, North Dakota, and South Carolina. 

The AMA study also compared 2018 market concentration with 2014 when the ACA exchanges opened. The researchers, José R. Guardado and Carol K. Kane, found that market concentration has inched up over those four years. In 2014, 71% of markets were highly concentrated compared to the 75% in 2018. They also found that the HHI went up in 58% of markets. 

RWJF’s look at the commercial insurance market was confined to the ACA exchange market. After the 2018 nadir, Medicaid managed care organizations and a couple of relative newcomers—Oscar and Bright Health—entered the exchange plan market this year. Next year, Centene, which is in the process of acquiring WellCare, is joining Oscar and Bright Health in having plans for a major push into the ACA exchange market, according to RWJF. Several big national companies—Humana, Aetna, UnitedHealthcare—have largely abandoned the ACA exchange market, notes RWJF, and Cigna and Anthem “have a much-reduced footprint.” 

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