Iowa has Exchange problems. It has a single insurer, Medica, planning to be on-Exchange in 2018. Its prices are comparatively high which is mainly a problem off-Exchange. There are real problems in Iowa.
Yet Iowa is in a stable, sub-optimal equilibrium of a single carrier taking on all actuarial risk without taking on strategic competition risk.
Indianapolis has a different stable equilibrium. It has two Medicaid like carriers on the market in 2018. The broader network carriers that pay their providers near commercial rates are leaving. Indianapolis will see low prices on their Silver plans but comparatively high post-subsidy prices because the two Medicaid like carriers have effectively converged on minimally differentiated products with nearly identical pricing.
Robert Laszewski seems to imply that there are not stable, sub-optimal equilibriums and that the market design of the ACA is inherently flawed:
Or, Republicans could just let things in the individual health insurance market get worse and take that to the 2018 elections!
I have always believed that the market imperative to act is what would finally force Republicans to figure this out.
That said, there is no clear path out of this just as the individual markets continue to spiral downward partly because of the inherent issues in Obamacare’s market architecture and partly because of Republican efforts to make things even worse.
Assuming no sabotage, there are viable stable equilibriums that different regions can settle into. They are not optimal equilibriums of low cost, broad network, no hassle insurance that never says no to anyone. But they are fundamentally stable. Those sub-optimal equilibriums are either single carrier states or market convergence of very similar looking plans with different logos. States that more aggressively manage their exchanges can and do get better markets like California but even benign neglect leads to stability. The only question is whether the neglect is benign or active for most counties.
** Yes, rural counties with almost no covered lives will be a challenge as we see in Nevada and Ohio but these are corner cases not dominant cases.
daveNYC
Is there anything in place that would prevent things from ending up with monopolies/duopolies as the the endpoint for the exchanges? That seems like a pretty serious potential risk for the smaller population states.
Victor Matheson
@daveNYC: But a monopoly with regulated prices and regulated essential health benefits coverage is not necessarily the worst endpoint.
Remember, “Medicare for all” is essentially advocating a monopoly insurance provider and that is the goal of many progressives and many health economists.
Plus a monopolist insurer would also have market power on the buying side allowing them to have a better chance of securing lower rates from health care providers.
What would really make this work is for the states to have some skin in the game, to borrow conservatives’ favorite line. If states were on the hook for a piece of the exchange subsidies, they would have a pretty strong incentive to make sure pricing didn’t get out of hand either though strict regulation of pricing or encouraging competition.
David Anderson
@daveNYC: at this time no; monopolistic or converged markets with a small number of very similar insurers are not regulated against in the ACA.
Plus everything that Victor said.
low-tech cyclist
OT:
“My inflatable doll is a lesbian” needs to join the rotation of tag lines at the top of the page.
David Anderson
@low-tech cyclist: done
daveNYC
@Victor Matheson: Pretty fundamental difference between a monopoly held by a private company and one held by a government agency. A monopoly insurance situation might not be as bad as the shit show that is cable TV or broadband, but it’s not exactly good either.
And a monopolist insurer also has the ability to potentially drive providers out of business. The insurance equivalent of Wal-Mart isn’t giving me the warm fuzzies.
low-tech cyclist
@David Anderson: Thanks!
ElegantFowl
David, I have a question maybe you can answer. The administration seems determined to leave CSR payment uncertain to sabotage the insurance markets, and you’ve explained that situation well. But I wonder how that plays with MLR requirements under the ACA. If an insurer overprices for uncertainty but doesn’t actually incur that risk/expense, don’t they go under MLR and need to reimburse?
David Anderson
@ElegantFowl: Good question!
If an insurer overprices for any reason, their MLR for a given year is under the benchmark. The 80% MLR calculation is based on a three year lookback so a one time overpricing would probably be used in most cases as a partial offset to the bad year of 2016 and the decent year of 2017. There might be refunds. There might not be refunds. I don’t know yet.
KithKanan
“…market convergence of very similar looking plans with different logos” describes broad though less populous swaths of California as well.
Looking at the 2017 plan list, the competition you describe does exist in the populous parts of the state, so my past comments have probably been a bit overly critical, but in my ~250K coastal county (San Luis Obispo) you’ve got your choice of which of the Blues you’d like to get your single narrow-network plan per metal level from. The situation is identical in the much more rural ~65K county (Lake) a good friend lives in.
I was going to say the situation was identical in the ~250K coastal county I grew up in (Santa Cruz), but it looks like Kaiser and Healthnet have moved in this year in at least some metal bands.
JFA
David,
Could you do a post on why ACA insurance policies are at the county-level? This has always confused me.
David Anderson
@JFA: Really good question… probably over the weekend.