We’re in a rural monopoly area (one “choice” of insurance companies) and I’m wondering – can a monopoly company pull out of an area if there’s too much uncertainty? That would leave us with no options.
The short answer is YES BUT… the business case really is hard to make to leave a county bare. An insurer may leave a county, but it is very likely that another insurer will enter. The ACA subsidy system creates a class of minimally price sensitive buyers who earn between 100-400% FPL. There is some gross premium level that is profitable for an insurer. That level may be extremely high and the folks who earn over 400% FPL would be in even more pain than they are now, but there is a premium level that is high enough to be attractive for one insurer to stay in a county to serve the subsidized individuals.
The ACA has a priced linked subsidy system. The subsidy is a gap filler between what an individual is expected to pay and the benchmark premium. The individual expected to pay amount is a percentage of income that increases as a buyer’s federal poverty level (FPL) income percentage increases. The benchmark premium is the premium of the second cheapest silver plan. The federal premium subsidy is the gap in between the individual expected to pay amount and the benchmark premium. An individual earning $30,000 in 2020 is expected to pay $199 for the benchmark plan. That individual pays $199 if the gross premium for the benchmark plan is $200 and they pay $199 if the gross premium for the benchmark plan is $2,000. Now if that individual chooses a plan that costs less than the benchmark, the premium that they pay every month decreases dollar for dollar until they get to zero.
Under this subsidy system, the monopolistic insurer if it is at all competent or reads Balloon-Juice for the past several years has a guaranteed way to make a bloody fortune. They jack up the the benchmark premium to a stratospheric level, introduce a second silver plan that is wildly cheaper than the benchmark so that almost anyone who is subsidy eligible can purchase a zero dollar premium silver or gold plan if they also aggressively load CSR costs into their silver premiums. If they price a gold plan underneath the benchmark, they can basically assume that no one should ever buy the benchmark plan. The only plans purchased would be plans priced wildly below the benchmark premium where the entire cost of the plan is covered by the federal premium tax credit. At that point, the entire revenue stream is effectively guaranteed and there will be no terminations for non-payment of premiums as no one is paying personal premiums.
This is a slightly farcical take on the incentive structure of an ACA monopolist. It is a business model that completely screws non-subsidized buyers but it provides insurance that can actually be quite decent at a very low effective premium for subsidized buyers.
I think that the incentive of a price-linked subsidy system will make bare counties a creature like a unicorn — often whispered about with rumors abound that there may be some at the edges of the urban areas but never actually sighted.