Choice and Competition: What United and Aetna’s Exit Means for the Future of the ACA

On November 1, 2016, open enrollment will begin for the Affordable Care Act’s marketplaces, meaning that the approximately twelve million Americans who purchase health insurance through the Obamacare exchanges will be looking to renew their plans for the 2017 year or to shop around for a better health insurance option. This year, however, they will be doing so under dramatically different circumstances: over the past six months, UnitedHealth Group, Aetna, and Humana, three of the largest insurers in the country, have all announced partial or full exits from the ACA marketplace, with varying effects on exchanges nationwide.

On a basic level, the consequence of these exits is clear: less competition in a marketplace that desperately needs it. Exchange plans will cost significantly more in 2017 than they did last year: according to a study by the Kaiser Family Foundation, premiums for the most popular exchange plans are projected to rise by an average of 9 percent, compared to a 2 percent rise between 2015 and 2016. While the mass exodus of insurers from ACA exchanges is certainly not the sole cause of this unprecedented price hike, it has certainly played a role. In fact, the American Academy of Actuaries lists marketplace competition as one of the major drivers of premium increases in 2017. More importantly, however, consumers’ ability to shop around in ACA exchanges has been a major mitigator of rising insurance costs. Last year, while premiums as a whole rose by double digits, a research brief published by the Department of Health and Human Services found that for the nearly two-thirds of ACA enrollees who shopped around, individual premiums rose by only 8 percent. With less competition in almost all state exchanges, shopping around will be far more difficult this open-enrollment season, meaning that these rate increases will likely hit buyers harder than they have in past years.

What this means in practice, however, varies greatly even within state lines. Take Illinois, for example. In the Chicago exchange there were fifty-one plans offered in 2016.  Aetna and Humana each offered four of these plans, while United offered ten, the second most of any insurer in the marketplace. Both Aetna and United have confirmed full withdrawals from the Chicago exchange, while Humana has yet to confirm whether it is staying or leaving. This means that in a little over a month, Chicago residents could enter open enrollment with eighteen fewer plans than were available last year, a 35 percent decrease. While this loss is certainly significant, it is unlikely that many Chicago residents will feel its impact. The city will be left with over thirty options on the private market, and more importantly, neither United nor Aetna nor Humana offered anywhere near the cheapest plan on the Chicago exchange. This means that Chicago residents will still have cheap health insurance options in their marketplace, allowing them to shop around and mitigate this year’s premium hikes.

However, less than four hours away in McDonough County, Illinois, the story is much different. While forty-seven plans were offered in the county in 2016 (a shocking number, given how rural the county is), three of its four cheapest Bronze (lowest tier) plans were offered by insurers who will not be in the marketplace in 2017, as were all five of its cheapest Silver plans (silver being by far the most popular tier of plans on Obamacare exchanges). It is impossible to know the exact enrollment statistics in McDonough’s exchange, but given that the median family income in the county is less than $38,000, it is safe to assume that many are enrolled in the cheapest plans on the exchange, and will be forced to find a new plan this November in a marketplace with higher premiums and far fewer options.

On September 9, 2009, President Obama gave a now-famous speech to address concerns about the ongoing healthcare debate. “My guiding principle,” he remarked, “is, and always has been, that consumers do better when there is choice and competition.” The health exchanges are but a small part of the Affordable Care Act, a monolith of law which has extended coverage to twenty million people since its inception. But their struggles still represent a serious challenge for the future of Obamacare. In the midst of a tumultuous campaign season, with the focus placed on the myriad of external threats to the ACA, the exit of United, Aetna, and Humana reflects a potentially more devastating internal flaw in the law. Regardless of November’s outcome, if the exodus from the health exchanges continues, Obamacare’s guiding principle may not survive another year.

(All data on Illinois premiums provided by healthcare.gov, the federal marketplace for healthcare plans. For more information on insurance plans in Illinois, please visit https://www.healthcare.gov/see-plans/)

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