JANUARY

It was expected that insurer exits and entries would occur during the early years of the
ACA as insurers adjust to the new market rules. Nevertheless, recent marketplace pullbacks,
especially among some major insurers, raise a concern that the current ACA marketplace
environment is not viable from a business perspective. (Notably, some of the insurers pulling
back from offering marketplace coverage continue to offer ACA-compliant coverage outside
of the marketplace.) A reduction in competition due to fewer participating insurers can
reduce consumer options as well as impact premiums. The ability of insurers to effectively
compete depends in large part on their ability to manage costs, which in turn reflects their
ability to effectively negotiate with providers to lower utilization and costs (e.g., through
narrower networks). Insurers with larger market shares in a particular area may have more
leverage in provider contracting. (The dynamic may be different in rural areas with a limited
number of providers—rural providers can have more negotiating power even if there is
only one insurer.) On the other hand, having a more competitive market could provide
insurers more incentives to negotiate aggressively and to pass along savings to consumers.
Research based on 2014 and 2015 ACA premiums suggest that the addition of an additional
competitor leads to lower premium increases, but the competitive effects shrink after two or
three additional entrants. 37
Due in part to lower potential enrollment, rural areas can support fewer insurers, so it
is not surprising that there are fewer participating insurers in rural counties and states.
Nevertheless, having only one or even no participating insurers in some areas is a cause for
concern.
Sufficient plan offerings.
Consumers have choices with respect to their particular plans. The ACA provides for four
metal levels, which reflect relative plan generosity, as well as a catastrophic plan available
to young adults and individuals who qualify for a hardship exemption from the individual
mandate. Insurers offering marketplace coverage must offer silver and gold metal plans, but
are not required to offer the other metal levels. In most states, insurers have flexibility within
metal levels to set particular benefit design and cost-sharing requirements. Some state
marketplaces impose standardized plan options, but may allow non-standardized options
as well. Standardized benefit options may help simplify consumer choices and facilitate plan
comparisons, 38 but could also inhibit innovative plan designs. For the 2017 plan year, the
federal marketplace is offering standardized benefit designs, called Simple Choice plans, on
an optional basis. Insurers can also offer choices across additional plan dimensions, such as
plan type (e.g., HMO, PPO), which can affect the level of care management, how broad or
narrow the provider network is, and the availability of out-of-network benefits.
AMERICAN ACADEMY OF ACTUARIES 17