By David Dankwa
Smaller carriers may step up to fill a coverage gap left by the recent exits of UnitedHealthcare and Aetna from California's individual health insurance market, reducing any potential impact on consumers.
A number of experts, including California Insurance Commissioner Dave Jones, have expressed concern that the withdrawals from the individual market — which is currently dominated by Anthem Blue Cross, Blue Shield of California and Kaiser — would result in less competition and increased prices.
However, Marian Mulkey, director of the California Healthcare Foundation’s Health Reform and Public Programs Initiative, told InsuranceNewsNet that, as these large national carriers leave, there are smaller regional carriers coming into the individual market as a result of the Affordable Care Act.
“On balance, I’m not sure this is going to make a big difference on either choice or price,” Mulkey said.
Just because the major carriers have significant scale across the country doesn’t necessarily mean they are able to leverage their size to provide reduced prices in California, she said.
“I’m not sure the size nationally of the health plan is what determines how competitive they can be. In the individual market, they put together a different kind of network with providers and they are able to negotiate what they are able to negotiate based on their California presence, not so much based on their size nationally,” Mulkey said.
Had the carriers decided to leave the group plan market, that would have been a different matter, she said. “If we see a big exodus of these carriers from the employer market, that would certainly be cause for concern.”
While Aetna and UnitedHealthcare are important carriers nationally and have a sizable presence in the employer market in California, historically they have played a much smaller role in the individual market. In addition, during the just-completed solicitation process for the California Health Benefit Exchange, a number of regional health insurance plans expressed interest in participating.
L.A. Care and Molina, which traditionally have served mostly Medi-Cal, California’s Medicaid program, will move into the individual market through the exchange. Regional carriers in Alameda, Contra Costa and Ventura counties also will enter the individual market through the health exchange.
According to the California Healthcare Foundation, the individual market was highly concentrated, with 87 percent of enrollees covered by the three main carriers. Anthem has the largest share with 47 percent of the market.
Overall, more than two thirds of Californians are covered through these carriers, including 51 percent with employer-based or individual private insurance, and 18 percent with Medicare or Medi-Cal managed care plans. The uninsured portion is expected to shrink, while Medi-Cal and individual coverage expands, as Obamacare goes into effect.
According to the California Department of Insurance, Aetna had about 60,000 people covered by individual policies as of March 31. UnitedHealthcare, through its subsidiary PacifiCare, had about 10,000 individual policyholders late in 2012. The policyholders will be able to purchase health insurance from other health insurers inside and outside the new California health benefits exchange.
Aetna and UnitedHealthcare, as well as Cigna, have decided not to participate in the exchange.
“Maybe they felt like they couldn’t compete very well there. If they don’t do it through the exchange, it takes an awful lot of money and effort to maintain an individual marketing presence for the number of enrollees they currently have and that number probably would have fallen because of the presence of the exchange in 2014,” Mulkey said.
California insurance commissioner Jones has singled out tax breaks that California gives to Anthem Blue Cross and Blue Shield for having created a competitive disadvantage in California for Aetna and UnitedHealthcare.
Mulkey said it is too early to tell whether the major carriers might also walk away from California's employer market. “There are so many complicated dynamics with the Affordable Care Act in 2014 that, by and large, both employers and health insurance carriers in the group market are watching very carefully and considering what their next steps would be. I don’t think we’re going to see huge turmoil in 2014 – it is going to play out a little more slowly than that," she said.
David Dankwa is a longtime business reporter with significant experience writing about the global insurance industry. Contact him at [email protected].
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