Early Projections Show Exchanges Will Increase Competition in Individual Market

A preliminary review of the number of insurers seeking to sell plans in the nongroup, or individual, health insurance market through state health insurance exchanges indicates that a growth in competition is likely. The report, Impact of National Health Reform and State-Based Exchanges on the Level of Competition in the Nongroup Market, was produced by Wakely Consulting Group with funding from the Robert Wood Johnson Foundation (RWJF). At least as many insurers applied as the number that actively participated in the nongroup market in the base year, before reform.

Ten states that planned to run their exchanges had complete data on the insurers’ applications to participate. The authors searched public records to identify the insurers that participated in the nongroup market in each of the states before reform, i.e., in 2005 in Massachusetts, and 2011 in the other states. Insurers often register to offer insurance in a state without actively participating in the market. These “shell” entities were excluded; the analysis counted only the insurers that covered at least 3,000 lives or, in smaller states, at least 5 percent of the individual lives insured.

 In six of the states, at least one more insurer applied to sell through the exchange than had participated in the market before reform. California, which had ten active insurers in the individual market in 2011, chose 13 to sell qualified plans through the exchange. Some who applied were not accepted.

Massachusetts, which began reform in 2007, experienced the most growth, and enrollment was spread more evenly among the participating insurers than in 2005. In 2005, the market was dominated by two insurers, and 80 percent of the covered lives were enrolled with Blue Cross. Nine insurers applied to participate in the exchange beginning in 2014. Blue Cross currently insures fewer than 40 percent of the covered lives, and the authors expect the trend toward more even distribution to continue.

In four states, the number of insurers that applied to sell through the exchange was the same as the existing number of participants; the authors did not address whether any of the insurers that applied were new competitors. The authors project that where there is “hardy” competition before reform, the exchanges will intensify that competition.