As technical failures bedevil the rollout of President Obama’s health care law, evidence is emerging that one of the program’s loftiest goals – to encourage competition among insurers in an effort to keep costs low – is falling short for many rural Americans.
While competition is intense in many populous regions, rural areas and small towns have far fewer carriers offering plans in the law’s online exchanges. Those places, many of them poor, are being asked to choose from some of the highest-priced plans in the 34 states where the federal government is running the health insurance marketplaces, a review by the New York Times has found.
Of the roughly 2,500 counties served by the federal exchanges, more than half, or 58 percent, have plans offered by just one or two insurance carriers, according to an analysis by the Times of county-level data provided by the Department of Health and Human Services. In about 530 counties, only a single insurer is participating.
The analysis suggests that the ambitions of the Affordable Care Act to increase competition have unfolded unevenly, at least in the early going, and have not addressed many of the factors that contribute to high prices.
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Insurance companies are reluctant to enter challenging new markets, experts say, because medical costs are high, dominant insurers are difficult to unseat, and powerful hospital systems resist efforts to lower rates.
“There’s nothing in the structure of the Affordable Care Act which really deals with that problem,” said John Holahan, a fellow at the Urban Institute, who noted that many factors determine costs in a given market. “I think that all else being equal, premiums will clearly be higher when there’s not that competition.”
The Obama administration has said 95 percent of Americans live in areas where there are at least two insurers in the exchanges. But many experts say two might not be enough to create competition that would lower prices.
For example, in Wyoming, two insurers are offering coverage and prices that are higher than in neighboring Montana, where a third carrier is seen as a factor in keeping prices lower.
It is unclear how the online marketplaces might evolve over time. Many large insurers are closely watching what happens in the first year to decide whether to more aggressively pursue new markets. In the meantime, problems with the healthcare.gov website are making it harder for them to know whether the exchanges’ slow start is the result of technical difficulties or more serious underlying problems, such as a lack of consumer demand, that would discourage them from entering.
In rural Baker County, Ga., where there is only one insurer, a 50-year-old shopping for a silver plan would pay at least $644.05 before federal subsidies. A 50-year-old in Atlanta, where there are four carriers, could pay $320.06 for a comparable plan. Federal subsidies could significantly reduce monthly premiums for people with low incomes.
Counties with one carrier are mostly concentrated in the South. Nearly all of the counties in Mississippi and Alabama, for example, are served by just one insurer, according to The Times’ analysis. Other states with scarce competition include Maine, West Virginia, North Carolina and Alaska.
“The consumer wants some level of choice,” said Alexander K. Feldvebel, the deputy insurance commissioner for New Hampshire, where one carrier, Anthem Blue Cross, owned by WellPoint, now offers plans. “You don’t have that when you have a single carrier offering all the products.”
The Affordable Care Act, which was passed in 2010, was designed to make health insurance available to people who had not been able to afford it or had been denied coverage because of pre-existing conditions. It has transformed the market for individual insurance by creating marketplaces aimed at making it easier for consumers to compare their options. The law also sought to level the playing field for new insurers.
Before its passage, the existing insurance marketplace was often dominated by a single insurer.
“The picture that comes away even before the ACA went into effect was that insurance markets are highly concentrated in many states,” said Larry Levitt, a policy expert at the Kaiser Family Foundation.
Impact of co-ops
One of the main ways of fostering competition was through the creation of consumer-operated plans, called co-ops, to compete with existing insurers. They received some $2 billion in federal loans and are operating on 22 exchanges. At least 18 others were proposed when the program was discontinued as part of last year’s negotiations over the fiscal cliff.
Concerns have risen recently about the co-ops’ financial viability because of heavy regulation and a lack of visibility so far among consumers, although it is too early to know whether or not they will succeed.
“If co-ops are the game-changing, paradigm-changing force that we hope and expect them to be, they will permanently drive down rates,” said John Morrison, the president of the board of the National Alliance of State Health Co-ops, which recently released a study concluding that premiums were lower in states with co-ops.
Some say the arrival of a co-op changed the landscape in Montana, where the insurers Blue Cross and PacificSource were joined by Montana Health Co-op.
In neighboring Wyoming, two insurers are offering plans under the exchange: Blue Cross and WINHealth, a small health maintenance organization, or HMO. The cheapest silver plan available to a 50-year-old in Wyoming cost nearly as much as the most expensive Montana plan.
“Adding that third competitor really changes the landscape vastly,” said Jerry Dworak, chief executive of the Montana co-op.
Too little leverage
In rural regions, several factors combine to create a landscape that is inhospitable to newcomers. Developing relationships with doctors and hospitals can be costly where cities and towns are widely scattered and the pool of potential customers is small.
“I think the problem was that the Affordable Care Act was designed for where the majority of the people live, in the big cities where there’s a lot of competition among health care providers,” said Tom Hirsig, Wyoming’s insurance commissioner.
He said insurers simply did not find his state, with its population of fewer than 600,000, attractive.
“You’ve got to have some bargaining chips and we don’t have that much,” he said.
Often a single hospital dominates an area, giving insurers little leverage when negotiating reimbursement rates. Only one Wyoming county is served by more than one hospital, said Stephen K. Goldstone, the chief executive of WINHealth.
“What it costs to be treated here is more expensive than other places because there’s no competition among providers,” Goldstone said.
In some areas, having one or two major carriers may be an advantage in being able to negotiate with powerful hospital systems.
Feldvebel, the New Hampshire regulator, said, “The bigger your carrier is, the bigger the discount the carrier can deliver because they have more lives to bargain with.”
It is also difficult to attract new insurers to areas where the population has health problems. Only one carrier, Highmark Blue Cross, is offering coverage in West Virginia, which has high rates of obesity and chronic diseases like diabetes.
Observers cautioned against drawing too many conclusions from the current landscape, noting that several major insurers were waiting to see what happens next.
One such company is Centene, a national insurer that has focused on plans for Medicaid recipients and low-income consumers.
K. Rone Baldwin, a Centene executive, said the company had offered plans under the brand name Ambetter Health in nine states, but it views this year as merely a start.
“We don’t view 2014 as the make-or-break year,” he said.