Are Insurers Bailing in to Obamacare?

Obamacare’s supporters cheered a report by the U.S. Department of Health & Human Services, which claimed, based on preliminary evidence, that more insurers will participate in Obamacare exchanges next year:

  • In the 44 states for which we have data, 77 issuers will be newly offering coverage in 2015.
  • The Federal Marketplace states alone will have 57 more issuers in 2015; a 30 percent net increase over this year.
  • The eight State-based Marketplaces where data is already available will have a total of six more issuers in 2015, a ten percent net increase over this year.
  • Four of the 36 states in the Federal Marketplace will have at least double the number of issuers they had in 2014.
  • In total, 36 states of the 44 will have at least one new issuer next year. And some of the nation’s largest insurance companies will be offering coverage in more than a dozen new states, joining the hundreds of insurance companies already participating in the Marketplace.

This is evidence, according to the media, that Obamacare is here to stay. There is no doubt that insurers are heavily invested in the success of Obamacare. They certainly want the subsidies that flow as tax credits via the exchanges. Nevertheless, I don’t think

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that means that Obamacare is a done deal, for at least three reasons:

  1. Insurers’ losses in exchanges are limited for three years, but the industry loses protection after that. Even the 2015 bailout is not assured.
  2. Obamacare exchanges are a very small — and shrinking — part of the entire market. Entering the exchanges is not a “bet the company” business decision for insurers.
  3. Private exchanges are growing rapidly. This demands insurers transform into retail businesses. The business skills to succeed in private exchanges are largely similar to those required to succeed in Obamacare exchanges. So, if an insurers is committed to succeeding in private exchanges (as it must), it is not a big

    strategic or operational lift to engage Obamacare exchanges for the next three years. Indeed, because of the subsidies, engaging with Obamacare exchanges is a low-risk way for an insurer to test and refine the needed skills for private exchanges.

Comments (5)

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  1. lose for words says:

    Well what can you believe anymore? Your articles are all over the place.
    You early posted an article that says employers will drop insurance in favor of employees going to the exchanges and receive tax credits to help subsidies.
    Now you are stating in this article that it’s a shrinking market and employers will go to private exchanges instead. Why would they go to private exchanges and forgo tax Credits? Which article should we believe?
    The main reason more carriers are not participating in the marketplace exchanges is because they simply do not have to. They are already getting plenty of tax payer’s money without risk.
    Let’s look at a major player in Iowa. BCBS of Iowa or Wellmark is not going to participate in the Marketplace exchange for a second straight year. Ask yourself why a carrier with over 80% market share would not want to participate. Simple answer (Children’s Health Insurance Plan) formerly the Schip program. The start of socialized medicine.
    In Iowa the plan is called the Hawk-I.
    You have your choice of either BCBS or United health care. (Nether are participating in the exchanges.)
    However Iowa is one of the states that expanded Medicare. So any person going to the marketplace exchange and receives tax credits that has dependents under the age of 19 and makes less than 300% of the federal poverty level must place those dependents with Medicaid. (BCBS or United Health Care)
    I would argue they are participating without having to participate.
    It just makes good business since for united and BCBS not to participate. They are getting the majority of healthy kids and being paid with tax dollars all ready. Why would they go after the older people who could already be sick? Get the kids addicted first then we will get the parents later. Let the co-ops and smaller carriers come in the first few years and pick up the sick people. They will wait 3 years then come in and underprice the little guys and take all the kids parents back.

    • John R. Graham says:

      Thank you for paying attention, nevertheless. I defend myself thusly: Although their are clear incentives for some employers to drop health benefits and move employees to Obamacare exchanges, that depends on the wages the employees earn and how the employer is incorporated. I’ve never endorsed a specific estimate of how many employers or employees will drop group coverage for Obamacare exchanges, although I have cited them with great interest.

      Private exchanges certainly make sense for firms with high-earning workers.

      • Don Levit says:

        As discussed previously, private exchanges are group plans that provide more choices for employees.
        If these choices are “me-too” plans, what benefit is choosing the lesser of two evils?
        Don Levit

  2. Wanda J. Jones says:

    John–I agree with you completely, as a relief for you from my regular disputations.