Little time is left until the new health insurance exchanges that came about as a result of the Affordable Care Act are open and selling health insurance to millions of people throughout the country. While this may be good news for those who did not previously have access to affordable health insurance, it is becoming clear that those who are planning to purchase their coverage through these exchanges will have very different choices depending on the area in the country that they live.
Some states such as Colorado, Maryland, and California have been able to attract many different insurers. California, for example, will have 13 insurers who are likely to offer a wide array of plans. Of the 13 insurers, there are notable names including some of most popular, best-known, and largest insurance carriers. But the story is drastically different for people in other states where options might be limited to a predominately local carrier or a completely unknown option, with no proven record in providing health coverage for individuals.
The Obama administration has suggested that the majority of Americans will have a choice of at least five carriers when open enrollment begins this October. There have also been encouraging signs that both existing and new insurers are working to provide plans that are competitive from the standpoint of affordability as well as creativity. These exchanges will be open to millions who are currently uninsured or who are already purchasing individual coverage for themselves and Federal subsidies will be available to many.
But people in some parts of the country may not have the same hearty level of insurance choices which means fewer insurers with instantly recognizable names to choose from. Inevitably, this will force some to take a chance on plans that are offered by insurers who are new to the individual health market and carriers who are brand new to the health insurance marketplace altogether. Not only will choices in providers be varying, but costs of insurance are expected to vary greatly as well.
It is probable that other companies will delay entry into the health insurance exchange until they see opportunity and the prospect of gaining new customers. The fact that there is a relative uncertainty over how well the exchanges will work and be received makes it likely that many companies will only enter the market after it is clear that a noteworthy number of customers exist.
The law was designed to encourage competition in the marketplace and, in fact, 25% of the companies offering plans on the 19 Federal exchanges are brand new to the marketplace according to a recent memo released. Using the State of Massachusetts as a case study for obvious reasons, it becomes apparent that a health plan that is new and unknown might not prevent it from becoming well-received quickly. In Massachusetts, an insurer that was basically unknown went on to capture a large share of the market. However, to remain competitive, insurers are going to have to search for opportunities to offer plans inexpensively.
Consumer-operated plans, or co-ops, will likely pressure other insurers to keep prices low since they might gain a larger market share by offering lower premiums. A consumer-operated insurer would typically charge little more than the actual costs of medical care and can even lower premiums when possible. Plans that specialize in Medicaid or government programs for low-income people might become an imposing competitor because they focus on serving their population segment.
Many within the insurance industry continue to speculate about how all of this will ultimately unfold. However, many knowledgeable industry insiders are conceding that it will likely take years for the new health exchange system to fully develop.