Cost, Not Choice, Is Top Concern of Health Insurance Customers

It is all about the price.

Millions of people buying insurance in the marketplaces created by the federal health care law have one feature in mind. It is not finding a favorite doctor, or even a trusted company. It is how much — or, more precisely, how little — they can pay in premiums each month.

And for many of them, especially those who are healthy, all the prices are too high.

The unexpected laser focus on price has contributed to hundreds of millions of dollars in losses among the country’s top insurers, as fewer healthy people than expected have signed up. And that has created two vexing questions: Will the major insurance companies stay in the marketplaces? And if they do, will the public have a wide array of plans to choose from — a central tenet of the 2010 Affordable Care Act?

“The marketplace has been and continues to be unsustainable,” said Joseph R. Swedish, chief executive of Anthem, one of the nation’s largest insurers.

Most Americans with health insurance get it through their employers or from government programs like Medicare and Medicaid. The marketplaces were created under the health care law to give the millions of people not covered in those ways a way to buy health plans.

While major insurers continue to make profits over all, they say that the economics of the marketplaces do not work for them. Insurers can offer marketplace plans at four different coverage tiers, and the government subsidizes the premiums for millions of people. The thinking was that enough healthy people would buy insurance to balance out the costs for the not-so-healthy.

But things are not going exactly as envisioned.
People shopping in the marketplaces are overwhelmingly choosing the cheapest plans they can find, according to a federal analysis. In 2014, two-thirds of people went for the lowest- or second-lowest-priced plans in each of the tiers. In 2015, about half chose the cheapest plans.

The pricing pressure is playing out on multiple fronts. People with expensive medical conditions, knowing that they need reliable coverage, seem willing to pay a little more for plans offered by the large companies. Those plans tend to have a wider choice of doctors and a stronger brand name, and the insurers say the people signing up are sicker than they expected.


Healthy and young people — who are essential to insurers to offset the costs of care for unhealthy people — are regularly turning to whatever plan is cheapest, including those from little-known insurers or with the smallest networks of hospitals and doctors.

Many other young and healthy people, particularly those not eligible for generous subsidies, are shunning plans altogether, finding all of the prices too high. That decision puts them at risk of tax penalties. By some estimates, about 10 million people are signed up, fewer than half of the 21 million expected by now.

All of this has the major insurance companies, as they finish their third year of selling individual policies under the law, reevaluating their role in the marketplace.

The top insurers have essentially stopped talking about expanding their marketplace ambitions. Two companies, UnitedHealth Group and Humana, have said they plan to largely exit the marketplaces. Aetna has halted plans to enter more states.

Even insurers that insist they are committed, like Anthem, which offers for-profit Blue Cross plans in more than a dozen states, are struggling to find their way. Mr. Swedish describes the market as “not predictable and not reliable.”

If the major insurers keep cutting back, it could lead to a cascade of effects for the people who depend on the marketplaces for coverage. People could potentially face higher premiums because there are fewer insurers competing, and they could have more limited choices of plans and doctors.

The apprehension is not lost on regulators and lawmakers. On Thursday, the Obama administration said it was exploring ways to protect insurers from very expensive medical claims. And recently in The Journal of the American Medical Association, President Obama wrote that more financial assistance for people may be needed.

So the mainstream insurers are struggling to find a business model for the marketplaces that works. If an insurer is successful at being the cheapest in a market, it has often found that it priced its plans too low to cover its medical costs. Some smaller insurers have already gone out of business. But if an insurer prices a plan too high, it might not attract enough healthy people to break even.

Companies both large and small now plan to raise prices sharply for 2017, which could prevent even more people from buying policies.

“The price competition has turned out to be much more cutthroat than anyone expected,” said Larry Levitt, an executive with the Kaiser Family Foundation, which closely tracks the law.

Still, most experts say there is no immediate danger that the market will collapse. Marjorie Connolly, a spokeswoman for the Department of Health and Human Services, said in a statement that the Obama administration was confident that the marketplaces would “continue to thrive for years ahead.”

The department said on Thursday that the people entering the marketplaces are becoming more mixed over time, and the marketplaces are attracting more young and healthy people over all. The major insurers, though, say the healthy people are going to other plans, often the least expensive ones offered by their smaller competitors.

Some defenders of the law say it is working as intended, harnessing competition to keep premiums as low as possible.

“We have to be realistic,” said Linda J. Blumberg, a health care expert at the Urban Institute, noting that some large companies may not be nimble enough to succeed. “You can’t lower costs without breaking some eggs.”

Not every insurance company is struggling. The exceptions seem to be those that offer the most limited choice of doctors and hospitals and may pay them the least, including plans offered by companies like Molina and Centene, which previously specialized in covering low-income Medicaid patients.

The insurers faring the worst sell plans that resemble those traditionally offered through employers. The plans give customers much greater latitude over where to get care and cover some of the high-priced doctors and best-known hospitals. The trouble is that people signing up for those plans are less healthy — and more expensive to treat — than anticipated.

The companies also say that the provisions of the law aimed at stabilizing the market and protecting them from heavy losses are not working. Several say that consolidation is the answer. Anthem, for example, says the only way it can expand in the marketplaces is by merging with Cigna, a deal the Justice Department is trying to block.

Another remedy is to attract a broader range of customers. “We have to get a healthier pool of people in the market,” said Kurt Kossen, an executive at Health Care Service Corporation, which operates nonprofit Blue Cross plans in several states but lost $1.5 billion last year.

The result could be a market essentially left to insurers that offer the same narrow networks found in Medicaid plans and some remaining Blue Cross plans, said Mr. Levitt, of the Kaiser Family Foundation.

“The market is sustainable but with a different mix of plans,” he said.

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