(Bloomberg) — Later this year, residents of Pinal County, Ariz., who go shopping for health insurance under Obamacare will face a peculiar dilemma — they’ll have to buy a product that may not exist.
The 400,000-population county southeast of Phoenix currently doesn’t have a single health insurer offering coverage next year on the Affordable Care Act’s exchanges, where Americans can shop for the insurance they’re required to have under the law. With the impending pullout of major health insurers — including Aetna Inc., UnitedHealth Group Inc., and Humana Inc.— Pinal County is just one place around the country where Americans will be left with few, if any, choices for coverage.
“The idea was that people who use the exchanges would have a variety of plans by different carriers,” says Robert Blendon, a health policy professor at Harvard University’s T.H. Chan School of Public Health. “If it isn’t addressed, you will have more companies drop out and you’ll have more pressure on the other companies in terms of their potential losses.”
The dropouts also undermine a key promise of the law: multiple insurers would compete for consumers’ business each year, and the power of the market would control costs and raise quality. Instead, the opposite is happening. Rates may jump 24% next year, according to ACASignups.net, a website that tracks the law, and a quarter of U.S. counties could have just one insurer on the exchanges, according to Cynthia Cox, a researcher at the Kaiser Family Foundation.
Few choices in many places
It wasn’t always so in Arizona. When the ACA began offering coverage three years ago, the state’s consumers had eight health insurers to pick from, says Swapna Reddy, a clinical assistant professor at Arizona State University’s School for the Science of Health Care Delivery. In about half the state’s counties, they’re now down to one.
“Many insurers offered premiums that were too low from the beginning, and they weren’t sustainable,” she says. “Unfortunately, we might be living through the one-time correction, but hopefully it’s not all doom and gloom.”
In Pinal County, two insurers, Blue Cross Blue Shield of Arizona and UnitedHealth, offered ACA health plans this year. UnitedHealth is leaving and BCBS previously said it would limit its state footprint. Aetna had initially planned to jump into the county before deciding to exit the state entirely.
While the law requires everyone to have coverage, people in Pinal County probably wouldn’t face a penalty for being uninsured. The Affordable Care Act contains an exemption to financial penalties if there’s not an affordable option on the exchanges.
“Arizona is now an example of what happens when the market is unstable, leaving residents with little choice,” Blue Cross Blue Shield of Arizona said in an e-mailed statement. The not-for-profit insurer said it’s re-evaluating its coverage next year because of the Aetna pull-out.
While consumers can buy insurance outside the exchanges, they won’t be eligible for the government-provided tax subsidies specifically targeted to help lower-income people afford it. The average subsidy in Arizona this year is $230 a month, and more than two thirds of people on the state’s exchange qualified.
Not just Arizona
It’s not just Pinal County. Entire states such as South Carolina and Alabama may be down to one insurance option on the Obamacare exchanges, though regulators are still reviewing 2017 filings. Parts of other states, including Georgia and North Carolina, may be left with a single carrier as well.
Aetna announced its intention to pull out of 11 of the 15 states where it sells individual Obamacare plans on the exchanges on Monday, after earlier saying it faced $300 million in projected losses this year. UnitedHealth and Humana also said the high cost of caring for sick customers helped push them from the market.
Bottom of Form
Those exits by three of the country’s biggest health insurers mean that more than 2 million people may have to pick new plans for 2017, according to a Credit Suisse Group AG estimate. In addition, 16 of the 23 health insurance “co-ops”— federally financed, not-for-profit insurance startups — have gone out of business, including four this year, further reducing consumers’ choices. Six of the seven remaining are facing financial difficulties.
In South Carolina, the ACA hasn’t worked for insurance companies or consumers, says Ray Farmer, the state’s insurance regulator.
“We have fairly narrow networks at high costs, and companies cannot seem to make a profit,” he says. “I’m not so sure this is what the federal government contemplated with their program.”
Up the coast in North Carolina, Insurance Commissioner Wayne Goodwin said the news of Aetna’s withdraw caught him by surprise, and that he learned of it while reviewing Aetna’s proposed rates for next year.
“I am shocked and disappointed that Aetna and its executives have chosen to abandon their exchange members,” he said in an e-mailed statement. “Never during the review did the company indicate any concern” that couldn’t be resolved.
Aetna declined to comment on Goodwin’s remarks.
BlueCross BlueShield of North Carolina, a not-for-profit, hasn’t said whether it will remain in every county for 2017, where it’s the only option in some places. The insurer says it’s evaluating the effects of Aetna’s exit, UnitedHealth earlier quit North Carolina as well, and what rates regulators will let it charge.
“We have not made a final decision of our continued participation until the answers to these questions are known,” the insurer said in a statement.
It’s also not clear yet what, if anything, the U.S. government can do in places where there are no insurers selling coverage on the exchanges, but the health law requires people to buy it or pay a fine.
The U.S. Department of Health & Human Services is working with Arizona regulators to ensure that everyone in the state has access to health coverage, according to Ben Wakana, an HHS spokesman.
Stephen Briggs, a spokesman for the Arizona regulators, says the state can’t force insurers to offer coverage on the exchange. “We’re doing everything within the law, within our authority,” he said.
Nor can they stop them from leaving, said Joe Antos, a health economist at the American Enterprise Institute, a conservative-leaning think tank in Washington.
"Unless there is a change in the law, conditions aren’t going to change,” Antos says. The insurers are “basically saying, ‘If this is the way it’s got to be, we have to leave.’"
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