Patient Protection and Affordable Care Act: Largest Issuers of Health Coverage Participated in Most Exchanges, and Number of Plans Available Varied
Published: 2014-08-29T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: PPACA required by January 1, 2014, the establishment in each state of health insurance exchanges—marketplaces where eligible individuals and small businesses can compare and select among insurance plans. Issuer participation, including the number of plans these issuers offer, is a key factor in the extent of consumer choice offered by the exchanges.
GAO was asked to examine the number and types of issuers participating in both the individual and small-business exchanges beginning in 2014, as well as how this compared with issuer participation in the individual and small-group markets prior to the exchanges. In this report, GAO describes (1) the extent to which issuers that previously offered health plans in the individual and small-group markets participated in the exchanges in 2014, and (2) the issuers that participated in 2014 exchanges and the health plans they offered.
GAO analyzed data obtained from CMS and states on the health plans offered by issuers that participated in states' exchanges in 2014. GAO also analyzed CMS data on issuers' participation and market share in the 2012 individual and small-group markets, the most recently available national market-wide data. GAO reviewed relevant laws and regulations and interviewed CMS officials to identify federal requirements related to exchange participation. GAO obtained information on state participation requirements from applicable states.
section_title: What GAO Found
paragraphs: Most of the largest issuers of health coverage from 2012 participated in the exchanges that the Patient Protection and Affordable Care Act (PPACA) required be established in all states in 2014. Previously, in 2012, while a large number of issuers participated in state individual and small-group markets, a small number of these participating issuers held a majority of the market share in terms of enrollment. In 2014, for both those exchanges serving the individual market and those serving the small-group market, in more than two-thirds of states the issuer with the largest share of the 2012 market participated in the 2014 exchange. In addition, in most states, other larger issuers with a 5 percent or more share of the 2012 market participated in the 2014 exchanges. Most smaller issuers with less than 5 percent of the 2012 market did not participate in the 2014 exchanges, although in many states more than one of these smaller issuers did participate. In addition, some issuers that participated in a 2014 individual or small-business exchange had not offered coverage in the respective 2012 market, although they may have offered coverage in other markets within the same state. In most states, for 2014, the issuers participating in the exchanges represented a mix of larger issuers, smaller issuers, and issuers new to that market.
Multiple issuers participated in nearly all 2014 exchanges and generally offered more health plans than the minimum of two required by PPACA. Overall, the number of participating issuers varied widely between states, from 1 to 17 issuers in the individual exchanges and from 1 to 13 issuers in the small-business exchanges. However, almost all exchanges—49 individual and 45 small-business—had more than one issuer participating. More than half of participating issuers offered coverage through both the individual and small-business exchange in that state, although more issuers participated in the individual exchanges than in the small-business exchanges. Issuers varied substantially in the number of plans they offered; 257 of the 291 issuers in the individual exchanges, and 183 of the 207 issuers in the small-business exchanges, offered more than the minimum number of plans required by PPACA in all the rating areas in which they offered coverage. For both the individual and small-business exchanges, collectively, issuers in the 25 most populous states tended to offer a higher than average number of plans, while those in less populous states were less likely to do so.
GAO received technical comments on a draft of this report from the Department of Health and Human Services and incorporated them as appropriate.

section_title: Letter
paragraphs: The Patient Protection and Affordable Care Act (PPACA) required, by  January 1, 2014, the establishment in each state of health insurance  exchanges—marketplaces where eligible individuals and small  businesses can compare and select among health plans. PPACA does  not require issuers of health coverage to offer plans through these  exchanges but, instead, generally relies on market incentives to  encourage their participation.exchanges that qualifying individuals seeking to purchase coverage can  qualify for premium tax credits and cost-sharing reductions to lower the  cost of their health plans and certain small businesses may qualify for tax  credits to lower the cost of the coverage they purchase on behalf of their  employees. PPACA also allows states and the federal government to take   For example, it is only through the  additional steps to encourage or require issuer participation in the  exchanges.
Issuers seeking to participate in an individual or small-business exchange  must first be approved to do so by the exchange in that state. In about  one-third of states, the state chose to operate the exchange in 2014,  known as a state-based exchange, and approved issuers for participation.  In the remaining states that elected not to operate an exchange, the  Department of Health and Human Services’ Centers for Medicare &  Medicaid Services (CMS) was responsible for carrying out these  responsibilities. These are known as federally facilitated exchanges.
Issuer participation is a key factor related to the extent to which an  exchange will offer consumers a choice of plans. You asked us to  examine the number and types of issuers participating in both the  individual and small-business exchanges beginning in 2014, as well as  how this compares with issuer participation in the individual and small- group markets prior to the exchanges. In this report we describe: 1.  the extent to which issuers that previously offered health plans in the  individual and small-group health insurance markets participated in  the 2014 exchanges, and  2.  the issuers that participated in 2014 exchanges and the health plans  they offered.
To answer these objectives, we identified and obtained data on issuers  that participated in the 2014 exchanges and the plans that they offered in  each state’s rating areas.facilitated—34 individual and 32 small-business—we analyzed data that  CMS collected from issuers as part of the agency’s certification of issuer   For those exchanges that were federally  plans to be included in the 2014 exchanges. This source also included  data for a small number of state-based exchanges—2 individual and 1  small-business—that chose to have CMS carry out certain functions on  their behalf in 2014. To assess the data’s reliability, we interviewed CMS  officials about the agency’s policies and procedures to ensure that the  data captured all relevant issuers and that data submitted by issuers were  accurate. In addition, we performed electronic tests of the data to identify  any outliers or anomalies. We determined the data were sufficiently  reliable for the purposes of our analysis. For the remaining 15 individual  and 18 small-business exchanges that were state-based, complete data  were not available from CMS and we obtained them directly from each  state. To assess the reliability of the data obtained from states, we  performed electronic tests of the data. When we found missing values or  other anomalies, we followed up with state officials and incorporated the  corrections we received. We determined the data were sufficiently reliable  for the purposes of our analysis. We also identified federal requirements  related to exchange participation by interviewing CMS officials and  reviewing relevant laws and regulations. To obtain information about state  participation requirements, we obtained information from each of the  state-based exchanges.
To identify the number of issuers previously offering health plans in the  individual market and the small-group market, by state, we analyzed  coverage data that PPACA required issuers to report to CMS. Using the most recently available data, we identified issuers that participated in  states’ 2012 individual and small-group markets and analyzed each  issuer’s total number of covered life-years to determine their share of the  individual and small-group market in that state. In addition, we  categorized the issuers by size. We defined larger issuers as those with   5 percent or more of the market in that state and smaller issuers as those  with less than 5 percent of the market. We reviewed these data for  reasonableness and consistency, including screening for outliers. We  also reviewed documentation about the data and spoke with CMS officials  about steps taken to ensure data reliability. Based on this review, we  determined that the data used for our analysis were sufficiently reliable for  our purposes. To describe the extent to which issuers participating in the  2014 exchanges also participated in the applicable 2012 market, we  matched 2014 issuers with those in the 2012 market using a unique code  that CMS assigns to each issuer in each state. When we were not able to  identify a match for a 2014 issuer code in the 2012 data, we used other  information from CMS and the insurance company to determine whether  the issuer participated in the 2012 market.was participating in its respective market in 2012, we identified its share  of that 2012 market. We did not determine whether multiple issuers in a  state were affiliated with a parent company. For those 2014 issuers that  participated in the 2012 markets, we also used the 2012 data to  determine whether they were for-profit or not-for-profit entities, as this  information was not available in CMS’s 2014 exchange data. For those  2014 issuers that did not participate in the 2012 markets, we used  documentation from the issuers and other sources to determine whether  the issuers were for-profit or not-for-profit entities.
For each 2014 issuer that  We conducted this performance audit from January 2014 to August 2014  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: PPACA contained several provisions with the potential to affect issuer  participation in the individual and small-group health insurance markets  starting in 2014. Specifically, it directed states to establish exchanges for  individuals and small businesses by January 1, 2014. In states electing  not to establish and operate either type of exchange, PPACA required the  federal government to establish and operate the exchange. For 2014,  about one-third of the states chose to operate their individual and small- business exchanges, known as state-based exchanges. Specifically, in  17 states, the state chose to operate both the individual exchange and  the small-business exchange, known as the Small Business Health  Options Program, or SHOP. In 32 states, the federal government  operated both the individual and small-business exchanges, known as  federally facilitated exchanges. In the remaining 2 states, the individual  exchange was federally facilitated, while the small-business exchange  was state-based. (See fig. 1.)
All individual and small-business health plans, whether offered through an  exchange or outside of an exchange, must comply with new insurance  market reforms enacted under PPACA. These include, for example, a  requirement to cover certain categories of benefits at standardized levels  of coverage, which are categorized by “metal level” as catastrophic,  bronze, silver, gold, or platinum, depending on the portion of health care  costs expected to be paid by the health plan. They also include  prohibitions on annual and lifetime limits on the dollar value of required  benefits and on the denial of coverage or charging of higher premiums  due to preexisting conditions. Some of these reforms were in effect in  2012, while others did not take effect until 2014.
To be certified to offer coverage through an exchange, issuers must meet  additional requirements, including offering a minimum of one silver and  one gold plan in any area in which it participates in an exchange.  Catastrophic plans may be offered only in the individual exchanges, and  not on the small-business exchanges, and may be offered only to certain  individuals. Issuers can offer plans statewide or within different  geographic regions, typically defined by rating areas. States could define  their rating areas using counties, Metropolitan Statistical Areas,codes, or a combination of those options.
PPACA also requires that the federal government establish multi-state  plans to be offered through each of the individual and small-business  exchanges. Specifically, multi-state plans are those that issuers offer  under a contract with the U.S. Office of Personnel Management (OPM).  PPACA requires the contracted issuers to offer at least two multi-state  plans through each exchange and requires that at least one of the issuers  with which OPM contracts be not-for-profit. Issuers of multi-state plans  are allowed to phase in coverage, but must offer coverage in 60 percent  of states in the first contract year and in all states by the third contract  year. During the first two contract years, OPM indicated that it would not  direct issuers to participate in particular states. For 2014, OPM entered  into a contract with the Blue Cross and Blue Shield Association to offer  coverage in 31 states through the individual and small-business  exchanges.
PPACA also established a program to foster the creation of consumer- governed, not-for-profit issuers of health coverage—referred to as  Consumer Oriented and Operated Plans (CO-OP)—that would provide  additional coverage options in the individual and small-business  exchanges. As required by PPACA, CMS established a loan program  through which qualified not-for-profit issuers could apply for federal  funding to help cover startup costs associated with establishing a CO-OP  and to help meet states’ solvency and reserve requirements for licensure.  A CO-OP issuer may operate within specific areas of a state, statewide,  or in multiple states. For 2014, 22 CO-OPs receiving federal loans  offered coverage through the exchanges.
The federal government and states instituted other provisions that relate  to issuer participation in the exchanges. For example, for federally  facilitated exchanges, CMS requires that issuers with more than   20 percent market share in the small-group market participate in the  small-business exchange as a condition of participation in the individual   In adopting this requirement, CMS indicated that the purpose  exchange. of this requirement is to promote robust participation in the small-business  exchanges and expand plan choice.operated their own exchanges enacted statutory, regulatory, or other  requirements governing issuer participation in exchanges. Seven states   In addition, some states that  reported requiring issuers participating in exchanges to offer a minimum  number of health plans, while four states set maximum limits. Three  states also reported requiring participation in individual and small- business exchanges. For example, in Maryland, certain issuers that  offered plans outside of the exchanges were also required to offer plans  through the exchange. Further, four states reported establishing waiting  periods related to exchange participation in future plan years for issuers  that chose not to participate in the 2014 exchange. For example,  Connecticut prohibited an issuer from re-entering the exchange for   2 years if the issuer voluntarily ceased to participate in the exchange.  (See table 1.)
section_title: Most of the Largest Issuers in the 2012 Individual and Small- group Markets Participated in the 2014 Exchanges, with Exceptions in Some States
paragraphs: In most states, issuers with the largest share of the 2012 individual and  small-group markets participated in the 2014 individual and small- business exchanges. In 2012, a large number of issuers participated in  state individual and small-group markets, although coverage was  generally concentrated among a small number of these participating  issuers. For example, while there was an average of 42 issuers in the  2012 individual market, only 4 had at least a 5 percent share of the  market and they accounted for a combined 87 percent of that market.  (See fig. 2.) For 2014, in 40 states the issuer with the largest share of the  2012 individual market participated in that state’s 2014 individual  exchange. For the small-group market, this was the case in 41 states. In  addition to participation from the largest issuer, most states had other  issuers with at least 5 percent of the market participating in the 2014  exchanges. For example, in 6 states all of the issuers with at least a   5 percent share of the 2012 individual market also participated in the  2014 exchanges; this was the case for the small-business exchanges in 5  states.
However, in some states, issuers with the largest 2012 market share did  not participate in the 2014 exchanges. Specifically, in the individual and  small-group markets for 11 and 10 states, respectively, the largest issuer  in 2012 did not participate in the 2014 exchanges. Among the 11 states  for which that was the case for the individual market, there were 5 in  which that issuer had the majority of the state’s 2012 market share; for  the small-business exchange, this was the case in 3 of the 10 states.
Most issuers with less than 5 percent of their 2012 market did not  participate in the 2014 exchanges, although in many states more than  one of these smaller issuers did participate. In 2012, states had an  average of 36 and 15 issuers with less than a 5 percent share of the  individual and small-group markets, respectively. Most of these smaller  issuers did not participate in the 2014 exchanges. However, in most  states, at least 1 of these smaller issuers did participate in the 2014  individual exchanges; in 9 states, 5 or more smaller issuers participated.  All smaller issuers that participated in the 2014 individual exchanges had  an average market share of 0.6 percent in 2012.
In addition, some issuers that participated in the 2014 individual or small- business exchanges had not participated in that respective 2012 market.  For example, with regard to the individual market, there were 39 states in  which at least 1 issuer that offered coverage through the exchange had  not provided coverage in that respective 2012 market. The number of  such issuers in each individual exchange ranged from 1 to 11, for a  nationwide total of 99 (out of the 291 total issuers that participated in the  individual exchanges). Of these, 23 were newly established through the  federally funded CO-OP program. Some of the other issuers, however,  had previously provided coverage in other markets. For example, in Iowa,  we identified 3 issuers that were new to the 2014 individual market. While  one of these was a newly established CO-OP, the other two had  previously participated in the small-group market in that state. There were  also several new issuers that had previously issued coverage in the  Medicaid managed care market. For example, one insurance company  that issued coverage in multiple Medicaid managed care markets in 2012  was a new entrant to the individual markets through 6 state exchanges.
In most states, for 2014 the issuers participating in the exchanges  represented a mix of larger issuers, smaller issuers, and issuers new to  that market. Overall, the issuers in each 2014 exchange that participated  in the 2012 markets represented from 3 to 98 percent of that state’s 2012  individual market and from 1 to 100 percent of that state’s 2012 small- group market, averaging about 56 percent in each market. An average of  4 larger issuers in the individual market and 3 issuers in the small-group  market accounted for the majority of these market-share totals in each  state and, on average, more smaller issuers—those that had less than   5 percent of the 2012 market—than larger issuers participated in the  individual exchanges in 2014. (See fig.3 for the number of participating  issuers, by category of 2012 market share. Also, see app. I for state-by- state information on issuer participation in the exchanges and their 2012  market share.)
section_title: Nearly All 2014 Exchanges Had Multiple Participating Issuers, Which Generally Offered More Plans than the Minimum Required by PPACA
paragraphs: In nearly all states, multiple issuers participated in the individual and  small-business exchanges in 2014; an average of 6 issuers and 4  issuers, respectively. Overall, the number of participating issuers varied  widely between states; from 1 to 17 issuers through the individual  exchange and from 1 to 13 issuers through the small-business  exchanges. However, almost all exchanges had more than 1 issuer  participating—49 individual exchanges and 45 small-business exchanges.  Further, in 31 states, both the individual and small-business exchanges  had 3 or more participating issuers. (See fig. 4 and app. II.)
More than half of participating issuers offered coverage through both the  individual and small-business exchanges, although more issuers  participated in the individual exchanges than in the small-business  exchanges. Of the 323 issuers that participated in the exchanges, 175  participated in both the individual and small-business exchanges in their  state. Of the remaining 148 issuers, 116 participated in the individual  exchange only and 32 participated in the small-business exchange only.  In 30 states, there were more issuers participating in the individual  exchange than the small-business exchange.
Most issuers offering coverage through the 2014 exchanges were for- profit entities, although the portion that was not-for-profit was greater than  in the 2012 markets. In 2014, about 40 percent of issuers participating in  the exchanges were not-for-profit with the remaining 60 percent for-profit.  In comparison, in 2012, 9 percent of all issuers were not-for-profit and   91 percent were for-profit. In part, the difference in the percentage of not- for-profit issuers between the 2012 individual market and the 2014  individual exchanges could be because issuers with the largest share of  the 2012 market were more likely to be not-for-profit and more likely to   In addition, both the multi-state plan and  participate in the exchanges. CO-OP programs established under PPACA require inclusion of not-for- profit issuers.coverage through the exchanges, 20 percent were the 22 newly created  CO-OPs. In 9 individual and 9 small-business exchanges, a CO-OP  represented the only not-for-profit issuer on the exchange.
For example, of the 116 not-for-profit issuers offering  Issuers varied substantially in the number of plans they offered in each  rating area through the 2014 exchanges. In the individual exchanges,  each issuer offered an average of 10 plans in each rating area. Of the  291 issuers, 257 offered more than the minimum number of plans  required by PPACA—one gold and one silver plan—in all the rating areas  in which they offered coverage. Of the 207 issuers in the small-business  exchanges, each issuer offered an average of 12 plans in each rating  area and 183 offered more than the minimum number of plans required in  all the rating areas they offered coverage in. (See table 2 for the range of  plans offered. Also see app. III for a state-by-state listing of the number of  rating areas and number of plans offered through the exchanges.)
Similarly, the total number of plans available to consumers in a given  rating area through the exchanges varied greatly. For example, in the  individual exchanges, the total number of plans available in a given rating  area ranged from 7 to 178, averaging about 41 plans. (See fig. 5 and   app. IV.) In all rating areas, consumers could select from at least one  bronze, one silver, and two gold level plans and about 58 percent of  rating areas had plans available at all five metal levels. However, in the  remaining 42 percent of rating areas, consumers did not have access to a  platinum plan. The trends for the small-business exchanges were similar,  and all rating areas had at least one silver and one gold plan available.  While these represent the number of plans available to consumers  through the exchanges, the total number of plans available to a consumer  in each market would include the additional plans that were available  outside the exchanges. These plans were required to meet many of the  same requirements as the exchange plans, but individuals enrolling in  plans outside the exchanges were not eligible for premium tax credits and  cost-sharing reductions to make the coverage more affordable.businesses enrolling in coverage outside of the exchanges were similarly  ineligible for tax credits.
section_title: Agency Comments
paragraphs: We received technical comments on a draft of this report from the  Department of Health and Human Services and incorporated them as  appropriate.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of Health  and Human Services. In addition, the report will be available at no charge  on the GAO website at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or dickenj@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in Appendix V.
section_title: Appendix I: Issuers’ Participation in the 2014 Exchanges and Their 2012 Market Share
paragraphs: In this appendix, we present the 2012 market share of issuers that  participated in the 2014 individual and small-business exchanges. Table 3  provides this information for those issuers in the 2014 individual  exchanges; table 4 provides this information for those issuers in the 2014  small-business exchanges.
section_title: Appendix II: Number of Issuers Participating in the 2014 Individual and Small-business Exchanges, by State
paragraphs: Table 5 presents information from interactive figure 4 on the number of  issuers participating in the individual and small business exchanges in  2014, by state.
section_title: Appendix III: Number of Plans Offered by Issuers Participating in the 2014 Exchanges across Rating Areas
paragraphs: Table 6 presents information on the number of plans issuers offered in  each state in the individual and small-business exchanges across rating  areas in 2014.
section_title: Appendix IV: Number of Plans Offered by Issuers in 2014 Individual and Small- business Exchanges
paragraphs: Table 7 presents information from interactive figure 5 on the number of  plans issuers offered in each state for the individual and small-business  exchanges in 2014.
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
paragraphs: John E. Dicken, (202)512-7114 or dickenj@gao.gov.
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, William Hadley   (Assistant Director), Sandra George, Laurie Pachter, Ann Tynan,   and Stephen Ulrich made key contributions to this report.