Patient Protection and Affordable Care Act: Largest Issuers of Health Coverage Participated in Most Exchanges, and Number of Plans Available Varied
Released: 2014-09-29T00:00:00

Letter

Background

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.)

Most of the Largest Issuers in the 2012 Individual and Small- group Markets Participated in the 2014 Exchanges, with Exceptions in Some States

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.)

Nearly All 2014 Exchanges Had Multiple Participating Issuers, Which Generally Offered More Plans than the Minimum Required by PPACA

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.

Agency Comments

We received technical comments on a draft of this report from the Department of Health and Human Services and incorporated them as appropriate.

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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.

Appendix I: Issuers’ Participation in the 2014 Exchanges and Their 2012 Market Share

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.

Appendix II: Number of Issuers Participating in the 2014 Individual and Small-business Exchanges, by State

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.

Appendix III: Number of Plans Offered by Issuers Participating in the 2014 Exchanges across Rating Areas

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.

Appendix IV: Number of Plans Offered by Issuers in 2014 Individual and Small- business Exchanges

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.

Appendix V: GAO Contact and Staff Acknowledgments

GAO Contact

John E. Dicken, (202)512-7114 or dickenj@gao.gov.

Staff Acknowledgments

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.