Health insurance exchanges to see more competition, uncertainty next year

Health insurers are preparing for a volatile 2022, factoring increased competition, regulatory changes and pandemic uncertainty into their bids for the coming enrollment season on the health insurance exchanges.

Next year is poised to be the most competitive yet on Affordable Care Act’s exchanges since they opened for business in 2013, said Ari Gottlieb, a principal at the consultancy A2 Strategy.

Atleast11insurersplantoenternewmarketsforthe2022planyear andsomecurrentparticipantsareexpandingtheirfootprints,accordingtodatacompiledby,just10%ofcountieshadasingleinsurer,downfrom25%in2019.

“There’s increased and enhanced competition in a variety of markets nationally, as more and more players look to enter and to be more aggressive in the space,” Gottlieb said.

UnitedHealth Group will expand into seven new markets in 2022. Aetna is returning to the exchanges after exiting them completely in 2018. Cigna will double its geographic footprint on the individual market to 20 states by 2025, and has inked a partnership with Oscar Health to offer a jointly branded virtual-first plan in some markets.

Whilenoteverystatehasfinishedcollectingbidsfrominsurers,payershaverevealedtheirpricingstrategiesin California,one of the largest individual markets in the nation.CoveredCalifornia,thestate’sexchange,alsohas offered enhanced subsidies since 2019 that are similar to the temporary increase in federal assistance introduced as part of COVID-19 relief this year, Gottlieb said.

Premiums will rise an average of 1.8% in California in 2022, essentially flat compared to the 1.1% hike for this year, according to documents insurers submitted to the state’s managed care department.

A closer look at California’s filings reveals how increased competition is affecting new entrants to the marketplace: Anthem, which effectively pulled out of California’s individual market a few years ago, plans a 2% premium cut in 2022, while Oscar Health plans to increase rates by 8.6%.

The difference between the two companies is simple: One has enough money to accept lower margins or even losses in exchange for market share, and the other doesn’t.

Anthem, which reported $1.8 billion in net income on revenues of $33.8 billion during its second quarter, can afford to tolerate a suboptimal financial performance in this market, while Oscar Health can’t, Gottlieb said. Oscar Health reported a net loss of $73 million on revenues of $529.2 million for the quarter ended on June 30.

“They may be trying to price for what others call profitability, but what I call lower losses,” Gottlieb said.

‘It’s a little fuzzy’

While every market is different, increased competition generally translates to lower premiums, and more entrants also mean lower profit margins, Gottlieb said.

The individual market has evolved to become one of the most profitable lines of business for insurers, second only to the lucrative Medicare Advantage market, according to data compiled by the Kaiser Family Foundation.

The Centers for Medicare and Medicaid Services does not want declining profitability to dissuade insurers from participating in the exchanges, said Adam Block, a health economist and associate professor at New York Medical College.

Last week, CMS announced it will direct $452 million from the American Rescue Plan Act to more than a dozen states’ reinsurance programs, which directly compensate insurance companies for some of their most expensive claims and help prevent premium increases. While the cash will affect insurers’ operations for 2021, the money will likely inform their pricing and subsidize their business for the years ahead, Block said.

“It’s a little fuzzy,” Block said. “They are going to get money that impacts 2021 plan year, but may get priced into the trend for 2022. But the trend for 2022 has already been priced into a lot of products. So maybe it’s 2023.”

Pandemic, regulations impact benefits structures

Uncertainty over the course of the pandemic and trends in telehealth will also impact premiums, Block said. Rates will be higher in regions with higher COVID-19 caseloads than in areas with fewer infections and higher percentages of vaccinated people, Block said.

InsurersrecognizeCOVID-19won’tdisappear,andwillcontinuetofactoritintotheirpremiumsandbenefitdesigns,Blocksaid.Insurancecompaniesalso willlookforcuesfromemployerslikeDeltaAirlines,whichwillchargeunvaccinatedemployeesanextra$200permonth for health benefits.

Regulatory changes like the end of enhanced unemployment benefits and a moratorium on Medicaid eligibility redeterminations are also likely influencing rate setting, said Brad Ellis, senior director of insurance at Fitch Ratings. “It’s a fine line to walk,” Ellis said. “You’ve gotta make sure that you’re covering the costs, but still competitive.”


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