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US Health & Human Services announced that some 2.5 million current ACA exchange enrollees will (or may) find that they have only 1 choice of insurer in 2018. https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/2017-08-09-Issuer-County-Map-Update.pdf

However 156 million are insured by employer-sponsored health plans. http://www.kff.org/other/state-indicator/total-population/?dataView=1&currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D

Am I correct (based on my limited experience) that most, if not all employer- sponsored health insurers offer only one insurer ? And if this is correct, why are US politicians alarmed that there could only be 1 insurer participating on the ACA exchange in certain counties next year?

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    Because it might fall to zero and then you enter a grey area since the original ACA didn't account for such a contingency.
    – JonathanReez
    Commented Aug 9, 2017 at 20:33

5 Answers 5

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There are four basic ways to get health care coverage (there are also some very minor exceptions to these that impact far fewew people):

  1. You can be eligible for Medicaid.
  2. You can be eligible for Medicare.
  3. You can buy private health insurance in the ACA exchange market for your household (and you are required to due so under penalty of paying a fine under the ACA).
  4. You can receive private health insurance through an employer who in turn buys an employer group health insurance policy in a (figurative) employer group health insurance market that is separate and distinct from the ACA exchange market.

As used here "you" usually operates on a household basis that includes you, your spouse, your minor children and your young adult children.

Your question addresses options 3 and 4.

With respect to option 3:

The far bigger concern is that a county have zero insurers, because the ACA does not address how to deal with that possibility.

The problem with a county having only one insurer is that the ACA individual exchange market relies primarily on competition to bring about reasonable premiums for policies offered on the exchange (and the premium for Bronze plans is also used to set subsidy levels under the ACA for participants in the individual exchange market). If there is only one insurer in a county it can set any premium it wishes, anyone in that county who wants an individual exchange market plan in that county has to pay it, and the price of that plan will determine the ACA subsidy amount for that plan.

With respect to option 4:

Am I correct (based on my limited experience) that most, if not all employer- sponsored health insurers offer only one insurer ? And if this is correct, why are US politicians alarmed that there could only be 1 insurer participating on the ACA exchange in certain counties next year?

Not all employer based health insurance plans offer only one insurer. Indeed, in big businesses and large government agencies, the norm is for more than one health insurance plan to be available for an employee to choose from, and employer based plans involving multiple choices are probably at or close to a majority of all employer based health insurance plans by number of employees covered.

But, most smaller employers offer only one health insurance plan for their employees.

This is still not a problem, because employer-sponsored health insurers are chosen by employers who are price conscious, from multiple available employer group health insurance plans available in the employer group health insurance plan market.

There is not a shortage of companies offering plans in the employer group health insurance plan market in most places. This is (1) because the employer group health insurance market is bigger as a share of the total private health insurance market, (2) because it is more profitable since one marketing sale to an employer results in the sale of health insurance to multiple households for a larger total premium and (3) because it is more profitable since there are fewer opportunities for adverse selection and moral hazards by prospective insureds in the employer group health insurance plan market in a world where lots of people required to get individual health insurance plans fail to do so except when they think they will need to purchase expensive health care.

In the case of employer group health insurance plans, the purchasing decision is just made at the employer level rather than the employee level. But, since employers usually pay a significant share of the premium for an employer based group health insurance plan, they have a strong incentive to choose a health insurance plan that provides good benefits relative to the premium charged vis-a-vis other employer based group health insurance plans competing for their business in the same marketplace. Therefore, the competitive marketplace still provides a market based means to regulate health insurance premiums.

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    actually here is a 5th option. In Ohio (as an example) an individual can purchase the same policy off-exchange. The only difference between the two is that only on the exchange can you qualify for a subsidy. Anthem (for example ) is pulling out of the exchange for Ohio in 2018, but the same policy will be available off-exchange. As to the employer-sponsored plans see blip's answer below. While my personal experience is not comprehensive I've worked for companies that ranged from 100 employees to 20,000 employees and in all of them there was only one choice of insurer.
    – BobE
    Commented Aug 10, 2017 at 2:55
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    continuation.. While there was only one insurer, there were many "plans" e.g. 70/30 , 80/20, 90/10. The distinction I am drawing is not on plans but on insurers.
    – BobE
    Commented Aug 10, 2017 at 2:59
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    In your point 3 you assert that you must purchase from the exchange or be liable for penalties. That is incorrect, policies that qualify as complying with ACA requirements, even if purchased of the exchange are eligible to avoid penalty. Your other assertion, that an HC insurer (without competition) can set any price it wishes is also grossly inaccurate, but I'd be interested in hearing your justification
    – BobE
    Commented Aug 10, 2017 at 3:16
  • @BobElston Examples of multi-insurer employers include the federal government, Denver Public Schools, a national biglaw law firm, and a Fortune 500 company. The real point is that the number of multi-insurer employers is significant rather than pinning down exact numbers.
    – ohwilleke ♦
    Commented Aug 10, 2017 at 17:01
  • @BobElston I acknowledged the four options weren't exclusive, but the non-ACA individual policy market is tiny compared to the ACA exchange individual policy market so I ignored it for simplicity, as well as the nuance that some of the rare exceptions to the four main categories can also avoid the penalty. What is the basis of your claim that an exchange insurer without competition may set its own premiums (which is what I asserted)? There are reasons why it wouldn't choose to set the premiums infinitely high, but it would set them at Econ 101 monopolist prices, not competitive prices.
    – ohwilleke ♦
    Commented Aug 10, 2017 at 17:05
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Am I correct (based on my limited experience) that most, if not all employer- sponsored health insurers offer only one insurer ?

That is correct. Some very large employers--especially those that span states may offer a few options in some regions, but for the most part, most employers negotiate with one provider. (Though note that may still be multiple plans available through that one provider)

And if this is correct, why are US politicians alarmed that there could only be 1 insurer participating on the ACA exchange in certain counties next year?

The ACA preserves the private market concept. Meaning that (in theory) competition is good. If there's only one provider, then there's no competition. That insurer can charge the max. That's not ideal for the consumer.

As others have pointed out, the bigger concern is the overall reduction in providers willing to gamble on the individual market. Given the uncertainty of it all since the new administration came in to power, the trend has been that insurance companies have been increasingly (and understandably) cautious about this venture.

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  • "Some very large employers--especially those that span states may offer a few options in some regions, but for the most part, most employers negotiate with one provider." In my experience, multi-provider plans are much more common than you suggest even for single state employers.
    – ohwilleke ♦
    Commented Aug 10, 2017 at 17:06
  • No, that is not correct. The purchaser of the group insurance plans usually have more than one option. It's just that after they choose an option, the employee-members of that group don't have a say after the choice has already been made, and that choice is the only one offered to employees, but it's not an individual plan, it's a group one. Employees are not the consumers.
    – PoloHoleSet
    Commented Aug 10, 2017 at 17:10
  • @ohwilleke I think your experience is unique. I've only worked at one place that offered options from multiple insurance providers and that was a .gov gig (i.e., really good benefits)
    – user1530
    Commented Aug 10, 2017 at 17:27
  • @ohwilleke To be clear, I'm referring to multiple insurance providers.
    – user1530
    Commented Aug 10, 2017 at 17:28
  • @blip IMO the Medical Loss ratio provision significantly alters the concept that the ACA relies on market competition to regulate premiums. Perhaps you could clarify your assertion that (in light of no competition) 'an insurer can charge the max'. I'm supposing that you mean 'whatever the market will bear' - but I'll let you explain.
    – BobE
    Commented Aug 10, 2017 at 21:26
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Am I correct (based on my limited experience) that most, if not all employer- sponsored health insurers offer only one insurer ?

That hasn't been my experience. I've been able to pick among different options in my jobs. E.g. two options from one insurer and one from another. And yes, I mean two different insurers (three different plans).

Even if true, note that the exchanges are different. While the individual has limited choice in employer-sponsored health insurance, the employer has a much broader choice. So there is competition for being picked by the employer even if there isn't any for the employee. You can also switch jobs to switch insurers, although that is a more extreme response.

I suppose you could switch counties to get a different Obamacare insurer, but that might be difficult if you own your house either outright or through a mortgage.

And if this is correct, why are US politicians alarmed that there could only be 1 insurer participating on the ACA exchange in certain counties next year?

In general the problem with one is that without competition, there is little reason for the insurer to keep premiums low. There is also the possibility that one will become none.

As stated earlier, employer-sponsored plans still face competition in the sense that the employer can switch plans. And if that insurer would leave the market, there are generally other options. But in the Obamacare exchanges, individuals and families purchase directly from the insurer.

Another way of looking at this is that each individual only has one plan. One does not generally sign up for health insurance from two insurers. They only let you submit a given expense to one. But being able to choose the one plan is valuable to the entity paying.

With employer-sponsored health care, that's the employer paying. So they choose the cheapest option (or options). With Obamacare, the individual or family pays. Having only one choice means that there is no competition. Premiums are only restrained by government oversight. And too much restriction may result in the insurer leaving the market.

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  • good answer, but could you clarify your understanding of "government oversight" In my state (as an example) insurers propose rates (and deductables etc) to the state insurance commission. An insurer is either authorized to sell that policy or not based on a showing by the insurer that a premium (and policy specifics) are commensurate with the demonstrated risk plus a 20% for overhead and profit. The insurance commission is disinterested in competition. In my state, Anthem is leaving the exchange because the current federal administration is threatening to withhold subsidy payments.
    – BobE
    Commented Aug 10, 2017 at 3:54
  • @BobElston What is your state? This level of price regulation is very much a minority rule. Most states do not fix insurance premiums and instead leave that to the marketplace - although the ACA does mandate a certain amount of insured return on a premium. Also which subsidy payments? There are multiple varieties under the ACA.
    – ohwilleke ♦
    Commented Aug 10, 2017 at 17:11
  • @ohwileke Ohio. I'm not sure I'd call it price regulation, rather authorization to market an insurance product. What the Insurance Commission explains is what I described above (re the process). It is my understanding at at least half of the states utilize the 80/20 Medical Loss ratio in processing an state authorization to market a policy. I think that the subsidy that is being "threatened" is the advance premium tax credits, wherein the Treasury pays to the insurer (on a monthly basis) the amount of the premium tax subsidy for each enrollee per month.
    – BobE
    Commented Aug 10, 2017 at 20:54
  • @ohwileke If that is not the case, can you clarify? Returning to the 80/20 Medical Loss Ratio.... I maintain that the provision of ACA (that applies to all policies) exempts healthcare insurance from being analyzed as a typical market driven commodity. It is that provision that prevents the insurers from increasing premiums in response to diminished or absent competition.
    – BobE
    Commented Aug 10, 2017 at 21:08
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In a nutshell, the difference is that employers can choose between several insurers. They might not switch often but the mere possibility is supposed to bring some competition and keep insurers honest. That's the right analogy for the ACA exchanges. The employees might not have a choice but employers have similar if not stronger incentives to shop around for the best price.

On the exchanges, it's up to individual customers to play that role. If there is only one choice, there is no competition at all. Additionally, some other part of the law (like the way insurance premium subsidies are computed) don't work as well if there are only 1 or 2 insurers.

And of course, 1 is awfully close to 0 so another concern is that these counties are on a path to a situation where there would be no insurance available and the system would break down completely, as least as far as the individual market is concerned (people with group insurance, Medicare, Medicaid, etc. would still have insurance obviously).

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  • I understand that bold employers can choose between insurers
    – BobE
    Commented Aug 10, 2017 at 3:19
  • understand that ** employers** can choose between insurers, it's the employees who are left with only one choice. Can you expand on why the premium subsidy computation doesn't work in light of no competition? The subsidy is calculated (to the best of my understanding) independent of the premium (kff.org/interactive/subsidy-calculator).
    – BobE
    Commented Aug 10, 2017 at 3:38
  • @BobElston Yes but what you need to understand is why, in the logic of the law, it's important that someone has a choice (be it the employer on the group insurance market or the customer on the individual market). If the employers have a choice, it's less important that the employees do. But on the exchanges, there are no employers, people are buying directly from an insurer. If they don't have a choice, there is no competition. I will try to elaborate on that some more in the answer in a little while.
    – Relaxed
    Commented Aug 10, 2017 at 8:04
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    @BobElston The premium subsidy amount is a function of the lowest cost Bronze Plan available on the exchange for a consumer. This detail may be hidden from the calculator you link as part of its guts since it doesn't vary from calculation to calculation in a given year in a given place and that data is probably pre-entered in the calculator.
    – ohwilleke ♦
    Commented Aug 10, 2017 at 17:14
  • @ohwilleke you are correct but the basis is the SLCSP (second lowest cost Silver Plan, not LCBP.
    – BobE
    Commented Aug 11, 2017 at 2:56
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Am I correct (based on my limited experience) that most, if not all employer- sponsored health insurers offer only one insurer ?

No, you are not correct about that.

Employers, who negotiate and purchase the group plans (and usually pay the bulk of the premiums) usually offer a single choice to their employees ("This is our plan. Participate or don't"), but the companies, themselves, usually choose that plan from several competing providers/options. In those cases, you are not dealing with a single option in the marketplace, it's just that the employee isn't actually the consumer making the choice, the employer is.

For the individual ACA health exchanges, the entire premise is based on a consumer choice-driven marketplace. Having one option essentially undercuts the idea that it is a marketplace, and that there is any consumer choice available. The premise of market competition keeping companies honest and striving to be most efficient in order to win that consumer choice does not exist when there is only one option.

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  • To clarify, most companies offer one insurance provider, but often multiple plans from that one provider.
    – user1530
    Commented Aug 10, 2017 at 21:31
  • @blip - I think they usually offer at least two tiers of coverage, but unless they are a pretty large employer, they don't offer a lot of options, usually.... in my experience.
    – PoloHoleSet
    Commented Aug 11, 2017 at 13:34

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