CO-OP failures and United's threatened pullout won't doom the exchanges, report says

Other low-cost insurance alternatives available on Affordable Care Act marketplaces
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The failure of many consumer operated and oriented plans (CO-OPs) and UnitedHealth's doubts about its future participation in the marketplaces aren't a significant threat to the viability of the health insurance exchanges or the Affordable Care Act, according to a new report.

Last year, more than half of the 23 CO-OPs established under the ACA were forced to shut down, mostly due to financial struggles, including those in New York, Oregon, Michigan, Colorado, Iowa and Nevada. In addition, UnitedHealth, which suffered financial losses on its individual plans, announced it is considering withdrawing from many or all ACA marketplaces in 2017.

But the CO-OPs and UnitedHealth have not been major players in many markets, and their exit from the health insurance exchanges won't cause a major disruption, according to the report authored by researchers at the Urban Institute and funded by the Robert Wood Johnson Foundation.

Instead, the researchers found health insurance markets are increasingly dominated by competition among Blue Cross and Blue Shield-affiliated insurers, managed care insurers that previously served the Medicaid population but are now entering private markets under the ACA, and provider-sponsored insurers. Those options dominate low-cost marketplace offerings and presumably have higher enrollments in their plans, the report says.

Researchers examined 81 of the most populous areas of the country to find which insurers offered the lowest-cost silver plans, which typically have the highest rates of enrollment. CO-OPs were the lowest- or second-lowest-cost insurer in 14 of the 81 regions. United was the lowest-cost or second-lowest-cost insurer in 15 of those regions.

"A potential withdrawal by United or any other national carrier would be important in terms of what it might say about the stability of the marketplace, but in terms of consumer options, no unfillable void would be created were they to leave," Kathy Hempstead, who directs coverage issues at the Robert Wood Johnson Foundation, said in the report. "In the case of the CO-OP failures, while some of those closures were abrupt and affected large numbers of consumers, other options were available on the marketplace."

Researchers said some other factors do create more serious concerns when it comes to the viability of the marketplaces, including affordability, network adequacy, outreach and enrollment funding, and the sufficiency of risk adjustment across insurers.

Despite the failure of the CO-OPs and other persistent challenges, competition among insurers has provided choices for consumers in the individual market. A recent analysis of the 17 state-based marketplaces found that most have an equal or greater number of insurers competing for business in 2016, as FierceHealthPayer previously reported.

To learn more:
- read the report

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Study: Insurer competition holds steady on state exchanges in 2016