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HHS Finds Competition Helped Consumers Under ACA, But Will It Be Short-Lived?


Proposed mergers of Aetna and Humana, and Anthem and Cigna, raise questions of whether consumers will continue to see competition in health insurance markets.

Most people shopping for health plans on the federal marketplace had more choices in 2015 than in the first year coverage under the Affordable Care Act (ACA), according to a study released yesterday by HHS.

However, the same law that called for empowering consumers has set in motion a wave of market consolidation, which in July brought announcements of 2 giant managed care mergers that could reduce the top 5 health insurers down to 3.

The potential unions of Aetna and Humana, and Anthem and Cigna, raise questions of how long the competition discussed yesterday by HHS Secretary Sylvia Mathews Burwell will last. It is not clear what the federal government is doing to ensure that the level of market choice discussed yesterday will continue.

Yesterday’s study of 35 states was limited to those who used the federal marketplace, healthcare.gov, in both 2014 and 2015. It examined county-level information to evaluate the connection between the level of competition in local markets and how much prices increased—or decreased—between the first and second year of mandated coverage under the ACA.

Findings were keyed to the cost of a mid-level silver plan, which has been the benchmark for calculating financial assistance. Among the findings in the study:

· Overall, competition increased, with 86% of households eligible for a qualified health plan having at least 3 choices in 2015, up from 70% in 2014.

· There was a net gain of 1 insurer per county, with 60% of counties gaining a choice and 8% seeing a net loss of choices.

· The average premium increase for the second-lowest silver plan was 2%. Some plans saw premium decreases.

· There was a direct link between greater competition and lower premium increases: each net gain of 1 insurer brought a 2.8 percentage point reduction in the rate of premium growth for the silver benchmark plan.

While yesterday’s study was limited to states using the federal marketplace, it comes after this week’s announcement from Covered California, which will have average premium increases of 4% for 2016. That announcement noted that rate hikes were lower in Southern California than in the northern half of the state, due to different levels of competition.

The federal study found better prices in more populous areas due to greater competition, and this is consistent with reports that rural areas have had a harder time attracting multiple insurers, physicians, and specialists.

Burwell said the study showed the ACA is working “to increase choice and competition for consumers and keep premium growth in check.” At the same time, federal officials refused to speculate on how the proposed mergers would affect premium levels.

The 2 mergers would affect 86 million customers, and the Aetna-Humana merger in particular would consolidate a large portion of Medicare and Medicaid business into a single operation, which would be based in Humana’s current headquarters in Louisville, Kentucky.

Both transactions are subject to antitrust review from the US Department of Justice and by state regulators; while those in states where the businesses are headquartered, or domiciled, have official authority, it is anticipated that officials from up to 2 dozen states with large numbers of affected consumers or employees will weigh in on the deals.

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