Health Insurance Exchanges: Competition is Working

To answer one of our recent entries, Will Health Insurance Exchanges Make a Difference?, the answer is a resounding “yes”. Or, at least that is the case for New York.

With the implementation of the online health insurance exchanges in less than three months, one of the main questions is whether or not premiums for individual policies will decrease. One of the goals for the exchanges is to provide more affordable health plans to consumers. This is hoped to be achieved by introducing more insurers into the market. With an increased number of insurers, healthcare policy makers are counting on competition being created in order to lower prices.

In New York, there are 17 insurers approved for their exchange. Eight of these seventeen are new to New York’s health insurance market¹. In contrast to states like Mississippi, which only has two insurers planning on participating in their exchange, New York’s exchange has a large amount of insurers, hopefully creating the competition so greatly desired.

Based on the information released on July 16th, it does indeed look as if the high number of insurers in New York will create competition and in turn lower their premiums. According to state insurance officials, there will be approximately a 50% decrease on average for individual insurance plans.

This is a huge step, especially for New York, since their healthcare costs per capita are 18% above the national average². In part due to this high premium cost, only 17,000 New Yorkers purchase insurance on their own.  2.6 million New Yorkers remain uninsured.  Due to enhanced access and lower premiums, state officials expect 615,000 individuals to buy insurance within the next few years.

Just having coverage is not enough to provide access to healthcare products and services.  A key question is the quality of the coverage available through the exchanges.  Each healthcare manufacturer should determine the extent to which the health insurance products available through the exchanges provide coverage for their products and services and determine the extent to which the associated deductibles, co-pays and co-insurances are a barrier to access.

Only a portion of New York’s 2.6 million uninsured will purchase insurance products through the exchanges.  Healthcare manufacturers should profile the population that will go through the exchanges to evaluate their likelihood to pursue care, even with insurance, and their ability to assume responsibility for the associated deductibles, co-pays and co-insurances.

The more significant questions for healthcare manufacturers lie with group plans.  Will the price reductions seen in New York for individual policies spread to group policies?  If premiums for group policies decline, will that occur only for policies purchased through the employer exchanges, through directly-purchased group policies or both? Will employers continue the trend of offering less coverage to keep premiums affordable?  It will be a fascinating to monitor these trends and employer reactions over the coming months.

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¹http://www.nytimes.com/2013/07/17/health/health-plan-cost-for-new-yorkers-set-to-fall-50.html?pagewanted=1&_r=1&hp
²http://online.wsj.com/article/SB10001424127887323309404578612320131440406.html

Check out some of our other entries:

How Will Medicare Advantage Developments Affect your Products?
ACA to Greatly Benefit Those with Pre-existing Conditions
Keeping Up with the Changes in Accountable Care Organizations

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