The Evolving Crisis of the ACA Exchange Marketplace

By Zack Buck

Following news last week that Aetna was pulling out of health care insurance exchange markets in eleven states, Pinal County, Arizona became the epicenter in the rapidly evolving and growing crisis facing the Affordable Care Act’s insurance exchanges.  Sandwiched between Phoenix and Tucson, Pinal County is home to about 400,000 residents, but no insurance companies; in short, Pinal County has been left without any insurance companies signed up to sell insurance on the exchange to its residents for 2017—becoming the “county that Obamacare forgot.”

Pinal County had nearly 10,000 citizens sign up on the exchange in 2016, but Aetna’s departure bookends a rough period for Pinal County residents.  In addition to Aetna, the county has recently endured the departure of UnitedHealth Group, Humana, and a non-profit co-op from Arizona’s exchange.  As a result, Pinal County is reportedly looking to other insurers who may be interested in selling on the exchange to its residents; in a bit of hopeful news, Blue Cross Blue Shield of Arizona is said to be “re-evaluating where it will offer plans next year.”

But the crisis isn’t contained to Pinal County.  Two states—Tennessee and Alaska—have been trying to avoid a similar fate.

In Tennessee, the Commissioner of the Department of Commerce and Insurance Julie Mix McPeak made news on Tuesday, noting in The Tennessean newspaper that the state’s exchange market is “very near collapse.”  This is due to the increasing cost of the plans sold on the exchange, and the fact that only one insurer—BlueCross BlueShield of Tennessee—sells insurance statewide.  For the companies offering plans, premiums are set to increase year over year; the three large companies that sell to at least a portion of Tennessee’s residents—BlueCross BlueShield of Tennessee, Cigna, and Humana—have all been granted premium rate increases of more than 40 percent for next year’s exchange (BCBST was granted a 62 percent increase, but has yet to decide the final profile of its participation in 2017).  The Tennessean noted that McPeak said that the “rate approvals, while a tough decision, were necessary to ensure that consumers around the state had options when open enrollment begins in November.”

And in Alaska, one exchange participant—Premera Blue Cross Blue Shield—remains on its exchange.  As reported in June, Alaska lawmakers were “scrambling” to stave off collapse of its insurance market, establishing legislation that would “subsidize enrollees’ costs through taxing insurance companies.”  Governor Bill Walker signed the bill in mid-July, which will hold down the insurance premium rate increase for 2017 (from 39 percent in 2016 to 10 percent in 2017) for Alaska’s one exchange insurer.

The challenges facing the insurance marketplace are multifaceted, but are clear indicators that the marketplace has not proven as profitable as expected.  Perhaps this is due to smaller than expected enrollments, a sicker pool of individuals, and the hamstringing of the non-profit co-ops by Congress.  Whether the crisis is quelled by smaller, localized insurance companies joining the marketplace, by the proliferation of scaled-back “catastrophic” health insurance plans, or by something more drastic, the exchanges are in need of legislative and regulatory attention.  One thing is for sure:  these moves by insurance companies and the rate hikes portend a turbulent and dynamic open enrollment period later this year—and have led many, even President Obama himself, to call for a “public plan option” in a noteworthy JAMA piece earlier this month.

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About buckz

Isaac D. (“Zack”) Buck is an assistant professor at the University of Tennessee College of Law, where he teaches torts and various health law courses. His scholarship focuses on how health care cost impacts the quality of American health care and the role of the physician. In 2013, he was selected as a Health Law Scholar as part of the ASLME Health Law Scholars Workshop at Saint Louis University School of Law, and he has recently published articles in the Ohio State Law Journal, Maryland Law Review, U.C. Davis Law Review, and Cardozo Law Review, and has articles forthcoming in the California Law Review and Florida State Law Review in 2016. Before joining Tennessee, Zack was an assistant professor at Mercer University School of Law, and was formerly a visiting assistant professor at Seton Hall University School of Law. Upon graduation from law school, he practiced law at Sidley Austin LLP in Chicago. Zack holds a J.D. from the University of Pennsylvania Law School, a Masters of Bioethics from the University of Pennsylvania School of Medicine Center for Bioethics, and a B.A. from Miami University (OH).