January 30, 2017 | Issue Brief on Health Care
One of the stated aims of the Affordable Care Act (ACA) was to increase competition among health insurance companies. That goal has not been realized, and by several different measures the ACA’s exchanges offer less competition and choice in 2017 than ever before. Now in the fourth year of operation, the exchanges continue to be far less competitive than the individual health insurance market was before the ACA’s implementation. Moreover, insurer participation in the law’s government-run exchanges has declined over the past two years and is now at the lowest level yet. This lack of insurer participation leaves exchange customers in 70 percent of U.S. counties with no insurer choice, or a choice between merely two insurers.
This Issue Brief reviews insurer participation in the ACA’s exchanges in 2017 in all 50 states and the District of Columbia, and compares those results with insurer participation in the pre-ACA (2013) individual market. Insurer exchange participation for 2017 is also compared with insurer exchange participation in previous years at the state and county levels. Insurers that offer exchange coverage through more than one subsidiary in a state are properly counted as one carrier (the parent company), while insurers that offer coverage in more than one state are counted for each state (as exchange participation is a state-level decision).
One way to measure insurer competition is to assess insurer participation on a state-by-state basis. That analysis, summarized in Table 1, shows the number of carriers in each state and the District of Columbia in the individual market in 2013, and in the exchanges each year since they began in 2014.
As shown in Table 1, the level of competition on the exchanges has somewhat fluctuated over the past four years. There was a net increase in insurer participation from 2014 to 2015, a slight decline from 2015 to 2016, and now a more significant (24 percent) decline from 2016 to 2017. For 2017, the exchanges have the fewest number of insurers since the exchanges launched. Relative to 2016, 33 states have fewer insurers selling coverage in the exchange, 16 states and the District of Columbia have the same number of insurers, and just one state—Virginia—has an increase in insurers offering exchange coverage in 2017. For 2017, there are five states—Alabama, Alaska, Oklahoma, South Carolina, and Wyoming—that have only one exchange insurer. Another 12 states (Arizona, Connecticut, Delaware, Hawaii, Mississippi, Nebraska, New Jersey, North Carolina, Rhode Island, South Dakota, Vermont, and West Virginia) and the District of Columbia have only two insurers selling exchange coverage in 2017.
Though state-level data are informative, for consumers, the most relevant measure of competition is at the county level. That is because health plans are offered (and priced) on a local basis, and many insurance carriers do not offer coverage statewide. Therefore, state-level figures can overstate the amount of choice available to consumers. For example, in Texas, 10 insurers are selling coverage on the exchange in 2017. But no one in Texas can choose from among 10 insurers on the exchange. In fact, 86 percent of Texas counties have only one or two insurers selling exchange coverage. The highest number of competing insurers in any Texas county is four, and only six of the state’s 254 counties have that many. County-level insurer competition on the exchanges has been limited for a significant portion of the country every year since the exchanges launched, as shown in Chart 1, and this year that situation is far more prevalent. For 2017, nearly 70 percent of U.S. counties will have either an insurer monopoly or duopoly on the exchange.
The number of counties with insurer monopolies on the exchange increased dramatically from about 7 percent in 2016 to nearly 33 percent in 2017. There has also been a significant increase in the number of counties with a duopoly in 2017—from 29 percent in 2016 to 37 percent in 2017.
In 2017, there were 80 insurer exits from the exchanges and 11 entrants, for a net decrease in insurer participation of 69 (summarized in Table 1). More than half of all exits can be attributed to withdrawals from multiple states by a few major health insurance companies, particularly UnitedHealthcare. Insurers cited financial losses from their exchange business as the main reason for dropping coverage offerings. The fact that the ACA’s temporary reinsurance program—which provided insurers with large subsidies to offset the cost of high-cost enrollees—also expired at the end of 2016 may have further induced carriers to exit the exchange market in 2017. UnitedHealthcare, the nation’s largest insurer, indicated early in 2016 that it was having financial trouble with its exchange business. Indeed, it released estimates that it lost $475 million on ACA-compliant plans in 2015 and expected to lose more than $500 million in 2016. Accordingly, for 2017, the company exited 31 of the 34 states where it offered exchange coverage in 2016. In addition to UnitedHealthcare’s massive withdrawal, Aetna exited 11 of 15 states, and Humana left four out of the 15 states, in which they sold coverage in 2016.
Among the many consequences of the ACA are its effects on insurer competition, particularly in the law’s government-run exchanges. The law has created an environment in which residents in 70 percent of the nation’s counties only have one or two insurance options if they purchase health coverage on the exchange. Given that proponents of the law expected it to increase insurer competition, diminishing consumer choice and insurer competition can be added to the list of ACA failures. Congress must repeal the ACA in order to revive state insurance markets, increase choice, and decrease costs for Americans who buy health insurance.
—Edmund F. Haislmaier is a Senior Research Fellow, and Alyene Senger is a Policy Analyst, in the Institute for Family, Community, and Opportunity at The Heritage Foundation.
 Barack Obama, “Remarks by the President to a Joint Session of Congress on Health Care,” September 9, 2009, video, https://www.c-span.org/video/?288799-1/presidential-health-care-address (accessed January 23, 2017).
 Office of Senator Ben Sasse, “Competition and Choice: A Report on the ACA’s 2016 Exchanges,” March 2016, http://www.sasse.senate.gov/public/_cache/files/b091dd97-f3f6-4b6e-8a3c-f95171768dcc/competition-and-choice---a-report-on-the-aca-s-2016-exchanges.pdf (accessed January 23, 2017).
 For more information on the reinsurance program, see Alyene Senger and Edmund F. Haislmaier, “The ACA’s Risk Programs: Why Congress Needs to Prevent Insurer Bailouts,” Heritage Foundation Issue Brief No. 4632, November 23, 2016, http://www.heritage.org/research/reports/2016/11/the-acas-risk-programs-why-congress-needs-to-prevent-insurer-bailouts.
 Tami Luhby, “UnitedHealth Expects to Lose Nearly $1 Billion on Obamacare,” CNN Money, January 19, 2016, http://money.cnn.com/2016/01/19/news/economy/unitedhealth-obamacare/ (accessed January 3, 2017).
 In 2017, UnitedHealthcare will continue to offer exchange coverage in Nevada, New York, and Virginia.
 The average increase in the benchmark plan premium is 25 percent in 2017 in the 39 states using the HealthCare.gov platform. U.S. Department of Health and Human Services, Assistant Secretary for Planning and Evaluation (ASPE), “Health Plan Choice and Premiums in the 2017 Health Insurance Marketplace,” ASPE Research Brief, October 24, 2016, https://aspe.hhs.gov/sites/default/files/pdf/212721/2017MarketplaceLandscapeBrief.pdf (accessed January 23, 2017).
 Shelby Livingston, “Anthem Warns of ACA Exchange Retreat in 2018,” Modern Healthcare, November 2, 2016, http://www.modernhealthcare.com/article/20161102/NEWS/161109978 (accessed January 23, 2017).