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Loss of Exchanges Would Complicate Health Insurers' Strategies

Analysis  |  By Gregory A. Freeman  
   March 08, 2017

Reverting to a pre-ACA insurance market model may be more challenging to commercial payers than dealing with the competition of the exchanges.

Health plan executives are busily developing strategies for surviving the next incarnation of the Affordable Care Act or its successor, and they all are factoring in their new competitor–the exchanges created under the healthcare law. Eliminating that competition actually might not be in their best interests, however.

The exchanges may survive in some fashion or be eliminated, and either result will be a major determinant in how health plans move forward, says Hector De La Torre, executive director of the Transamerica Center for Health Studies, a non-profit division of Transamerica Institute.


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"Whether they were in the marketplace or not, they had to take the exchanges into account. If they are just in the traditional insurance market, direct-to-consumer, they still have to take into account what the pricing and benefit structure was in the exchange because they're competing against it," De La Torre says.

"The exchanges have become a significant player in the health insurance market, and you don't just shrink or eliminate that payer and not have it affect the rest of the market."


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Removing ACA requirements and eliminating the exchanges would essentially take the insurance market back to 2010, the pre-ACA era, De La Torres says. If essential health benefits are removed, for instance, insurers will be free to sell skinny plans with limited coverage or catastrophic plans, De La Torre says.

"The problem is this isn't 2010. We're seven years later and we've had this other experience. Consumers have had this other experience and that will affect their expectations," he says.

"If we go back to a state-by-state model with one state demanding this kind of coverage and another demanding something else, it's just going to become that much more complicated for the health insurers. The ACA simplified things in many ways."


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For better or worse, the ACA took a lot of control and decision making away from the health plans, De La Torre notes. It specified essential health benefits, cost structures, and medical loss ratios under which all plans had to operate.

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"You just had to price those products the best you could, in order to be competitive," he says. "Now if we're going back to the pre-2010 model, they're going to have to be everything to everyone. That's more complicated, more expensive, and more risky."

Insurers are developing a range of strategies for every foreseeable scenario, De La Torre says, but volume is the most difficult variable to nail down.

"It's hard to anticipate volume until you know the specifics of what changes are happening," he says.

"I serve on the board of the largest public health plan in America, and we can't anticipate the numbers because there are too many moving parts to anticipate how many people we are going to lose. But we can anticipate some of the impact in terms of how we provide the services, an 'if A, then B' approach, so that's where the focus is now."

Gregory A. Freeman is a contributing writer for HealthLeaders.


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