37% of US Residents Live in ACA Rating Regions with Few Insurers

March 26, 2019 - Just over 37 percent of the US population is living in an ACA rating region with either one or two insurers, resulting in higher premiums and increased spending, according to a recent study conducted by the Urban Institute and commissioned by the Robert Wood Johnson Foundation.

In 2017, the researchers conducted an analysis on the number of marketplace-participating insurers and premiums in ACA rating regions throughout the US. They found that in 2017, rating regions with fewer insurers usually had smaller populations and higher premiums than areas with more insurers.

“The rating regions with one or two insurers tended to have much smaller populations than those with five or more insurers, because rating regions with fewer potential enrollees generally cannot support enough insurers to make markets competitive,” the team said.

“Premiums in the rating regions with one or two insurers were, on average, significantly higher than in regions with five or more insurers.”

Researchers set out to assess how changing regulations and competition have affected marketplace trends since that last analysis.

READ MORE: Regulatory Uncertainty Continues to Disrupt ACA Marketplaces

The 2019 findings showed that 37.5 percent of the population lives in a region with one or two insurers.

Of the 502 premium rating regions in the US in 2019, 165 have only one insurer offering marketplace nongroup coverage. This is an increase from 2017, when 146 rating regions had only one insurer. Additionally, the number of rating regions with two insurers increased from 125 to 157.

The results also showed that between 2017 and 2019, the number of rating regions with five or more insurers decreased significantly, from 69 in 2017 to 39 in 2019.

Similar to 2017, the researchers found that rating regions with more insurers tended to have larger populations, while regions with fewer insurers had smaller populations.

“In 2019, the average rating region with one insurer has a population of approximately 240,000, and rating regions with two marketplace insurers have an average population of about 530,000,” the report said.

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“Rating regions with five or more insurers have much larger populations, an average of 1.69 million.”

The team also analyzed premium and insurance participation data from public use files and state-based marketplace websites from 2017 to 2019.

Over this period, median benchmark premiums in rating regions with a single insurer increased by 31.2 percent. In rating regions with five or more insurers, premiums increased by 24.7 percent.

Researchers also found that by far, residents of the South are most likely to live in regions with just one or two marketplace insurers, with 24.6 percent of the population in the South living in a region with one insurer and 28.3 percent living in a region with two insurers.

Residents of the South are also less likely to live in areas with four or more insurers, the team noted.

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“In 2019, only 12.3 percent of the population in the south lived in a rating region with four insurers and only 4.0 percent lived in a region with five or more,” the report said.

“The share of the southern population living in rating regions with four or more insurers declined considerably since 2017, when 30 percent of the population lived in a rating region with four or more insurers.”

In contrast, there are no rating regions of the northeast that have only one marketplace insurer. Nearly 41 percent of the population in the northeast live in areas with five or more insurers, and another 9.3 percent live in regions with four insurers.

The West showed similar marketplace competition, with 36.8 percent of the population living in rating regions with four insurers, and another 26.8 percent living in areas with five or more insurers.

In rating regions with a single insurer, the researchers found that Blue Cross Blue Shield was often the only participant, a situation that has not changed since 2017. Blue Cross Blue Shield insurers made up 146 of the 165 rating regions with one insurer in 2019.

Medicaid insurers were also prevalent in less competitive regions, participating in 68 rating regions with two insurers in 2019.

These findings demonstrate that the number of highly competitive markets is declining, resulting in higher premiums for consumers.

“The decrease in highly competitive markets is concerning because marketplace premiums tend to be substantially higher in rating regions with one insurer than in more competitive marketplaces,” the report stated.

“In 2019, the median marketplace benchmark premium for a 40-year-old in rating regions with one insurer is $592 per month, compared with $376 per month in rating regions with five or more insurers.”

Because more than one-third of the population is living in rating regions with either one or two marketplace insurers, the lack of competition is increasing both federal and household spending, the researchers said. To reduce spending, officials should take steps to increase competition among insurers.

“In markets with fewer insurers, policymakers could cap the provider payment rates that private ACA-compliant nongroup insurers pay (e.g., at Medicare levels plus some percentage),” the report said.

“Alternatively, or in addition, introducing a publicly administered insurance plan could increase competition among existing insurers, with premiums set based on regulated provider payment rates.”