Health Insurers’ Participation on the Health Insurance Exchanges; and, Current-Market Premium and MLR Patterns by State

Richard

Health insurance exchange (HIE) participation across the publicly-traded HMOs varies greatly – the only consistent pattern being that the publicly-traded names’ are selectively focused on states with less concentrated supply-sides (i.e. states lacking dominant underwriters)

AET most of all, and to a lesser degree HUM, WLP and MOH are aggressively pursuing growth on the HIEs. UNH and particularly CI are participating only on a very limited basis

We continue to prefer ‘Medicaid predominant’ HMOs (e.g. WCG, MOH, MGLN, CNC) to ‘commercial predominant’ HMOs, with the exception of CI, which we prefer for its exposure to small group administrative services (ASO) and stop-loss offerings

‘Current market’ premiums and MLRs vary greatly across states. This variation primarily reflects state-level regulatory influences; competition among underwriters appears to have very little effect on either premiums or MLRs

The regulatory features of markets with higher premiums (particularly guaranteed issue in the individual markets) become universal in 2014, implying significant premium inflation in states that currently lack these regulations, and significant inflation of average national premiums – this feeds our concerns of limited demand-side participation and the rapid emergence of adverse selection pressures on the HIEs

Importantly, whether or not a state regulator has the authority to pre-approve premiums has little or no effect on premium (or MLR) levels – this implies regulators’ impact on premiums and MLRs has far more to do with market ‘structure’ than with de facto ‘fiat’ pricing power

For our full research notes, please visit our published research site.

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