by David Ramsey
We noted on Tuesday the announcement of letters of intent from four carriers to sell on the Arkansas health-insurance exchange, known as the Health Insurance Marketplace (HIM). That was followed up yesterday with the announcement that a fifth carrier submitted a letter of intent. (More background in this post.)
A letter of intent doesn't guarantee that a carrier will sell on the HIM, or be approved by the Arkansas Insurance Department to do so. But it's a good sign. Meanwhile, AID officials said that it's possible that one or two more federal multi-state carriers may come in to the fold (they also cautioned that the federal multi-state Blue Cross Blue Shield, one of the carriers that sent a letter of intent, still needs approval from the feds). So let's call it four to seven carriers.
This represents a major improvement on the status quo (Arkansas Blue Cross Blue Shield currently controls more than 75 percent of the market). Will it be enough to drive down prices? We'll find out more when the carriers submit their full applications at the end of the month with proposed premium prices. Those prices will be key not just because of their impact on the private insurance market, but the impact on government spending — the "private option" legislation has the government paying the full premiums of around 200,000 low-income people newly eligible for coverage under Medicaid expansion. Competition was one of the factors cited by actuaries in projecting the costs of the "private option." Policymakers decided against competitive bidding, at least in Year One, so the question is whether there will be enough carrier competition to produce significant downward price pressure.
Rep. John Burris called the carriers coming in to the market a “great start” (I spoke to him prior to the announcement of the fifth carrier) and said he expected the market to grow in coming years.
DHS Director John Selig said that the priority in terms of “private option” carriers in the first year was getting two plans in every county, which now appears likely. “The key is to get started. In terms of a competitive marketplace, part of that will develop over time. Our focus this year was to get enough carriers in to have good coverage and good access. We’ll focus more on the competitive pieces later.”
“Our hope and what the actuaries told us is with the changes in the marketplace, the premiums ought to be pretty competitive," he added.
The waiver needed to get federal approval for the "private option" is contingent on the state having a plan that will be comparable in cost to traditional Medicaid expansion, and I asked Selig whether the number of carriers in 2014 would impact cost estimates.
“I think what CMS will look at is over a 3-year period of a waiver,” he said. “The expectation is over the first three years of the exchange, the market may shift quite a bit and evolve. I really can’t sit here and predict beyond what the actuaries predicted will happen.”
The insurance companies will be competing on price for many in the market, but one group that won't be price sensitive is the "private option" expansion pool. Because the full tab of the premiums will be picked up for them, a good chunk of the market will be making their choices on factors other than price. It will be up to Insurance Commission Jay Bradford to nix any plans that are extreme price outliers or not actuarially sound (according to this DHS fact sheet, the standard is "appropriately and competitively priced").
It will also be up to AID to ensure that the plans offered are "meaningfully different," as mandated by federal regulations. This may come up with Arkansas Blue Cross Blue Shield and the federal multi-state Blue Cross Blue Shield, which are considered two separate entities but may share a network.
After the jump, see a map of the seven service regions AID divided the state into. The two Blues and United Security plan to cover all regions, and QualChoice plans to cover five regions, excluding the southwest and southeast regions. It is not yet know how many regions Centene will cover.