The federal health insurance marketplace (Healthcare.gov) opened for business in the fall of 2013, and has provided an affordable health insurance shopping platform for millions of Americans. Admittedly, the federal exchange – along with many of the state-run exchanges – got off to a very rocky start in October 2013. But by December of that year, things were working better, and the exchange was quite functional during the latter half of the six-month initial open enrollment period.
In August 2014, Kevin Counihan, who had served as CEO of the highly successful state-run exchange in Connecticut, was selected to be the CEO of the federally run marketplace. In the ensuing year, the federally run exchange has continued to grow and improve.
In 2014, there were 191 health insurers selling policies on the federal exchange in 36 states (including states with partnership exchanges, as well as Idaho and New Mexico, both of which had federally supported state-based marketplaces in 2014). In September 2014, HHS issued a report on carrier participation for 2015, noting that the federally run exchange would have 57 additional insurers in 2015 – a 30 percent increase over the prior year.
The federally run exchange has also proven to be a cost-efficient enrollment platform. For 2014 enrollees, the federally run exchange spent an average of $647 per enrollee, which was less than half the $1,503 per enrollee that state-run exchanges spent.
By August 2015, enrollment through Healthcare.gov had reached nearly 10 million people (including 944,000 who enrolled between February 23 and June 30 via special enrollment periods), although not all of the plans had been effectuated. And nearly nine out of ten Healthcare.gov enrollees are receiving premium subsidies to lower the cost of their coverage.
In addition, millions of people have enrolled in Medicaid through the federally run exchange, including many who are newly eligible due to Medicaid expansion (nearly half the states have opted not to expand Medicaid however, and a disproportionate number of them are states that use the federally run exchange).
Healthcare.gov does the heavy lifting
There are 27 states that have a fully federally run exchange (seven of them provide plan oversight for the plans sold through the exchange: Kansas, Maine, Montana, Nebraska, Ohio, South Dakota, and Virginia).
In addition, another seven states (Arkansas, Delaware, Illinois, Iowa, Michigan, New Hampshire, and West Virginia) have established partnership exchanges, working together with the federal government to run the exchange. All seven of them use Healthcare.gov for enrollment, but the states also take on varying levels of plan management, consumer assistance, and outreach. They are generally counted together with the 27 states that rely fully on the federally run exchange, with all 34 states considered to be using the federally run exchange.
Some of the state-run exchanges also use Healthcare.gov for enrollment. Prior to the 2013 launch of the exchanges, some states wanted to operate their own exchange, but weren’t able to get an enrollment platform up and running in time. Idaho and New Mexico both opted to establish federally supported state-based exchanges for 2014, meaning that while their exchanges were run by the state, they were using the Healthcare.gov enrollment platform, just like the states that rely fully on the federally run exchange.
Ultimately, Idaho was able to transition to running its own exchange by the time the second open enrollment period began in the fall of 2014. But New Mexico has opted to continue to use Healthcare.gov as a supported state-based marketplace.
Oregon and Nevada ran their own exchanges in 2014, but have since become federally supported state-based marketplaces, with both states ditching their troubled enrollment platforms prior to the second open enrollment period, and using Healthcare.gov instead. Hawaii operated its own exchange in 2014 and 2015, but is transitioning to a federally supported state-based model in time for the 2016 open enrollment period that starts in November.
So while Hawaii, Nevada, Oregon, and New Mexico will all be using the same enrollment platform as the states that rely on the federally run exchange, they’re still considered state-based exchanges. Utilizing Healthcare.gov’s economies of scale and technologically smooth enrollment software simply proved to be a better choice than operating their own enrollment platform.
All told – including states with partnership exchanges and federally supported state-based exchanges – Healthcare.gov will be enrolling consumers in 38 states during the 2016 open enrollment period (November 1, 2015 through January 3, 2016).
More options for consumers
Prior to 2014, many people looking to buy individual health insurance had few options. A 2011 study by the Kaiser Foundation found that the individual insurance market was dominated by a single insurance company in 30 states and the District of Columbia.
The American Medical Association (AMA) also conducted a series of studies analyzing competition among health insurers, and found similar results. A 2012 AMA study determined that in nearly 40 percent of US metropolitan areas, a single insurance company had at least half of the market share. The same study also found that a single carrier had at least 30 percent of the market share in nearly nine out of ten U.S. markets.
Although 2014 ushered in a new era of guaranteed-issue individual health insurance – a dramatic change from the medically underwritten markets that existed in most states prior to 2014 – some states still had relatively few carriers offering coverage, particularly in the exchange.
In 2014, West Virginia and New Hampshire had only one participating exchange carrier, and several other states – Alabama, Wisconsin, North Carolina, Florida, Mississippi, and Arkansas – had only one carrier in at least a portion of the state (all eight of those states either rely fully on the federally run exchange, or have a partnership exchange model). In 2015, West Virginia still has just one carrier in the exchange, although the CO-OP in neighboring Kentucky is planning to expand to West Virginia in 2016 (it had planned to do so for 2015, but pulled out at the last minute). But New Hampshire now has five exchange carriers, and the other six states each gained at least one additional exchange carrier for 2015.
Multi-state plans were available in 31 states in 2014 and in 36 states by 2015. They are slated to be available in all states by 2017, but HHS noted in early 2015 that they are being flexible about that target, given the challenges that insurers face in expanding rapidly into multiple states. Multi-state plans were created through the Affordable Care Act to address the lack of competition in the individual health insurance market. Multi-state plans are operated by the Office of Personnel Management, which is the entity that runs health insurance programs for Congress and federal employees.
New market, some new players
While some big-name insurers stayed away during the first year of ACA enrollment, the exchanges attracted some new companies to compete in the individual health insurance market, along with many existing big-name carriers – all drawn by the opportunity to gain new customers.
According to a 2013 White House memo, about a quarter of the insurers who applied to participate in the federal exchange in 2014 were new to the individual market, and about 65 percent of those newcomers were joining markets previously dominated by a single carrier.
Among the new carriers are CO-OPs, newly created by the ACA; their plans are currently available in 12 states that use the federally run exchange. The CO-OPs are all start-ups that began offering coverage in 2014, so they’re added to the diversity of the health insurance landscape in the states were they’re operating (CO-OPs are also operating in the majority of the states that have state-run exchanges).
And some of the big-name carriers that initially stayed away are now joining the federal exchange. United Healthcare only offered plans through exchanges in four states in 2014, and they were all state-run exchanges. In 2015, the carrier expanded significantly, selling exchange plans in 23 states, including 16 that use the federally run exchange. They are planning to expand further into more exchanges in 2016.
Healthcare.gov was created to fill a need when more than half the states decided that they didn’t want to run their own exchanges – either because they didn’t think it would be financially or technologically feasible, or because they were simply opposed to the ACA and didn’t want to participate in any activities that helped to implement the law.
But with two years of open enrollment in the books and many hurdles overcome, Healthcare.gov has proved to have staying power, and has also become a feasible solution for states that have run into problems with their own exchanges. In late 2013, the federal exchange’s glitchy website was the butt of many jokes and the cause of many headaches. But it has become an integral part of the individual health insurance market in two-thirds of the states, gaining more insurers and insureds with each passing year.