NCPA - National Center for Policy Analysis

Health Exchanges Could Lack Competition

April 29, 2013

By January 1, 2014, most states will have some form of insurance exchange as mandated by ObamaCare. The exchanges are supposed to provide more choices and greater competition. However, a lack of competition within the exchanges might hamper their ability to lower prices, says Stateline.

  • Alabama, Hawaii, Michigan, Delaware, Alaska, North Dakota, South Carolina, Rhode Island, Wyoming and Nebraska are all dominated by a single insurance company.
  • This lack of competition is unlikely to change once exchanges are introduced into the health care system.
  • Outside of the competition issues, many fear that the health exchanges will struggle to achieve their envisioned purpose.

ObamaCare skeptics wonder how many eligible individuals will show up given the fact that a majority of Americans do not know what an exchange is or how it works.

  • An exchange is supposed to operate as a private marketplace that provides insurance to individuals who do not receive insurance from their employers.
  • Individuals and businesses with up to 100 employees will be able to shop on the exchanges, which are supposed to provide an array of insurance options.
  • The American Medical Association estimates that a single insurance company held 50 percent or more of the market in nearly 70 percent of local markets nationwide.

With the lack of competition, federal regulations may push up premiums because carriers are now required to cover everyone, even people with preexisting conditions who cost more to insure.

  • Insurance rates for individuals may increase by as much as 32 percent over the first few years of the exchanges because many healthy people will not enter the exchanges.
  • The federal government is expected to provide more than $300 billion in subsidies to people who cannot afford insurance.

For states that choose to expand Medicaid, the federal government will pour even more money into the health exchanges. For the exchanges dominated by fewer insurers, this could equal huge profits.

Source: Christine Vestal, "Lack of Competition Might Hamper Health Exchanges," Stateline, April 23, 2013.


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