The raging wave of nonprofit health insurance exchanges, or co-ops, created under the Affordable Care Act (ACA) to foster competition appears now to be lessening to more of a ripple.
One academic with an extensive background researching the economics of the Massachusetts Health Insurance Exchange (MHIE) said she understands why these state co-ops are struggling.
“It is difficult to achieve the scale needed to effectively negotiate with providers,” University of Pennsylvania Wharton School Assistant Professor of Health Care Management Amanda Starc recently told Patient Daily.
In recent months, these co-ops - backed by billions in government loans - also have faced federal scrutiny from the Centers for Medicare and Medicaid Services (CMS), which is charged with overseeing the ACA, also known as the Obamacare law.
CMS hasn't been completely happy with what it has found regarding some of the startups’ finances, enrollment or business practices. So far, CMS has sent warning letters to 11 of the 23 co-ops, placing them on “enhanced oversight" or requiring them to produce a corrective action plan, or, in some cases, both.
The increased federal monitoring has resulted in one co-op shutting down. Eight more plan to close in 2016 and more closures could be announced before Nov. 1, which is start of the third open-enrollment season in which Americans may buy coverage through these ACA insurance exchanges.
Even without the federal scrutiny, the long-term outlook for the health insurance exchanges is questionable.
“Risk adjustment may hurt firms who attract younger, healthier enrollees," Starc said.
Having written several research papers on the MHIE, Starc also has co-authored a forthcoming report, titled “Pricing Regulation and Imperfect Competition on the Massachusetts Health Insurance Exchange,” that focuses on consumer behavior and insurer incentives in these markets.
Going forward, Starc told Patient Daily that “active choice and comparing all the features of plans is critical” for consumers.