Regular insurer entry and exit in the ACA

We’ve talked about unanticipated insurer exit in the ACA a lot this summer.  Friday Health Plan is ceasing operations by the end of the week.  Their obligations will be taken over by a number of state guarantee funds and the people who enrolled in that company will either need to pick another insurer through some mechanism or go uninsured.

However that is not the only type of insurer exit.  Insurers make a business decision every year as to where they will offer products. Some markets where they had previously been in they withdraw because it does not make business sense.  They might not have good hospital contracts, they might be getting adversely selected, they might not have enough membership to cover the fixed costs of operations.  Their VP in charge of the product line might discover that they don’t like the regional BBQ.  For whatever reason they withdraw.  And conversely, insurers will also expand for normal business reasons.

We see this with Cigna as reported by Bruce Japsen at Forbes:

Cigna plans to grow its business of selling individual coverage under the Affordable Care Act for 2024 to 15 new counties in North Carolina, but will leave Missouri and Kansas, slightly reducing its Obamacare footprint.

So what happens to Cigna enrollees in Missouri?

They continue their coverage through December 31st, assuming they pay their premiums on time.  After that they have to pick a new insurer during the Open Enrollment Period for new coverage that starts on January 1.

This is disruptive.  Some people highly value continuity.  These folks are more likely to use a lot of services because they are ill.  There is a lot of value of knowing a doctor, knowing a hospital, knowing the formal and informal processes of insurance.  Moving to a new insurer is a pain in the ass as that knowledge has to be recreated.  Given that Cigna (with a single exception) was priced well above benchmark, they likely were covering a disproportionate number of sick people. But this is not unusual.  Employers routinely switch insurers every couple of years.  People routinely switch employers as well.

The question to me is what does this do to market enrollment?

Several years ago, Crespin and Deliere had a Health Affairs paper that looked at county level enrollment after an insurer left a county.

In policy years 2015–18. Insurer exit was associated with increased likelihood of consumer disenrollment from Marketplace coverage. The increase was twice as large for unsubsidized consumers (18.3 percentage points) than for consumers who received subsidies in the form of Advance Premium Tax Credits (8.7 percentage points) and was largely independent of premium increases measured using the lowest-cost silver plan available.

They do a nice job of estimated expected cheapest silver, net of subsidy costs and find that price barely matters for re-enrollment probabilities for people who lost their insurer. The big problem with this paper is one that they acknowledge. For plan years 2017 to present, CMS will automatically re-enroll folks whose insurer left them. They acknowledged this but did not adjust for it. I think that automatic re-enrollment is a major driver of retention and that the default matters a lot as a bad default can be either expensive or plausibly lead to rage quitting.

I think that we need to think more about the factors that lead to people to choose insurers that are likely to exit markets and then think about how to map out landing spots better. I’m not sure what the solution is, but it is something we need to think more about.