But the marketplaces won’t just create opportunity for individuals and small businesses to buy insurance for the first time. They will also open new opportunities for insurance companies by making private coverage more affordable for the uninsured more widely available to those who currently don’t have access to coverage.
In a sign that insurers are eager to compete for the new business, about one in four insurance companies offering coverage through the marketplaces will sell individual health plans for the first time, according to the U.S. Department of Health and Human Services.
That includes Dayton-based CareSource, the largest Medicaid managed-care insurer in Ohio, which plans to leverage its nonprofit tax status and low administrative costs to compete on price with large commercial insurers selling plans in the state’s marketplace.
“If you look at those two advantages, it’s giving us approximately a 10 percent cost advantage over our competitors,” said Steve Ringel, senior vice president of the market and product group at CareSource.
Ringel said selling insurance in the marketplaces is first and foremost an extension of CareSource’s primary mission of providing a safety-net for lower-income people.
“It’s very important for us not just to be a commercial player,” he said. “A lot of the commercial players are going to go out there and try to expand their market share. We deliberately designed our product to extend our mission and serve the under served.”
Enrollment might be slow
Still, the potential for growth is clear.
The Congressional Budget Office projects that 7 million people will sign up for coverage through the state marketplaces in 2014 — the first year in which coverage begins. By 2023, 25 million people will be enrolled, the CBO predicts.
CareSource expects to sign up between 50,000 and 150,000 new members in the next 18 to 24 months.
“We think it’s going take at least two open enrollment periods for folks to get excited, learn about the marketplaces and sign up,” Ringel said.
All plans eligible for tax subsidies in the marketplaces will be separated into four tiers: bronze, silver, gold and platinum, with the bronze plans covering the least amount of medical costs and platinum the highest.
Insurers will also offer catastrophic plans, but they will not be eligible for subsidies to offset the cost of insurance. The subsidies are based on a sliding income scale: the lower your income, the more financial assistance you'll receive and apply only for people who select either the silver, gold or platinum plans.
Under the Affordable Care Act, which created the marketplaces, all insurers are required to offer at least one silver and one gold plan to participate in the marketplaces.
CareSource will meet the minimum requirement, Ringel said. But the company expects to be most active in the marketplace selling silver plans, which require the insurer to pay at least 70 percent of medical costs.
“That’s our sweet spot,” Ringel said. “The silver plan is the one that gets the full subsidies.”
Any nonelderly adult not eligible for Medicaid — and who does not have access to affordable insurance from an employer — can sign up for insurance in the marketplace. And subsidies to help cover premium costs will be available to anyone earning between 100 percent and 400 percent of the federal poverty level, or between $11,490 and $45,960 for an individual this year.
But CareSource’s target market will be people whose income falls between 100 percent and 250 percent of the federal poverty level — between $11,490 and $28,725 — who may be eligible for a cost-sharing reduction subsidy, which would lower the cost of deductibles, co-payments and coinsurance for anyone buying a sliver plan though the marketplace.
“If they qualify for a subsidy, and especially if they qualify for a full subsidy including cost-sharing, they’re going to be looking for a very cost-effective plan, and that’s going to be us,” Ringel said. “Folks who are fully subsidized are going to get insurance for almost single digits a month. I mean less than $10.”
Profit vs. helping sick
Such price competition in addition to the health care law’s requirement — that the sickest enrollees can be charged no more than three times the premiums of the healthiest enrollee — will keep rates down in the marketplaces. This could provide a strong incentive for the uninsured to sign up, said Mike Suttman, president of Dayton-based employee benefits brokerage McGohan Brabender Inc.
But the most important question is who and how many will the marketplaces attract, Suttman said.
“I think the exchanges have the potential to be a significant source of providing coverage, and that means you may have nontraditional players who want to get into the market to capitalize on it,” he said. “But there is also the potential for getting yourself into a tough spot from a risk-management perspective.”
If, as many fear, mostly older, sicker people with high medical costs flock to the marketplace without a critical mass of young people signing up to balance out the risk pool, some insurers could end up losing money or barely breaking even in the marketplaces, Suttman said.
“If you can get younger people to pay a higher rate than their risk, then the system could work,” he said. “But if all the people the marketplaces attract are sick people, and they (insurers) end up spending more than they collect in premiums, that’s really scary for a private company that’s in business to turn a profit.”
In Ohio, 12 companies have been approved to sell a total of 200 plans for individual health coverage on the state’s marketplace, according to the Department of Health and Human Services. In the Dayton-Springfield region that includes seven counties, six insurers will offer 39 different plans on the exchange to uninsured Ohioans, including 23 plans that will qualify for tax subsidies.
In Butler, Hamilton and Warren counties seven insurers will offer 66 plans, including 41 plans that will qualify for tax subsidies. In both metropolitan regions, six of the plans will also offer catastrophic plans for people under age of 30.
A number of the insurers have declined to discuss their expectations or offerings before the marketplace opens Tuesday.
Still, analysts who have looked at exchange plans in Ohio and other states warn that consumers should curb their expectations.
They will get coverage if they choose, but they are likely to have fewer options than the vast majority of people participating in company-sponsored group health insurance plans, said Jonathan Wu, co-founder of the insurance price comparison website ValuePenguin.
“What we’ve seen in most states is that the managed care programs are usually the most affordable in terms of premiums,” Wu said. “In order to compete on premiums, some of the bigger commercial providers may limit their networks and choose to select only the providers who will lower costs for them.”
But fewer choices is better than no choice for the throngs of uninsured who have never had health insurance before and are now guaranteed coverage, said Dr. Donald Nguyen, a Dayton-area pediatrician and state director for Doctors for America — a national organization of physicians and medical students who support health care reform.
“It’s not like people are going to be standing in line and can’t get in to see a doctor,” Nguyen said. “New patients seeking coverage through the marketplaces won’t be coming online fast enough to overwhelm the system. And just because they have insurance doesn’t meant they’ll use it right away. They just won’t hesitate to use it once they get sick.”
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