Health Law is fostering competition, U.S. says

The new health care law is injecting more competition into health insurance markets nationwide, drawing additional insurance companies into states long dominated by a few carriers, Obama administration officials said Thursday.

Such competition offers the prospect of more choices for millions of consumers who will be shopping for insurance this fall. Companies entering the market could also put downward pressure on prices, partly offsetting factors that tend to increase premiums. The competition could pose new challenges to Blue Cross and Blue Shield plans, which dominate the individual insurance markets in many states.

The administration gave a snapshot of applications filed by insurers in 19 states where the new insurance markets, or exchanges, will be run entirely by the federal government. The data was preliminary and incomplete and could not be independently verified. It was supplemented by federal officials with information from California and several other states that have released data on applications from insurers.

These states account for 80 percent of the seven million people expected to obtain coverage next year through the government-run markets being established under President Obama’s health care law.

The 2010 law promotes competition by standardizing many features of insurance policies and creating Web sites where consumers can compare costs and benefits. The Web sites will also make it easier for insurers to market their products.

"The majority of states will have new health insurance choices that are not available today," the administration said in a memorandum summarizing its analysis. In about three-fourths of states with exchanges run by the federal government, it said, "at least one new insurance company intends to enter the market."

More than 120 insurance companies have filed applications with the federal government, and it appears that most consumers will be able to choose from health plans offered by five or more insurers, the administration said.

One-fourth of insurance companies proposing to offer coverage in these federal exchanges have recently entered the individual market, the administration said.

Experts on health policy said the filing of applications was only the beginning of a race to the market for insurers. After scrutinizing applications, federal and state officials could demand changes in benefits and rates, and insist that insurers expand their proposed networks of doctors and hospitals.

Paul B. Ginsburg, the president of the nonpartisan Center for Studying Health System Change, said: "The individual insurance market is now up for grabs. Blue Cross plans will face a lot more competition. Many products sold in the insurance exchanges will have more limited networks of doctors and hospitals than has been the norm in employer-based coverage."

Moreover, Mr. Ginsburg said: "Consumers will receive federal subsidies based on their income, not on the plans they choose. That creates a strong incentive for consumers to seek plans with lower premiums."

Federal officials said that consumers shopping for private insurance in the exchanges would often benefit from the same type of competition Medicare patients see when choosing prescription drug plans. Many industry experts doubted that stand-alone drug coverage could succeed, but Medicare beneficiaries now have a choice of more than 20 drug plans in every state, and the average premiums have been relatively stable in the last few years.

May 3 was the deadline for insurers to file applications to participate in markets run by the federal government, but administration officials said they were still trying to expand the options available in states where they wanted more competition.

The upbeat assessment by federal officials follows months of criticism by Republicans and some Democrats who said the administration had fumbled the rollout of the new health care law. Senator Mitch McConnell of Kentucky, the Republican leader, predicted recently that the law would be"the biggest issue" in Congressional elections next year.

In at least 31 states, administration officials said, consumers will be able to sign up for a new kind of product offered by private insurers under contract with the federal Office of Personnel Management, the agency that arranges health benefits for federal employees.

These multistate plans will be available in all states by 2017. They were included in the health care law as a substitute for a pure government-run insurance program -- the "public option" sought by liberal Democrats and reviled by Republicans.

The health care law classifies insurance into several categories, based on the generosity of coverage. In its preview of the market in 2014, the administration said that "consumers will have multiple options in each tier of coverage: catastrophic, bronze, silver, gold and platinum."

On average, it said, insurers intend to offer more than 15 health plans per state, with some being offered in just part of a state.

People are generally enrolled in plans for a year at a time, but can switch if they want lower costs or more extensive coverage in later years.

Starting in October, consumers will be able to enroll in new health plans, for coverage beginning on Jan. 1, 2014, when most Americans will be required to have insurance.

For years, the American Medical Association has complained that "highly concentrated health insurance markets are a problem for physicians," and Mr. Obama says they are an even bigger problem for consumers.

"In 29 states," the administration's memo said, "one insurer covered more than 50 percent of all enrollees in the individual insurance market" last year. In 11 states, it said, the largest two insurers accounted for 85 percent or more of the individual market.

By Robert Pear

Source: The New York Times