The new entrants are primarily companies that previously provided only Medicaid coverage and consumer-government co-op plans nurtured by the healthcare reform law through startup loans. Those insurers represent
76% of the additions to the individual insurance marketplace, according to the McKinsey report.
John Morrison, president of the National Alliance of State Health Co-Ops, said he isn't surprised that the group's members are providing low-cost competition to the existing carriers. “Co-ops bring a completely different paradigm to the health insurance market because their goal is not to make money,” Morrison said. “A co-op's goal is to provide good coverage and good health at the lowest possible prices.”
The new entrants appear to be pricing their plans competitively. The McKinsey study found that about half the plans offered by these entities were priced below the median in their respective markets. Co-op insurers in particular are offering lower-cost products. More than a third of the cheapest products sold through the exchanges were created by co-op insurers in the 22 states where such entities exist.
Breakaway Policy Strategies, in conjunction with the Robert Wood Johnson Foundation, has released a separate initial analysis of products (PDF) offered on the exchanges. The group studied plans offered in 15 states, 11 of which are running their own exchanges. According to Nowak, that makeup is in part a reflection of where reliable data are available given the ongoing technological problems with the federal exchange.
Breakaway looked at 196 silver-tier plans offered in those 15 states, designed to cover about 70% of enrollees' medical costs. Specifically, the study looked at what coverage is available to a 27-year-old shopping for insurance. It found great disparities depending on where individuals live. Premiums ranged from $127 a month in Minnesota to $439 a month in New York. The average premium cost in those 15 states was $266 a month. Those rates don't include federal premium subsidies that are available to individuals and families with incomes up to 400 % of the federal poverty level.
There are similar discrepancies in deductibles associated with exchange plans. Deductibles were as low as $2,000 in Maine and as high as $4,061 in Minnesota, according to the Breakaway study. The average deductible among the 15 marketplaces was $2,763.
“There's not sort of a one size fits all,” Nowak said. “It's very much an individual market.”
The McKinsey report echoes that finding. The number of insurers participating in exchanges ranges from one to 17. Similarly, the cheapest product for a 40-year-old individual in Minnesota is $115 a month, while in Colorado it's more than $400 a month.
The McKinsey report also found that 6 million to 7 million individuals will be eligible for bronze-tier plans that will cost them nothing upfront after federal subsidies are taken into consideration. In seven states, including Texas, more than 35% of individuals lacking insurance coverage will be eligible for bronze plans with no premiums. In addition, roughly 1 million individuals will have access to silver-tier plans with no premiums.
That finding is similar to earlier studies. For example, Credit Suisse issued a report in September that estimated 6.5 million people would be eligible for zero-premium plans. The Congressional Budget Office has estimated that 7 million people will buy coverage through the exchanges during the open enrollment period that closes on March 31.
Follow Paul Demko on Twitter: @MHpdemko