Limited Choice Under ACA

Tuesday, March 29, 2016

Regulars here may recall that things under the Affordable Care Act (ACA, aka ObamaCare) haven't been so great for the huge Blue Cross Blue Shield insurance companies. Many saw major declines in net earnings or even took losses in the first three quarters of last year. That report, from Investor's Business Daily, asked, "If the Blues are struggling, how likely is it that the smaller insurers can succeed?"

We may have our answer, in the form of a government report on the number of insurers participating in ACA exchanges:

Speaking in the Rose Garden, on July 21, 2009, President Obama said, "If you like your current plan, you will be able to keep it. Let me repeat that: If you like your plan, you'll be able to keep it." But it wasn't true. Many plans disappeared because they did not comply with the ACA regulations.

Sen. Ben Sasse, a Republican from Nebraska, recently released a report about Obamacare's effects on competition among insurers, concluding that outcomes have worsened for most Americans, in terms of choice of insurers and plans. Over the past year, the number of insurers offering plans in exchanges has dropped by nearly 6 percent.

Many states have lost more than 80 percent of their insurers: Alabama went from 23 to 3, Arkansas went from 24 to 4, and Wyoming from 21 to 1, just to name a few. Only New York did not lose over half of its insurers, going from 28 to 15 insurers, a 46 percent decline. [links in original]
I disagree with the common premise of the report that the number of companies in a market necessarily correlates with "competition." In a truly free economy, a great company could earn (and would have to fight to keep) monopoly or near-monopoly status. But I think the disappearance of these firms from the exchanges in the context of the beatings being taken by the large insurers indicates that profit has become elusive in medical insurance, and that will surely erode the quality of "insurance" offerings, such as they are. Fewer participants will be a symptom of the cause of this problem, central planning, just like the lower quality. We should be careful that the blame goes to the right place.

-- CAV

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