ACA Exchange Competitiveness In Michigan

• Author: Megan Foster Friedman,Nancy Baum,Joshua Fangmeier,Marianne Udow‐Phillips
• Published date: 01 September 2017
• Date: 01 September 2017
• DOI: http://doi.org/10.1111/rmir.12077

Risk Management and Insurance Review

C

2017 The Brookings Institution. Risk Management and Insurance Review C

2017 The American Risk

and Insurance Association, 2017, Vol. 20, No. 2, 211-232

DOI: 10.1111/rmir.12077

PERSPECTIVE

ACA EXCHANGE COMPETITIVENESS INMICHIGAN

Megan Foster Friedman

Joshua Fangmeier

Nancy Baum

Marianne Udow-Phillips

ABSTRACT

The expansion of Medicaid and the creationof the Health Insurance Marketplace

has provided greater access to health insurance coverage for many Michigan

residents. To date, Michigan’s Health Insurance Marketplace has seen relative

success, in part due to the presence of multiple regional insurance carriers and

the state’s embrace of managed care in its Medicaid program in the 1990s. This

report examines the conditions in Michigan’s exchange market and analyzes its

experience to date with carrier participation, pricing, and provider networks.

INTRODUCTION

Since the launch of the coverage expansions created under the Affordable Care Act

(ACA) in 2014, the number of uninsured individuals in Michigan has fallen by nearly

half. While Michigan previously had a lower uninsured rate than the national average,

the expansion of Medicaid and the creation of the Health Insurance Marketplace has

provided greater access to coverage for many Michigan residents.

Michigan’s exchange has been relatively successful to date. This success can be linked in

part to the historical role of Blue Cross Blue Shield of Michigan (BCBSM) as an insurer

of last resort, and to the presence of several other regional carriers who continue to offer

exchange coverage. The breadth of carriers may be due, in part, to a strong history of

local and regional HMO organizations that resulted from the embrace of managed care

by the state Medicaid program in the mid 1990s, along with the dominance of a local

Blue Cross and Blue Shield plan. The for-profit national carriers have never had a strong

presence in Michigan.

This report describes the conditions in Michigan’s exchange market and analyzes its

experience to date with carrier participation, pricing, and provider networks. The

Megan Foster Friedman, Nancy Baum, and Marianne Udow-Phillips are with the Center for

Healthcare Research and Transformation, University of Michigan, Ann Arbor, United States,

Joshua Fangmeier is an independent consultant and contributed to this report while with the

Center for Health Care Research and Transformation. Megan Foster Friedman is at; e-mail:

mfosterf@umich.edu, Josh Fangmeier is at; e-mail: jfangmeier@gmail.com, Nancy Baum is at;

e-mail: nmbaum@umich.edu, Marianne Udow-Phillips is at; e-mail: mudow@umich.edu.

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212 RISK MANAGEMENT AND INSURANCE REVIEW

first section of this article provides context on Michigan’s health insurance landscape.

Section 2 reports on the state of the exchange prior to the 2016–2017 open enrollment

period. Sections 3 and 4 describe the five counties of focus for this study and the method-

ology for data collection and analysis. Section 5 presents findings for the selected counties

and highlights factors affecting competition in the exchange market. Section 6 analyzes

these findings and offers concluding thoughts.

STATE CONTEXT

Table 1 provides some basic facts and statistics on the Michigan health insurance ex-

change environment.

Exchange Characteristics1

Michigan operates a state-partnership marketplace.2Under this model, the state of

Michigan assumes responsibility for many functions of its exchange but uses the fed-

eral HealthCare.gov platform for exchange enrollment activities. The Department of

Insurance and Financial Services (DIFS) has general regulatory authority over exchange

operations. DIFS performs plan management functions for qualified health plans (QHPs)

and certifies carriers to participate on the exchange. DIFS also conducts annual rate re-

views for plans on the individual market to ensure rates meet requirements of federal

and state laws. DIFS contracts with outside actuaries to review carriers’ rate change re-

quests. Their analysis of proposed rate changes is based on historical experience, trends,

risk adjustment, the carrier’s mix of plans, and the expense provisions established by

the carrier, including expenses and profits as they relate to medical loss ratio require-

ments. In addition, DIFS solicits public comment on proposed rate changes as part of its

effective rate review process.

Michigan has 16 rating areas for the individual market. Each rating area encompasses

anywhere from one to 13 counties, and all counties are fully included in a rating area.

Carriers do not have to offer plans across an entire rating area but aregenerally required

to offer exchange plans to an entire county. The boundaries of Michigan’s rating areas

have not changed since their introduction in 2014. Building off its previous experience

regulating regional health maintenance organizations (HMOs), DIFS decided to divide

the state into exchange rating areas based off of the boundaries of previously existing

HMO service areas. DIFS also solicited input from insurance carriers and consumer

groups as it was determining the boundaries of the state’s rating areas. The benefit to

this approach was that carriers were used to rate based on county lines, and keeping

similar boundaries would be easier for consumers to understand.

1In Michigan, carriers must establish a separate company to write PPO business. Michigan’s

Department of Insurance and Financial Services considers the PPO affiliate of an HMO carrier

to be a separate carrier when it reports the number of carriers participating on the state’s

exchange. We follow DIFS’s convention in this report.

2The facts and statistics in this section are compiled from the Michigan Department of Insurance

and Financial Services (2016), Gabel et al. (2016), Kaiser Family Foundation (2015, 2016), Udow-

Phillips and Fangmeier (2016), Barnett and Vornovitsky (2016), and Michigan Department of

Health and Human Services (2016).