ACA Exchange Competitiveness In Texas

• Date: 01 September 2017
• Author: Tiffany A. Radcliff,Michael A. Morrisey
• DOI: http://doi.org/10.1111/rmir.12075
• Published date: 01 September 2017

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, 249-268

DOI: 10.1111/rmir.12075

PERSPECTIVE

ACA EXCHANGE COMPETITIVENESS INTEXAS

Michael A. Morrisey

Tiffany A. Radcliff

ABSTRACT

The health insurance exchange in Texasbegan with some timidity in 2014. How-

ever, it saw rapid entry of insurers and plans, and the lowering of many plan

premiums relative to those of the dominant Blue Cross Blue Shield offerings

in 2015 and 2016. By 2017 insurers had reliable information on the utilization

experience. Several insurers withdrew from the exchange; others reduced the

number of counties in which they offered coverage. In the 2017 open enroll-

ment period, only health maintenance organizations (HMOs) were offered and

premiums increased dramatically for most remaining insurers.

The health insurance exchange in Texas was one of five state insurance marketplaces

examined in detail in the summer and fall of 2016. The Affordable Care Act (ACA) had

been in effect of 3 years and the fourth open enrollment (OE) period was about to begin.

There was considerable speculation about how the exchanges were functioning after

their difficult first-year rollout. In Texas, two insurers that had entered Texas markets

in 2015, UnitedHealthCare and Assurant, had withdrawn. Blue Cross and Blue Shield

(BCBS) of Texashad reportedly lost $400 million in the Texasindividual insurance market

in the first year of exchange operation. However, some other local and regional insurers

had cut their premiums relative to BCBS and were rumored to be doing well.

The ACA Implementation Research Network selected five states for in-depth field re-

search aimed at better understanding the differences that existed across the states in

the functioning of the exchanges, and at developing testable hypotheses that could be

examined over time with both empirical and field research methods.

Texas was chosen for the project because it was an early oppositional state; Texas had

not expanded its Medicaid program, had not used the federally facilitated exchange

infrastructure, and state government generally did not assist in the implementation of

the ACA. However, earlier field research had concluded that therewas meaningful and

growing insurer competition in at least several areas of the state (Morrisey et al., 2016).

Michael A. Morrisey is at Texas A&M University, Health Policy and Management, 212

Adreance Lab Road, Suite 135, College Station, TX 77843. Morrisey can be contacted via e-mail:

morrisey@tamu.edu. Tiffany A. Radcliffis at Texas A&M University, Health Policy and Manage-

ment, College Station, TX. Radcliff can be contacted via e-mail: radcliff@tamu.edu.

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250 RISK MANAGEMENT AND INSURANCE REVIEW

This experience in the second most populous state in the country warranted further

inquiry.A local team of researchers, familiar with both the state and the health insurance

research literature, carried out this study, using the same design as the other included

states. They conducted in-person and phone interviews with insurers, hospital and

health system leaders, insurance agents/brokers and navigators, advocates and policy

experts, and with the state Department of Insurance. Structured interview questions

were used as jumping off points to discuss the participants’ perceptions of how the local

insurance markets were functioning.

The study found that local Texas insurance markets differed significantly one from an-

other, and that the extent of insurer competition depended heavily on the extent of

hospital or health system competition in the community. There was substantial agree-

ment that the Texas individual insurance market was in a death spiral that arose from

substantial and unexpectedly large adverse selection. Carriers had shifted completely

from preferred provider organization(PPO) models to exclusively offering health main-

tenance organizations (HMOs). Finally, while several national and regional insurers had

left the exchange, most had remained in the off-exchange market, and insurers that used

business models resembling Medicaid managed care appeared to be doing well.

This article begins with a brief overview of the health care and insurance environ-

ment in Texas along with developments as the study began. These are followed by

details of site section for the five rating areas examined in the state and the authors’

overall methodology. The authors then present findings by rating area and a general-

ization and analysis of those local findings. They conclude with some post-2017 election

comments.

STATE CONTEXT

Individual health insurance policies in Texas are sold both on and off the exchange.

Insurers offering coverage on the exchange are required by the ACA to offer at least

some plans outside the exchange. However, insurers offering plans offthe exchange are

not required to offer coverage through the exchange. If an insurer in Texas withdraws

from the individual market—that is, stops offering any policies—it may not re-enter the

individual market for 5 years under ACA rules and Texas insurance regulations. See

Table 1 for some basic state facts.1

BCBS in Texas is the largest insurer in the individual market and had an enrollment

market share of 59 percent in the individual market in 2014. BCBS is a subsidiary of

Health Care Services Corp. (HCSC) of Illinois. HCSC also has BCBS subsidiaries in

New Mexico, Oklahoma, Montana, and Illinois. In addition, national carriers, includ-

ing Aetna, Cigna, Humana, and UnitedHealthcare, provide coverage in the individual

market. Regional insurers include Baylor Scott & White and FirstCare. Both Molina and

Community Health Choice offer Medicaid managed care plans.

BCBS offers exchange-based coverage in all 254 counties in Texasand has done so in every

year the exchange has been in place. Other carriers have been more selective, typically

entering some, but not all, metropolitan rating areas and some, but not necessarily all,

1The facts and statistics in this section are compiled from Kaiser Family Foundation (2016a, 2016b,

2016c, 2016d) and Gabel et al. (2016).