Every time a health plan reveals its health exchange strategy, the market winces. The same holds true when health exchanges pulling back the curtain on participating plans.
For all the trepidation surrounding the exchanges, the numbers thus far fit the markets and carriers snugly. It would be tempting to read into Cigna's decision to participate in just five health exchanges in 2014. But Cigna's business is predominantly self-funded employers, who won?t participate in health exchanges, so Cigna was never going to be in dozens of state exchanges.
Cigna picked its five states methodically. Texas, Florida and Tennessee represent three of Cigna's four largest markets by enrollment (California got left out). Florida and Texas have huge uninsured populations. With Medicaid expansion killed in Texas and Florida, residents of those states whose earnings exceed the federal poverty level will be eligible for exchange subsidies, not the 133 percent FPL needed in states that expand Medicaid. In Texas, that could mean upward of 1 million people receive exchange subsidies. The individual mandate affects those people whether Texas or the federal government runs the exchange.
Other market factors are at play in Arizona and Colorado. In Phoenix, Cigna also owns the Cigna Medical Group, operates a staff-model HMO and has a contract with the Arizona Small Business Association, through which it covers many small businesses. Colorado is a highly competitive market and will be among the nation's most attractive for insurers; Cigna, Anthem Blue Cross and Blue Shield of Colorado, Kaiser Permanente and UnitedHealthcare all have strong market shares of at least 16 percent, led by UnitedHealth's 22.1 percent (HealthLeader-InterStudy).
Cigna doesn?t dabble heavily in the small-group market. For some of its top competitors, individual and small-group members are their lifeblood. WellPoint's base of small-business and individual clients makes clear its intentions. The plans of UnitedHealth and Aetna will be a better barometer for exchange health. Those two will be more selective in where they will go, but they will bump into Cigna in several markets. Most carriers hunger for a slice of exchange business in Texas and Florida.
In most states where a Blue Cross and Blue Shield plan has locked down an intimidating market share, national carriers aren?t going to bother competing. In many states, regional health plans have wilted and been purchased when they could no longer keep pace with cost pressures. That doesn?t just refer to the Great Plains or the strong Blue plans of the Southeast; the Illinois Health Exchange will have only six participating plans.
Six insurers sounds like small potatoes, but people purchasing through the exchange will have a buffet of 165 different plan options from those six carriers, a feast by any measure. Carriers include the Land of Lincoln CO-OP and the state's heavyweight, Blue Cross and Blue Shield of Illinois. The latter covers nearly half of Illinois? medical lives, leaving little room for upstart competitors.
For Cigna and for Illinois, the math works. How the numbers add up for other states and carriers will probably hew closer to what those markets can bare, not the broad marketplaces that few states can support.
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