Fewer plans to be on biggest Obamacare exchange for 2016

The health-care wildcard
The health-care wildcard   

HealthCare.gov is going to see some shrinkage in 2016.

The number of health insurance plans available on that huge federal Obamacare marketplace for 2016 is decreasing by up to 12 percent compared with this year, industry sources told CNBC.

And there will be an even sharper reduction — of more than 40 percent — in the number of health plans on HealthCare.gov known as PPO plans, which offer customers the most flexibility in where they can get medical services covered by their insurer, sources said.

Ariel Fernandez, left, sits with Noel Nogues, an insurance advisor with UniVista Insurance, as he signs up for health insurance under the Affordable Care Act in Miami.
Getty Images
Ariel Fernandez, left, sits with Noel Nogues, an insurance advisor with UniVista Insurance, as he signs up for health insurance under the Affordable Care Act in Miami.

At the same time, there will be a marked increase in the number of so-called HMO plans, which do not as a rule cover costs incurred by customers outside of the plan's network of health providers.

The decreases on HealthCare.gov — which serves residents of 38 states — come a year after federal officials boasted about a 25 percent increase in the number of insurers offering plans for 2015.

The rollback in offerings may reflect the economic reality that insurers are facing in the Obamacare market, with existing customers costing plans more than had been anticipated.

But industry experts also said it could reinforce an existing trend in which Obamacare plans are often purchased by people with lower incomes, who benefit most from the subsidies and other assistance available on the government-run insurance exchanges. PPO plans are more likely to be purchased by people who earn more money, who tend to get less in subsidies or no subsidies at all.

Insurance industry sources recently learned of the decreases from data sent to them by federal officials so they could prepare for the start of open enrollment in 2016 Obamacare plans this Sunday.

Those sources differed on the exact numbers they were seeing. But they all agreed that there was going to be a net decrease in plans available on HealthCare.gov, and a much more dramatic decline in the number of preferred provider organization plans.

The overall trends reflect news in recent days: Oregon-based insurer Moda Health said it will stop selling Obamacare plans in Washington state, and it soon will exit the California exchange. And the number of Obamacare co-op insurers selling plans is shrinking even more, as the 10th such co-op announced it will close.

In Texas, the state's biggest insurer, Blue Cross Blue Shield of Texas, decided in July not to offer PPOs as Obamacare plans for 2016.

Ryan Smolek, vice president of operations at Web-based insurance broker GoHealth, said, "We're seeing a 12 percent drop in total plans."

He said the data show a 41 percent drop in the number of PPO plans.

And the number of insurers on HealthCare.gov is "definitely going to be down," Smolek said, although he did not provide hard figures on insurers. Smolek said that according to data obtained by GoHealth, the number of plans on HealthCare.gov would shrink from 4,688 in 2015, to 4,125 for 2016.

The number of preferred provider organization plans available on HealthCare.gov is dropping from 1,899 this year, to 1,123 plans, Smolek said.

HMO, or health maintenance organization plans, are increasing from 2,008 this year to 2,181 for 2016, which represents a 9 percent rise, he said.

And extended provider organization plans are increasing by 42 percent, from 271 plans this year to 385 next year, he said. Like HMOs, EPOs tend not to cover services by providers outside of the plan's network, meaning that consumers have to foot the entire bill themselves for such services.

Obamacare 2016: Here's what's new
Obamacare 2016: Here's what's new   

"Wow," said health insurance analyst Jon Gabel, when told of the drop in total plans and PPOs.

Gabel, who is a senior fellow at social research organization NORC at the University of Chicago, said he was surprised by both declines, particularly the decrease in the total number of plans.

"Last year there was a 28 percent increase in the number of plans," Gabel noted.

Aaron Albright, a spokesman at the federal Centers for Medicare and Medicaid Services (CMS), which operates HealthCare.gov, said he could not confirm the accuracy of data described by Smolek and others.

"The Affordable Care Act is working, and the quality health coverage offered on its health insurance marketplace is a product that consumers need, want and like," he said.

"The ACA requires health insurers selling plans to meet consumer protections and network adequacy requirements to help ensure that health insurance plans offer a variety of physicians, community providers and specialists. This is true regardless of plan type," he said.

CMS also noted that a J.D. Power study found that people who bought Obamacare plans are generally more satisfied than those with other types of insurance, including those with job-based coverage.

The drop in total plans does not necessarily mean that people in an individual Obamacare market will see a net decrease in the number of plan offerings. Some states will see insurers enter the market, offering new plans.

Asked why he believed the number of total plans is decreasing after an upswing in 2015, GoHealth's Smolek said, "I just think that some of the big carriers are seeing that the economics doesn't always work on the individual side." Smolek was referring to the differences in individual health plans, which Obamacare exchanges sell, and job-based group insurance plans.

Likewise, Smolek said he believes the decrease in PPO plans and the increase in HMO plans is because "the HMOs are less risk to the carrier than the PPOs. When they look at the population they are trying to service, they have more [control] where the people are receiving their treatment [under HMOs] and that helps them control costs."

Smolek added that he doesn't believe that having fewer plans overall would necessarily lead to less price competition among insurers, and hence higher premiums for customers.

Final prices of all plans have yet to be released by the federal government. But officials have said that most Obamacare customers, the vast majority of whom get subsidies to help pay for their plans, will be able to buy coverage for less than $100, or even $75 per month.

Nate Purpura, spokesman for another Web-based insurance broker, eHealth, said, "I don't know how much consumers think about an HMO versus PPO until they have to use their plans, until something unexpected happens."

"I think ultimately, less choice is not a good thing," Purpura said.

He pointed to eHealth research which has found that among customers who had a serious medical issue in the past year, "about 20 percent had to go out of network."

If the number of people in HMOs and EPOs increases in 2016, Purpura said, there may be more people who end up getting out-of-network care, and "then you're going to see more out-of-pocket expenses."

Chini Krishnan, co-founder and CEO of Web broker GetInsured, said, "Smaller plan networks are not a bad thing if well-coordinated and accompanied by clear communication so consumers know what they're buying."

"However," Krishnan added, "this can be an issue in rural areas where there are fewer providers."

Clare Krusing, a spokeswoman for the trade group America's Health Insurance Plans, said the decreases detailed by GoHealth's Smolek and others are coming after insurers have had a few years of experience in the Obamacare market.

"Plans have a better sense in this third year what type of coverage options are most popular among consumers, and will adjust benefits to make sure they are tailored to meet those individual health and financial needs," Krusing said.

She also said that shortfalls in an Obamacare program designed to minimize financial risk for insurers selling plans in the marketplace "also may force plans to make adjustments with their product offerings."

"But it's important to consider all of this at the market level," Krusing said. "In many cases, plans may be responding to significant cost increases at a local level — higher hospital or provider prices — and balancing that with the need to offer affordable coverage options."

"All a sign that this is a market still in transition and one that continues to evolve," she said.