When a typical 40-year-old uninsured woman in Maine goes to the new state exchange to buy health insurance this fall, she may have just two companies to choose from: the one that already sells most individual policies in the state, and a complete unknown—a nonprofit start-up.
Her counterpart in California, however, will have a much wider variety of choices: 13 insurers are likely to offer plans, including the state's largest and best-known carriers.
With only a few months remaining before Americans will start buying coverage through the new state insurance exchanges under President Obama's health care law, it is becoming clear that the millions of people purchasing policies in the exchanges will find that their choices vary sharply, depending on where they live.
States like California, Colorado and Maryland have attracted an array of insurers. But options for people in other states may be limited to an already dominant local Blue Cross plan and a few newcomers with little or no track record in providing individual coverage, including the two dozen new carriers across the country created under the Affordable Care Act.
Maine residents, for example, will not see an influx of new insurers. The state has an older population and strict rules that already have discouraged many insurers from selling policies, so choices will probably be limited to the state's dominant carrier, Anthem Blue Cross, and Maine Community Health Options.
"What we're seeing is a reflection of the market that already exists," said Timothy S. Jost, a law professor at Washington and Lee University in Virginia who closely follows the health care law.
Obama administration officials estimate that most Americans will have a choice of at least five carriers when open enrollment begins in October. There are signs of increased competition, with new insurers and existing providers working harder to design more affordable and innovative plans. In 31 states, officials say there will be insurers that offer plans across state lines. The exchanges will be open to the millions of Americans who are uninsured or already buying individual coverage. Many will be eligible for federal subsidies.
But the insurance landscape will be highly varied, with some of the states that have been slow to embrace the law potentially offering the fewest options—and plans with the highest premiums—in the first year.
People in certain parts of the country may not have the robust choice of insurers that the law sought as a way to keep premiums lower and customer responsiveness high. These people are likely to have few brand-name options to choose from, and they will be gambling on plans offered by insurers new to the individual market as well as brand-new carriers. The choice of providers and costs could also vary as a result.
As people become aware of the differences among the exchanges, "some of the laggard states are going to end up changing," said Ron Pollack, the executive director for Families USA, a consumer advocacy group that supports the law.
Whether the law ultimately accomplishes its aim of making the insurance markets nationwide more competitive—and plans more affordable—will only become clear over time. Experts expect some insurers to drop out after a year or so, while some other companies may decide to enter, depending on how the markets evolve. Insurers will have to figure out how to offer plans that most people can afford but still provide coverage to those with expensive medical conditions—and, for investor-owned plans, how to make a profit in the meantime.
"A rush to judgment will be just that," said Dan Mendelson, the chief executive of Avalere Health, a consulting group. "It's not going to be possible in 2014 to make a strong valid judgment of whether the exchanges are working or not."
Insurers already active in the market are the most likely to show up on the exchanges. Blue Cross plans, for example, have already established relationships with local hospitals and physician groups, as well as state regulators. "We don't have to recreate the wheel because the Blue plans are already there," said Daniel J. Hilferty, the chief executive of Independence Blue Cross, a nonprofit headquartered in Philadelphia.
In California, Anthem Blue Cross, Health Net, Kaiser Permanente and Blue Shield of California will remain big players. Most likely to be missing from any given exchange are many of the national insurers, whose business is focused mainly on providing coverage to workers through their employers—companies liked UnitedHealth Group, Aetna and Cigna.
WellPoint, which operates Blue Cross plans in 14 states and is the nation's largest provider of individual and small business policies, has little choice but to compete because many of its customers will be buying insurance on the exchanges.
But the other companies may delay entering any given exchange until they see a real chance to gain customers. Given the uncertainty over how well the exchanges will function, and whether enough healthy people will enroll, insurers are likely to enter only those markets where they already have a sizable number of existing customers.
"If you're not going to protect your position, you would more likely take a cautious, wait-and-see-stand," Ana Gupte, a health insurance analyst for Dowling & Partners Securities.
Once the market becomes more established, some of those companies may start offering plans, Mr. Jost said. "As soon as they see there's money to be made there, they will jump right in," he said.
The law has clearly encouraged the entry of new competitors. As many as a quarter of the companies vying to offer plans on the 19 exchanges run by the federal government are new to the market, federal officials said in a memo released last month.
If the experience in Massachusetts is any guide, the fact that a plan is new and unknown might not keep it from becoming popular quickly. In that state, a relatively unknown insurer, Neighborhood Health Plan, captured a large market share. The Affordable Care Act "represents disruption," said Kevin J. Counihan, who spent several years in Massachusetts helping to run its marketplace before coming to Connecticut to head its exchange.
On the flip side, though, one of the potential new entrants in Vermont, the Vermont Health Co-op, has not been able to win licensing approval from state regulators.
(Related Video: Marriage of Health Care and Tech?)
Insurers also say they plan to compete aggressively on price. The new law places strict limits on how much of every dollar of premium can go to anything other than medical expenses, and the insurers say success will depend on enrolling as many customers as possible rather than figuring out how high a premium they can charge to raise profits.
"It's more a volume game," said Wayne S. DeVeydt, an executive vice president at WellPoint, which expects to spend about $100 million in marketing for plans offered on the exchanges.
To compete, insurers will have to find ways to offer inexpensive plans, he said. In California, for example, WellPoint's Anthem Blue Cross wants to offer a plan in southern Los Angeles for as little as $259 a month for a 40-year-old. In Maine, WellPoint has asked regulators to approve plans in which it will partner with selected health systems to offer less expensive coverage for people willing to go to a specific network of doctors and hospitals.
The consumer-operated plans, known as co-ops, are also expected to put pressure on other insurers to hold down prices. "We don't have to return money to stockholders on Wall Street, like for-profit insurers," said Jerry Burgess, the chief executive of Consumers' Choice Health Plan, the co-op established in South Carolina.
He says the insurer expects to charge little more than the actual costs of its medical care and will lower its premiums if possible. "We would see an opportunity to gain market share by lowering our price," Mr. Burgess said. "That's exactly what health reform hopes will happen."
The plans offered by insurers like Molina Health Care that specialize in Medicaid, the government program for low-income individuals, may also prove to be formidable competitors because of their focus on serving that population. "These are players who are going to be aggressive," said Jaime Estupiñán, a vice president at Booz & Company.
Experts say large health systems are also expected to compete. Kaiser and Sharp Healthcare, a San Diego hospital group that also offers insurance, are expected to participate in California, and hospital groups and insurers are increasingly working together to offer new plans.
Insurance executives concede that it may take years for the new market to take shape. "We're looking at three to five years," said Joel Farran, an executive for the Health Care Service Corporation, which operates nonprofit Blue Cross plans in four states.
—By Reed Abelson, The New York Times.