A new report from the Robert Wood Johnson Foundation examines marketplace competition and variation in insurance premiums across 10 select states, finding that premiums are generally higher in less competitive markets.
The brief’s Urban Institute authors find that premiums depend largely on provider and insurer markets, especially when a state is dominated by one major insurer. Of the 10 states examined, Alabama, Arkansas, Rhode Island, and West Virginia had fairly limited competition with a Blue Cross Blue Shield plan dominating the market—making it more challenging for other insurance carriers to compete.
Alternatively, Colorado, Maryland, Massachusetts, New York, Oregon, and Virginia were very competitive markets, especially in highly populated urban areas.
The authors note that one strategy to lower premiums in states with less competition is to create more limited provider networks—resulting in lower costs, but also fewer choices for consumers. While the authors acknowledge that limited or tired network strategies are helping to keep premiums low for now, issues around network adequacy will need to be monitored over time.
“Marketplace premiums in 2014 were affected by many factors, including competition among carriers and the development of narrow networks” said Katherine Hempstead of the Robert Wood Johnson Foundation. “The new carrier entry into 2015 markets signals that competition will remain a factor. It remains to be seen what becomes of narrow networks in the face of potential pushback from providers, regulators, and consumers.”
