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Study: Limited Competition Raised Obamacare Prices

Many insurers only dipped a toe into the Affordable Care Act’s online marketplaces for their first year.

Cigna, one of the country’s largest insurers, offered 2014 plans to individuals in fewer than half a dozen states. Humana is only in a little more than a dozen states. The biggest health insurer, UnitedHealthcare, didn’t offer any policies through the federally run online portal and only a few elsewhere.

The result: substantially higher premiums than otherwise would have been the case, according to a new paper.

Economists Leemore Dafny, Jonathan Gruber and Christopher Ody ran alternate-reality experiments in markets in the 34 states served by, the federal exchange.

What if UnitedHealthcare had competed everywhere that it already sold individual policies? Premiums in those markets for the second lowest-cost silver plan would have averaged 5.4 percent less, they calculated.

Silver plans come after platinum and gold in the exchanges’ “metal” rankings of coverage. The second-lowest priced silver plan in each market determines the level of tax-credits for medium- and lower-income consumers.

What if every insurer selling individual plans in at least some portion of a state had decided to offer 2014 exchange policies throughout that state? Average premiums on for the second lowest-cost silver plan would have been 11.1 percent lower, the researchers found.

That level of competition would have saved federal taxpayers $1.7 billion in subsidies, they reported — not to mention substantial amounts for consumers.

Competition varied sharply according to state and locality. Consumers in many markets saw only one company offering coverage while others saw eight or more. In general, the more competitors, the lower the premiums.

Carriers that stood aside or tread lightly in 2014 have said they may expand next year. That could increase competition and dampen premium increases.

UnitedHealthcare has “a bias to increase that participation in 2015,” Gail Boudreaux, the insurer’s chief executive, said recently.

“That’s welcome news and I’d like to see more of it,” Dafny said in an interview.