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Insurers dive into ACA's exchanges as big names exit

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UnitedHealth Group Inc. and Humana Inc. are bailing on multiple exchanges that sell individual health insurance, and more than half of the nonprofit co-ops have closed up shop.

But other companies are willingly, and quietly, taking their place.

The loss of insurance carriers, many of which have been burned by adverse selection, is problematic for the Affordable Care Act and especially for consumers who live in rural counties and states like Alabama and Alaska, where there is only one option for exchange coverage next year.

Yet many insurers have signaled their intent to expand their exchange operations, and new companies will roll out in areas that have lost competition. While exits have garnered more attention, health care experts say the addition and expansion of other insurers shows how the marketplaces are still in their formative years.

“You can't start an insurance company from your garage,” said Deep Banerjee, a health care director at ratings agency Standard & Poor's Corp. “The process is slowly seeing new entrances, but clearly you are seeing it because it's a more viable market” than before the ACA.

Aetna Inc. and Medica intend to sell individual plans in the Kansas exchange for 2017, along with Blue Cross and Blue Shield of Kansas and Blue Cross and Blue Shield of Kansas City, which sells plans in only two counties. Kansas is one of the two dozen states in which UnitedHealth is exiting. Aetna and Medica aren't obligated to be on the Kansas exchange until binding agreements are signed by September.

Wellmark Blue Cross and Blue Shield also will start selling health plans on Iowa's exchange during the 2017 open enrollment period after sitting out the first few years. Iowa's nonprofit co-op, CoOportunity Health, folded in 2015. Wellmark will offer limited networks of hospitals and doctors, a common thread among exchange plans that some consumers have viewed unfavorably.

A spokeswoman for Bright Health Inc., a new startup insurer, confirmed Monday that the carrier will sell individual exchange plans in Colorado next year. The Colorado Division of Insurance controversially forced the state's lone nonprofit co-op to shut down at the end of last year.

Canopy Health Insurance, another new company, anticipates selling ACA coverage in Nevada and Wyoming, two states that have struggled with exchange competition. Canopy, formerly known as Melody Health Insurance, was founded by health plan information technology executives and recently added former co-op executives to its payroll.

Even though the individual market has had costly enrollees and is much smaller than the employer market, where 150 million Americans obtain their health coverage, many insurers have continued to show a willingness to try the exchanges considering the large amount of federal support.

“This is a huge opportunity,” Bob Sheehy, Bright Health's CEO and the former top executive at UnitedHealthcare Inc., told Modern Healthcare in April. “The individual health insurance market is a growing marketplace. I think there's a real need for this.”

Leaving the entire individual market has serious repercussions for insurers that already sell exchange plans. Federal law bars insurers from re-entering the marketplaces for five years, assuming they discontinue all types of individual policies. That incentivizes plans to stay in and compete for market share, especially if they already went through the trouble of getting regulatory approval and building capital reserves and provider networks.

“Competition will change year over year,” S&P's Mr. Banerjee said.

Bob Herman writes for Modern Healthcare, a sister publication of Business Insurance.