Sizing Up Exchange Market Competition

The long-term success of the exchanges and other ACA provisions governing market rules will be measured in part by how well they facilitate market competition, providing consumers with a diversity of choices and hopefully lower prices for insurance than would have otherwise been the case.  With the first open enrollment period not yet completed, it is too soon to tell how well the exchanges will work to improve competition in the individual insurance market, which historically has been highly concentrated and dominated by a small number of insurers in most states.  Exchange enrollment will certainly change – especially during this last month of open enrollment, but also throughout the year as enrollees gain and lose eligibility – and it will be several years before we can truly evaluate the success of the new markets.

Only scattered information is available so far on enrollment across plans.  Seven state-run exchanges have released market share data, but these enrollment numbers do not include individual market enrollment outside of the exchange.  Off-exchange individual markets will continue to exist alongside exchanges, so exchange enrollment alone does not tell the whole story of consumer choice and competition.

Nonetheless, early indications suggest that some exchange markets are more competitive than their states’ individual markets before the ACA.  In particular, the two largest states, California and New York, have significantly more competitive exchange markets compared to their individual markets in 2012.  Two states (Connecticut and Washington) that have also been successful at enrolling consumers seem to have less competition than in their 2012 individual markets.  Results from the remaining states generally show either similar levels of competition as their pre-ACA markets or mixed signs.

Several insurers with lower-cost silver options have gained significant market share (most enrollees are choosing silver plans).  Some exchange insurers may have found a competitive edge in offering narrow network plans that have lower premiums but give enrollees fewer choices of providers.  Recent Kaiser polling suggests that consumers who are either uninsured or buying their own insurance prefer a cheaper plan with a narrow network to one that has a higher premium but a broad network.  Minnesota’s PreferredOne, in particular, appears to have gained significant market share by offering a narrow network plan that comes with the lowest-cost silver premium in the country.

While new entrants to the market have generally not picked up meaningful market share, there are notable exceptions where new plans have altered the competitive landscape significantly, such as in Nevada.  And, in Minnesota (where competition appears similar to what it was before) and Washington (where it appears to be somewhat less competitive), exchange enrollment is distributed across plans very differently from how it was before in the individual market.  This suggests a more dynamic market than indicated by aggregate statistics alone and points to the potential for greater price competition in the future.


Market share was calculated as the percent of a given state’s individual or exchange market enrollment that was accounted for by a given insurer (plans that shared a parent company within a given state were collapsed into one insurer).  Exchange enrollment numbers reflect nongroup (individual market) purchasers only and do not include SHOP enrollees.  The Herfindahl–Hirschman Index (HHI) was calculated by taking the sum of squares of market share by state.

Pre-ACA individual market enrollment data were obtained from Public Use File of Submissions of 2012 Medical Loss Ratio Annual Reporting Data available from the Center for Consumer Information & Insurance Oversight (CCIIO).

The sources for each state’s plan level enrollment data are listed below:

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