The federal exchange option

Medical Insurance

The federal health insurance marketplace (HealthCare.gov) opened for business in the fall of 2013, and has provided an affordable health insurance shopping platform for millions of Americans.  Admittedly, the federal exchange – along with many of the state-run exchanges – got off to a very rocky start in October 2013. But by December of that year, things were working better, and the exchange has been quite functional ever since.

In 2014, there were 191 health insurers selling policies on the federal exchange in 36 states (including states with partnership exchanges, as well as Idaho and New Mexico, both of which had federally supported state-based marketplaces in 2014). In September 2014, HHS issued a report on carrier participation for 2015, noting that the federally run exchange would have 57 additional insurers in 2015 – a 30 percent increase over the prior year. The number of participating carriers remained very stable in 2016; HHS reported that 238 carriers were offering plans across the states that use Healthcare.gov in 2016.

However, there was a widespread exodus of insurers leaving the exchanges nationwide for 2017 and again for 2018. By 2018, only 132 insurers were offering health plans through HealthCare.gov. But that trend then began to reverse itself, with insurers joining the marketplaces in many states for 2019, 2020, and 2021. As of 2021, there are 181 insurers offering plans through HealthCare.gov, despite the fact that the platform is now being used by only 36 states, after Pennsylvania and New Jersey transitioned to their own enrollment platforms in the fall of 2020.

During the open enrollment period for 2021 coverage — which ended in mid-December 2020 in states that use HealthCare.gov — more than 8.25 million people enrolled in plans through the federally-run exchange. Most of these enrollees receive premium subsidies that make their coverage much more affordable than it would otherwise be.

In addition, millions of people have enrolled in Medicaid through the federally run exchange, including many who are newly eligible due to Medicaid expansion (14 states have opted not to expand Medicaid however, and all of them are states that use the federally run exchange; Oklahoma and Missouri will both expand Medicaid in mid-2021).

Healthcare.gov does the heavy lifting

There are 24 states that have a fully federally run exchange (five of them provide plan oversight for the plans sold through the exchange: KansasMontana, Nebraska, Ohio, and South Dakota).

In addition, another six states (Delaware, Illinois, Iowa, Michigan, New Hampshire, and West Virginia) have established partnership exchanges, working together with the federal government to run the exchange. They use HealthCare.gov for enrollment, but the states also take on varying levels of plan management, consumer assistance, and outreach. The partnership states are counted together with the other 24 states, with all 30 states considered to be relying fully on the federally run exchange.

Some of the state-run exchanges also use HealthCare.gov for enrollment. Prior to the 2013 launch of the exchanges, some states wanted to operate their own exchange, but weren’t able to get an enrollment platform up and running in time. Idaho and New Mexico both opted to establish federally-supported state-based exchanges for 2014, meaning that while their exchanges were run by the state, they were using the Healthcare.gov enrollment platform, just like the states that rely fully on the federally run exchange.

Ultimately, Idaho was able to transition to running its own exchange by the time the second open enrollment period began in the fall of 2014. New Mexico opted to continue to use Healthcare.gov as a supported state-based marketplace, but plans to have its own website up and running by the fall of 2021.

As described here, there have been several changes to the approaches that states use in the ensuing years, and additional changes planned for the future. As of 2021, Arkansas, Kentucky, Oregon, New Mexico, Maine, and Virginia have state-run marketplaces but use the HealthCare.gov enrollment platform. Utilizing Healthcare.gov’s economies of scale and technologically smooth enrollment software simply proved to be a better choice than operating their own enrollment platform. But some of them are actively working towards running their own enrollment platforms in order to take advantage of the flexibility and control that provides.

All told – including states with partnership exchanges and federally supported state-based exchanges – Healthcare.gov is used in 36 states as of the 2021 plan year.

A changing carrier landscape

Prior to 2014, many people looking to buy individual health insurance had few options. A 2011 study by the Kaiser Foundation found that the individual insurance market was dominated by a single insurance company in 30 states and the District of Columbia.

The American Medical Association (AMA) also conducted a series of studies analyzing competition among health insurers, and found similar results. A 2012 AMA study determined that in nearly 40 percent of US metropolitan areas, a single insurance company had at least half of the market share. The same study also found that a single carrier had at least 30 percent of the market share in nearly nine out of ten U.S. markets.

Although 2014 ushered in a new era of guaranteed-issue individual health insurance – a dramatic change from the medically underwritten markets that existed in most states prior to 2014 – some states still had relatively few carriers offering coverage, particularly in the exchange.

In 2014, West Virginia and New Hampshire had only one participating exchange carrier, and several other states – Alabama, Wisconsin, North Carolina, Florida, Mississippi, and Arkansas – had only one carrier in at least a portion of the state (all eight of those states either rely fully on the federally run exchange, or have a partnership exchange model). In 2015, West Virginia still had just one carrier, although they gained a second carrier in 2016. New Hampshire now has three exchange carriers (although they had reached a high of five in 2015), and the other six states each gained at least one additional exchange carrier in 2015.

But carrier participation started to decline in 2016, and large swaths of the country had just one insurer offering coverage through the exchange by 2018. UnitedHealthcare, Humana, Aetna, Cigna, and Anthem all scaled back their exchange participation in 2017 or 2018.

Insurers started to join or rejoin the exchanges in 2019. By 2021, every state in the country (including those that use HealthCare.gov and those that run their own exchange platforms) had at least two participating insurers, although there are still some rural areas of some states where only one insurer offers plans in the marketplace (this brief from CMS shows how insurer participation changed in each county for 2021 in the states that use HealthCare.gov).

Long-term success

Healthcare.gov was created to fill a need when more than half the states decided that they didn’t want to run their own exchanges – either because they didn’t think it would be financially or technologically feasible, or because they were simply opposed to the ACA and didn’t want to participate in any activities that helped to implement the law.

But with eight years of enrollment in the books and many hurdles overcome, Healthcare.gov has proved to have staying power, and has also become a feasible solution for states that have run into problems with their own exchanges. In late 2013, the federal exchange’s glitchy website was the butt of many jokes and the cause of many headaches. But it has become an integral part of the individual health insurance market in two-thirds of the states. And while the Trump administration sharply reduced funding for HealthCare.gov’s outreach and enrollment support, the Biden administration could restore that funding.

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