Marketplace Pulse: Health Plan Participation Outlook

Small group market gets smaller

Reality might be finally catching up with longstanding predictions of decline as insurer exits from the small group market have accelerated over the past few years. The number of health plans dropped from 492 in 2022 to 430 in 2024, a drop of nearly 13%. There is a strong regional pattern to the most recent withdrawals, with a contiguous swath of Midwestern and Southern states most likely to have lost a plan. 

Texas had the largest drop in absolute terms, with four of its 12 issuers leaving between 2023 and 2024. In Colorado, the number of issuers will shrink by one-third, from nine to six. Other states that lost plans include Illinois, Kentucky, Indiana, Arkansas, Kansas, Georgia, Florida, and Arizona. All in all, twenty-one states lost a small group insurer in 2024, while only four states gained one. States gaining plans (Rhode Island, Pennsylvania, Maryland, and California) were in the Mid-Atlantic and Pacific regions. The only states losing plans from these regions were New York and Oregon. Some of the exits came from states where the small group market is on average more expensive than the individual market, as seen in this comparison. This is true, for example, in Florida, Georgia, Indiana, Ohio, and Kentucky. But in other states with exits, like Texas and Arizona, this was not the case.

It is not surprising that participation in the small group market is on the wane, since enrollment has been declining for years. "Level-funded" self-insured plans are increasingly an option for small employers, as is the individual market. But it is important not to overstate the decline. Much reflects Humana's exit from the entire employer market, a move which has taken on more significance in the context of the rumored merger with Cigna, though that plan has been tabled. Aetna/CVS also reduced their participation considerably, and a handful of small regional plans exited. But most Blues plans, Elevance, and United Health maintained their same footprint. Also, some of the exits reflect reductions in the number of licenses held by a plan in a particular state rather than a total withdrawal.

Big plans get bigger in the individual market

News of record enrollment has dominated stories about the individual market over the last few years, while growth in plan participation has slowed. The composition of health plans has also been shifting recently toward larger insurers such as United and Elevance. Enrollment for the 2024 plan year seems on track to once again break records. What’s happening with participation?

While 2023 saw a slight decline in participation, a moderate upward trend returned in 2024, although few states saw big changes. At the state level, the number of issuers grew from 362 to 375 between 2023 and 2024. United Health increased its participation the most, entering Wisconsin, New Jersey, New Mexico, and South Carolina. Aetna/CVS entered a few new states, including Indiana, Kansas, and Maryland. Cigna left Kansas and Missouri. Medicaid MCOs made minimal changes: Molina entered Nevada while Centene entered Delaware. Many plans increased their footprint within existing states. Oscar, for example, entered more counties within the 18 states where it already participates.

Bells and whistles associated with Medicare Advantage are increasingly seen in individual market plans, with various kinds of inducements as well as plan offerings tailored to specific populations. For example, Oscar has created plans for enrollees with respiratory health issues and diabetes, and has also issued a Spanish language plan. Cigna, in a twist on employer wellness programs, is offering a rewards program in some plans that gives a debit card to enrollees in exchange for healthy behaviors. In addition to a rewards program, United Healthcare is also offering fitness memberships. Aetna/CVS is leveraging their vertical integration by offering $0 visits to Minute Clinics.  

Despite the unfortunate fate that seems to await most new health plans, witnessed most recently by the collapse and exit of Friday and Bright Health, there are nevertheless a few new insurers trying their luck in the individual market. Imperial Health Plans, a small regional plan that also sells Medicare Advantage, first entered Arizona and Texas in 2023. This year, they added plans in those two states and entered Nevada and Utah. Taro Health, a small plan that entered Maine in 2023, made a hard-to-anticipate expansion into Oklahoma this year. They focus on primary care and advertise unlimited visits without a copay. Another new entrant is Antidote Health, which is a telehealth provider. While Antidote provides telehealth services in many states, the health plan for now is limited to Arizona and Ohio.

Things to worry about

The trend toward larger insurers and Medicare Advantage style plan features may be mutually reinforcing, as smaller insurers that are not vertically integrated may find it increasingly difficult to compete with larger plans with the experience and resources to offer more elaborate benefits. These factors exemplify why competition in health insurance is so difficult, and a small number of insurers are able to gain greater market share while most new entrants do not succeed. This scenario is unlikely to benefit consumers in the long run.

From the standpoint of affordability and equity, a few other trends bear watching. Lessons from Medicare Advantage suggest there may be some important tradeoffs between extensive plan features and access to needed care. These concerns are prompted by recent reporting that details strict adherence to predictive algorithms in some Medicare Advantage plans, even when it is at the expense of patient wellbeing. Relatively little systematic attention has been given to coverage decisions and prior authorization in the individual market, but this is likely to change. Meanwhile, a shrinking small group market will make it more difficult for some employers to offer coverage, making the continued affordability of the individual market even more important