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Insurer's Bid To Join California's Marketplace Meets Resistance

United HealthCare wants to get on the Covered California bus, but the state marketplace isn't inclined to allow insurers on board that weren't part of the launch in 2014. Marcio Jose Sanchez/AP hide caption

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Marcio Jose Sanchez/AP

United HealthCare wants to get on the Covered California bus, but the state marketplace isn't inclined to allow insurers on board that weren't part of the launch in 2014.

Marcio Jose Sanchez/AP

UnitedHealthcare can't have its cake and eat it, too.

That's the message from California's health insurance marketplace, which turned aside a request from the nation's largest health insurer to sell statewide on the exchange because it opted not to participate when the effort was getting off the ground in 2014.

California is one of a handful of states that imposed waiting periods of up to three years for insurers to join exchanges, if they didn't take part from the start. The idea was to encourage insurers to participate in marketplaces when they were launched. Among the others are New York, Oregon, Colorado and New Mexico, according to a study conducted by researchers at Georgetown University for the Commonwealth Fund.

"I think it helps the willingness of carriers to participate over the long haul if they think there's a level playing field, and it's good for consumers if the exchange is managing competition and has rules of the road to abide by," says Sabrina Corlette, project director at Georgetown University's Center on Health Insurance Reforms.

Last month, California modified its position. Marketplace officials, who had originally said insurers could be locked out for three years if they didn't join the marketplace in 2014, announced that some insurers – including UnitedHealthcare — could apply to sell in 2016, but only in a few areas that had a shortage of carriers.

Anthony Wright, executive director of Health Access California, a consumer advocacy group, supports the move by Covered California. The dozen or so insurers that agreed to sell on the exchange the first year took a risk in an untested setting, knowing they would likely be signing up sicker-than-average people who might be expensive to cover, Wright says.

"You don't want to undermine your word to the plans that came in in year one," he says.

But California's insurance commissioner says that restriction is bad for consumers.

There's nothing in the [health law] about protecting market incumbents," says Dave Jones. "There's a lot about expanding choice and competition."

Under the policy announced in January by Covered California's board, plans are prohibited from applying to sell statewide in 2016 unless they were newly licensed since August 2012 or are managed care plans for Medicaid. Plans that didn't meet those criteria may apply to offer coverage in just five of the state's 19 regions where fewer than three carriers currently sell plans.

A spokesperson for Covered California says the policy is a good compromise. It benefits insurers like UnitedHealthcare that may have some limited participation in the California exchange before 2017. It may also help consumers in areas where coverage hasn't been very competitive.

"We look forward to working with state officials to expand plan choices and affordable access to health care for consumers through our participation in Covered California in 2016," wrote Benjamin Goldstein, director of public relations at UnitedHealthcare, in an email.

Just because several insurers offer coverage on a state exchange doesn't mean everyone has many plans to choose from, however. In many regions of the country, especially rural ones, selection continues to be limited to a few carriers. That is the situation in northern California, where thousands of residents have only one choice on the marketplace.

Nationwide, insurer participation on the exchanges continued to grow in 2015. The number of issuers offering plans grew by 25 percent, topping 300, according to the Department of Health and Human Services.

"More consumer choice often results in lower premiums and innovation in benefit design in terms of finding ways to reduce costs," says Caroline Pearson, a vice president at Avalere Health.