Contributor: AnnJeanette Colwell

Topic: Health plans, managed care, ACA

The Affordable Care Act was touted as a way to increase competition among insurers in order to drive down costs for consumers, as well as provide an opportunity for small to mid-size carriers to expand their business. However, the recent exit of a strong regional plan from most of its markets indicates that the ACA could be having the opposite effect.

Cleveland-based managed care organization Medical Mutual of Ohio recently announced its plans to exit the South Carolina, Georgia and Indiana markets in order to focus solely on its core business in Ohio, citing the requirements associated with the Affordable Care Act as its reason for leaving. Beginning this month, Medical Mutual will transition its lives in these states to UnitedHealthcare, and coverage will end for most beneficiaries on Dec. 31, 2013.

It is not surprising that Medical Mutual has chosen to prioritize its business in Ohio. Although Anthem tends to dominate in most states in which it provides coverage, Medical Mutual actually gives Anthem a run for its money in Ohio. According to HealthLeaders-InterStudy data, Medical Mutual is the second-largest managed care organization in Ohio behind Anthem Blue Cross and Blue Shield of Ohio, and the Cleveland-based health plan has the largest commercial enrollment in the state.

It is surprising, though, that Medical Mutual would choose to exit its other markets after employing such a strong growth strategy in the Midwest and southeastern United States. Medical Mutual has worked hard over the past few years to significantly grow its enrollment in Indiana. Officials set a goal to increase enrollment in the state by 30 percent in 2012 and another 40 percent in 2013. The insurer also expanded its provider network in Indiana, which includes more than 12,000 physicians and 110 hospitals and the majority of health systems across the state. So it is rather startling that Medical Mutual would choose to exit the market when it has been making such strong progress.

It has also expanded its presence in South Carolina in recent years. Medical Mutual is the second-largest individual insurer in the state, and has approximately 37,000 lives statewide (HealthLeaders-InterStudy data). Med Mutual entered the South Carolina market when it acquired Columbia-based health plan Carolina Care Plan, which had been suffering financially, for $11 million in 2007. The MCO then purchased the Columbia-based Premier Health Systems plan in 2008. Medical Mutual’s decision to exit South Carolina will further consolidate the health plan sector in the state. Aetna’s recent acquisition of Coventry and the transition of Medical Mutual’s lives to UnitedHealthcare decreases the number of managed care organizations in the already-consolidated South Carolina market.

If a strong regional health plan like Medical Mutual, especially one that has spent significant amounts of capital and resources over the past decade expanding its geographic reach, is choosing to focus only on its strongest markets because of the requirements of the Affordable Care Act, might this indicate an alarming trend? Health plans such as Medical Mutual were supposed to be motivated by the opportunities presented by the Affordable Care Act to expand their business and obtain more lives. If these types of plans are instead pulling back and focusing only on places where they are already strong, then the ACA could produce the unintended consequence of decreasing competition in some markets and making the large national insurers even stronger.

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