Competition in the Obamacare health insurance exchanges declined for the third consecutive year in 2018 — raising further questions about the longtime viability of the landmark law, according to a new study by The Heritage Foundation.

The conservative think tank’s study, released Thursday, found that 181 companies are selling policies this year, down from 218 last year and 253 when the exchanges went online for 2014. The year before, 395 companies sold individual health insurance policies, meaning that choice has contracted by 54 percent.

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“Essentially, what this is pointing to is, you have a market that’s a niche market,” said the report’s author, Heritage senior research fellow Edmund Haislmaier. “It’s not going to have no insurers in it. It’s only going to be attractive to certain insurers.”

That means, Haislmaier said, people not covered directly by the government or a company-sponsored plan increasingly will be left with options that include Medicaid managed-care firms and companies with narrow networks.

[lz_table title=”Obamacare Competition Plummets” source=”The Heritage Foundation”]Number of insurers on government exchanges
*Year before Obamacare

Medicaid managed-care companies are used to dealing with a poorer, sicker population, Haislmaier said. Meanwhile, he added, companies like Kaiser have doctor networks, hospitals, and insurance plans. Combining them allows for vertical integration that helps keep costs down.

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The law heavily regulates insurance companies, mandating services they must provide and eliminating the ability to reject sicker customers or charge them more. Haislmaier said that has pushed many insurance companies out of the market.

“They don’t have a lot of dials they can turn,” he said.

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Haislmaier said an insurance network with a small number of doctors might be attractive to someone who was uninsured before Congress passed the Affordable Care Act. But for people used to having a wide choice of doctors, it can be limiting. And it is an open question whether models with narrow networks deliver better care or just cheaper care.

Then-President Barack Obama’s famous promise was that, “If you like your doctor, you can keep your doctor.”

But that is less likely to hold in the current environment, Haislmaier said.

Competition is up in just two states. Compared to 2017, competition declined in 27 states and stayed the same in 21 states and the District of Columbia. It increased in just two — Alabama and New Jersey.

The number of states with only one or two insurers on the exchanges increased from 17 to 25 since last year. More than half of all counties have only one insurance company on the exchanges, up from less than a third in 2017.

[lz_table title=”Obamacare Options by County” source=”The Heritage Foundation”]Most counties have only one insurer
|Insurers,Percentage of counties

Only seven new companies joined a state exchange in 2018, while 44 companies exited an exchange. The number of exiting insurance companies was actually smaller than the 80 that left a market the prior year, undercutting Obamacare defenders who argue that President Donald Trump is to blame for shortcomings in the system.

Advocates of free market reforms to health care said the report is the latest evidence that Obamacare is failing.

“Obamacare was created under the notion that it would increase competition and decrease premiums,” said Jason Pye, vice president of legislative affairs at FreedomWorks. “That hasn’t happened.”

Grace-Marie Turner, president of the Galen Institute, said it should not be a surprise that Obamacare is not working as advertised.

“It’s not working because the Obama administration had the audacity and hubris to think it knew what people wanted to do better than they did,” she said. “This is reality confronting the promises that were made.”

Turner said Obamacare priced too many consumers out of the market by forcing them to purchase comprehensive policies that offered more services and procedures than they wanted or needed. Many people who were relatively healthy opted out — even if it meant paying the fine for not having insurance.

Turner, whose organization lobbies for market-based solutions to health care, noted that the people who have paid the penalty disproportionately have had moderate incomes.

Insurers are in a “downward spiral.” It is not just consumers who have had to deal with broken promises, Turner said. Insurance companies have fled because they have not gotten the healthier customers to balance the insurance pools that Obamacare promised.

“With insurance companies, you see this downward spiral,” said Turner, adding that the companies wanted to participate but “can’t do it and lose billions of dollars.”

The Heritage report notes that the nation’s four major insurance companies — Aetna, Humana, Cigna and Anthem — have almost entirely left the market to concentrate on the much larger employer-sponsored market. The report notes that Blue Cross and Blue Shield companies largely remain in states where they had market dominance before Obamacare but have not expanded into other markets.

About half of the roughly 17 million people who buy insurance in the individual market qualify for taxpayer subsidies. The report argues that there is little reason for wealthier people who do not qualify for subsidies to participate in the exchanges rather than buy a plan from companies outside the exchanges. As a result, wealthier and healthier customers are unlikely to enter the exchanges.

Related: Conservatives Tell Congress: Don’t Give Up on Obamacare Repeal

FreedomWorks aggressively advocated for the ultimately unsuccessful effort to repeal Obamacare. Pye said his organization would support another try, as many conservatives have urged.

“That said, it’s hard to see a path for something like that now,” he said, noting that the Republican majority shrank with Democrat Doug Jones’ victory in the Alabama Senate race last month.

Turner, however, argued that the opportunity remains. She has endorsed a proposal by Sens. Bill Cassidy (R-La.) and Lindsey Graham (R-S.C.) to overhaul Obamacare by converting its subsidies into block grants for the states.

“There is a huge, huge effort in the policy community, both in Washington and in the states, to use Graham-Cassidy as a platform,” she said. “This may not be a leadership-driven effort.”

PoliZette senior writer Brendan Kirby can be reached at [email protected]. Follow him on Twitter.