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Another Obamacare Train Wreck Not Happening

Federal exchanges look like they'll have plenty of insurance options

One of these days, a dire prediction about Obamacare will come true. Today isn’t it.

The Administration on Thursday released new information about the “Federally Facilitated Marketplaces.” Under Obamacare, every state must have an exchange—a place where people without employer-sponsored insurance can find insurance. Some states are running their own exchanges. Others are asking the federal government to do most, or all of, the work. Those federal-run exchanges are the FFMs.

To be successful, exchanges must have enough plans to generate some competition. The whole idea of the exchanges is to let people shop around, seeking the best combination of benefits, service, and prices—just as they might shop for a car, an accountant, or any other good or service. Yes, that's probably more of a conservative idea than a liberal one. But, for competition to take place, insurers must participate. And conservatives have predicted the insurers would stay away, because of Obamacare's supposedly onerous regulations and a fear that the whole system is doomed to collapse.

Even liberals like me have worried how the insurers might act—and, sure enough, some carriers really do seem wary. But plenty aren't. On Thursday, the administration announced it expects the FFMs to have more than sufficient competition. At least one new insurer will be offering plans in about three-fourths of the FFMs, according to the administration, and 90 percent of “target enrollees” (people the administration is hoping will use the exchanges) will be able to choose from at least five different insurers. Given the poor state of competition that exists in many states today, the administration says, that’s a big improvement.

The data is preliminary and sketchy—and the improvement may not be as dramatic as the administration made it sound. “I would characterize it as modest plan competition,” Caroline Pearson, vice president for health reform at Avalere Helath, told Sarah Kliff of the Washington Post. “In most markets, there seems to be a bit more choice than what’s available in the market today. But we’re certainly not seeing a wild influx of plans into the market.” 

But there's such a thing as too much choice in health insurance. And it actually shouldn't take more than a few plans to foster serious competition, particularly given all the other changes Obamacare is making. "It’s important not to lose sight of the obvious stuff," says Larry Levitt, a senior vice president at the Kaiser Family Foundation. "This market will become much more competitive just because people will be able to compare prices (which they can’t now because of medical underwriting) and be guaranteed access."

The FFM news is also of a piece with the news from California, which last week offered a look at the options that will be available on its exchange. (California is among the states running an exchange on its own.)

The California exchange will offer insurance from the three largest companies already offering coverage to people without employer insurance. It will also have options from several carriers that haven’t sold this kind of coverage before. It’s an “auspicious start,” according to Jon Kingsdale, who was executive director of the exchange in Massachusetts and is now advising states trying to replicate its success. “If the Massachusetts experience is any guide,” Kingsdale, who is now director of the Wakely Consulting Group, told me, “initially robust competition will actually spur even more entrants and competition in succeeding years.”

Like all news about Obamacare, Thursday’s development must be kept in perspective. The FFM numbers are encouraging, but it remains to be seen how they break down by state—and, more important, what premiums they end up charging. Making sure consumers in the states have options is just one of many serious challenges that the Administration faces and most of us expect the Administration will struggle with some of them. But the evidence to date should make us all more optimistic, not less.

Jonathan Cohn is a senior editor at The New Republic. Follow him on twitter @CitizenCohn