Blue Cross and Blue Shield of Louisiana submitted dozens of individual health insurance plans for the federal government’s online health insurance marketplace, which went live that fall.
“We are excited for the opportunity, and we’re looking forward to the challenge,” Allison Young, the company’s senior vice president for benefits administration, said at the time.
Three years later, Blue Cross is considerably less excited about the business they’ve done through the federal exchange, which was set up as part of the Affordable Care Act, or “Obamacare.” But Young certainly was right about the “challenge.” The company says it lost $66 million on individual marketplace business in 2014 and $77 million last year, enough to drive losses for the company as a whole, says Brian Keller, senior vice president and chief marketing officer with Blue Cross.
The Baton Rouge-based health insurer expects to continue to offer ACA exchange policies in every parish next year, he says, although the “platinum” plans will be scrapped. But he says the company needs to jack up rates “so we don’t go broke.”
“While we are a not-for-profit, we’re not a charity,” Keller says. “We can’t lose money, and we’re not going to subsidize one block of business on the backs of another.”
JUMPING AND DUMPING
Blue Cross wouldn’t have gotten into the exchange marketplace if company officials hadn’t expected to make money. So what went wrong?
Many people acquired insurance for the first time on the exchange. Some of them are using more services than expected, driving up costs. That might be OK if the federal government enforced its own rules, critics say. With limited exceptions, consumers are only supposed to be able to sign up for insurance during specified enrollment periods. But Keller says people are being allowed to sign up for insurance whenever they want, take care of whatever services they need, then drop coverage—and those costs are borne by other policyholders.
Historically, many small companies, rather than buying group insurance for their employees, would instead encourage them to buy their own policies and perhaps give them a raise to cover it. This was often cheaper for the company. But as rates climb on the individual side, that practice is falling out of favor.
“In Massachusetts, we used to call them ‘jumpers and dumpers,’” says Ronnell Nolan, a lobbyist and president of Health Agents for America. “You jumped on, then when you got well you dumped the plan. That kind of thing is happening now.”
It was anticipated that newly insured patients might consume a lot of health care during the first few years of the ACA. The law promises insurers like Blue Cross that get hit with higher-than-expected costs will be compensated.
But last year, the U.S. Department of Health and Human Services announced that its “risk corridor” program was only able to collect $362 million to pay $2.87 billion in requested compensation. The anti-ACA Republican majority in Congress used the 2015 “CRomnibus” appropriations bill to ban payments from other sources, which they said would have amounted to taxpayer-funded bailouts, so insurers only received about 12.6 cents on the dollar.
HHS intends to make up the shortfalls, although it is unclear when—or if—funds will be available. But in a bit of good news for insurers, the department recently issued new guidelines to tighten up enrollment period enforcement. And while a number of the ACA-supported Consumer Operated and Oriented Plans have shut down, including Louisiana Health Cooperative, at least three formerly struggling co-ops reported a profit during the first quarter of 2016, which might be a hopeful sign.
THE BOTTOM LINE
The loss of UnitedHealthcare which is getting out of the Obamacare business in Louisiana next year, citing loses of about $1 billion in both last year and this year and Louisiana Health Cooperative leaves only Blue Cross and Vantage offering individual health policies in every parish. Humana remains active in the New Orleans metro area, says state Commissioner of Insurance Jim Donelon.
The two companies that pulled out did so despite an average rate increase in the individual market of 15% in each of the past two years, Donelon says. The Louisiana Legislature has thus far denied his requests to be granted authority to approve rate hikes.
“I see Vantage expanding their writings in our state, and we’re very grateful for that,” Donelon says, “but the overall picture in Louisiana and across the nation is very negative.”
Historically, many small companies, rather than buying group insurance for their employees, would instead encourage them to buy their own policies and perhaps give them a raise to cover it. This was often cheaper for the company. But as rates climb on the individual side, that practice is falling out of favor.
“We have had record sales of small groups over the last six months that are setting company records,” Keller says.
While insurers don’t have to finalize their marketplace rates for next year until September, Keller says costs for individual plans might be going up by “double digits across the board.” But Jonathan Gold, press secretary for HHS, cautions that such projections don’t necessarily translate to higher costs for everyone.
In Louisiana, the average marketplace premium among people who receive tax credit subsidies—which includes 89% of the state’s buyers went from $97 last year to $86 per month in 2016, an 11% reduction, HHS says, despite reports of anticipated rate increases of as much as 55.5% on some plans based on companies’ rate filings last year.
“Our analysis highlights how different the premiums that people actually pay are from the rates that are initially proposed by issuers,” Richard Frank, assistant secretary for planning and evaluation at HHS, says in a prepared statement. “Consumers’ actual health insurance premiums depend on whether they shop around for the best deal and the availability of tax credits that lower premium costs.”
Shopping around also is good advice for businesses. Bob Formeller, a commercial lines producer with Community Financial Insurance Center, says company owners should review with their agents the dynamics of their group. In some cases, he says, paying the penalties for not providing insurance might make more financial sense than providing coverage.
“The bottom line is for small employers and insurance companies everybody wants to stay in business,” he says.
Date: June 22, 2016