Blue Cross Blue Shield of Minnesota, the largest insurer in the state, has announced it will stop selling plans on the Obamacare exchange next year, though its parent company will continue to make some offerings available. The dramatic departure, which will impact over 100,000 Minnesotans, could signal insurers are reconsider their participation in the program after two years of big losses. NPR reports:
“Based on current medical claim trends, Blue Cross is projecting a total loss of more than $500 million in the individual [health plan] segment over three years,” the insurer said in an emailed statement.
The Blues reported a loss of $265 million on insurance operations from individual market plans in 2015. The insurer said claims for medical care far exceeded premium revenue for those plans.
“The individual market remains in transition and we look forward to working toward a more stable path with policy leaders here in Minnesota and at the national level,” the company stated.
Back in April when United Healthcare, the nation’s largest insurer, announced it was dropping out of most Obamacare exchanges, the word from the Kaiser Family Foundation was that it would harm competition in some states but otherwise wouldn’t matter much so long as other big insurers remained. Vox ran an explanatory piece with the subhead “UnitedHealth isn’t a canary in the coal mine.” It quoted Cynthia Cox of the Kaiser Foundation saying United Healh’s decision was not the start of a trend:
“I don’t see this becoming a trend,” says Cynthia Cox, Kaiser Family Foundation’s associate director for the Program for the Study of Health Reform and Private Insurance. “Cigna and Anthem will likely become more significant players. They’ve already confirmed they plan to continue to participate, and Cigna has additionally indicated they may expand into new areas.”
It is certainly possible that, in a few years, Cigna and Anthem may revisit their positions and change course. Right now, however, is not that moment.
But Cox sounds a little rattled by today’s news. From NPR:
“Right now what it seems like is that insurance companies are really trying to reset their strategy,” Cox said. “So they may be pulling out selectively in certain markets to reevaluate their strategy and participation in the exchanges.”
She said the individual markets just aren’t turning out as expected. “The hope was that these markets would encourage exchange competition and [get] more insurers to come in. … I don’t know if we’re at a point where it’s completely worrisome, but I think it does raise some red flags in pointing out that insurance companies need to be able to make a profit or at least cover their costs.”
A University of Minnesota health economist is decidedly downbeat about what the decision says about the market:
University of Minnesota health economist Roger Feldman called the Blues’ departure a major blow to Minnesota’s already troubled individual market.
“What this says about the individual market is that it is very unstable and it has been disrupted by a number of events, and we still don’t know whether it will recover or not from those disruptions,” he said.
Will other state BCBS insurers follow Minnesota’s lead? Just last month a spokesman for BCBS in Lousiana said, “The way the law was designed and is now being administered simply does not work.” There’s no evidence BCBS is planning to pull out in Louisiana but it is asking for rate increases of up to 28 percent. In other words, they are facing the same problems even if they haven’t given up on solving them quite yet.
Meanwhile, the Obama administration is doing its best to urge state insurance regulators to limit rate increases. That serves the short term political interest of Democrats, who don’t want to face big double digit increases announced just weeks before the election, but it makes it more likely insurers will continue to suffer losses in the market next year. And that could lead to more of them deciding to pull back. That would mean less competition which in turn means less pressure to control costs.
It’s not a death spiral yet but if you squint a bit you can begin to see it from here.