The decision by Blue Cross Blue Shield of Nebraska to leave the Affordable Care Act’s individual insurance marketplace may awaken officials to the need for change, the head of the state’s largest health insurer said Friday.
If not, said Blue Cross CEO Steve Martin, there’s no end in sight for the losses that he said forced the Omaha-based insurance company to remove itself from the exchange for 2017, only hours before the deadline to stay or leave.
Although Blue Cross’ individual exchange policies cover only about 20,000 of its 750,000 customers, those policies have lost $140 million since 2014. If Blue Cross remained in the market, it estimated that the loss could reach $250 million by the end of 2017.
“We cannot take another hit,” Martin said. “We are very hopeful and will work with federal regulators with positive intent and try to be back in the marketplace next year. But if the markets are worse or don’t change, we can’t guarantee we’ll be back.”
The decision doesn’t affect insurance covering employee groups, Medicare or Medicaid clients, small businesses and pre-ACA policies that have been renewed annually since the federal law, also known as Obamacare, passed in 2010.
The departure by Blue Cross, which has participated in the ACA marketplace in Nebraska from its start in 2014, leaves only Aetna and Medica Inc. as marketplace alternatives when open enrollment begins Nov. 1.
The marketplaces, or exchanges, are a key part of the federal law because they allow lower-income people to qualify for tax credits to offset part of the cost of health insurance — with the aim of making it affordable to more people.
Another 6,000 people are covered by individual Blue Cross policies purchased outside of the exchange. Blue Cross also will reduce the individual insurance options that it sells outside the public marketplace, dropping its higher-benefit “silver” and “gold” policies but leaving a low-benefit “bronze” policy and a policy that covers only catastrophic health claims.
Several other companies also offer individual policies outside the exchange that do not qualify for tax credits.
The silver and gold policies have been losing money, too, said Martin and Lew Trowbridge, Blue Cross’ president.
“We had to think long and hard about the effect on our company,” Trowbridge said. “I mean, enough’s enough, and $140 million is a lot of money to us. We don’t see it ending, so we have to take corrective action now, as much as it pains us.”
Martin said he is hearing more discussion on the federal level about making changes in the law.
“We’re not trying to demonize the exchange,” Martin said. “We believe the Affordable Care Act can be fixed, and we hope, post-presidential election, that whoever gets elected president and whoever is leading both sides of the aisle (in Congress) will come together and concentrate on making some fixes on this.”
For example, Martin said, federal rules let too many people buy insurance just before they are due to receive an expensive health treatment and then drop their coverage immediately afterward.
The law itself sets too narrow a range of prices between the oldest and the youngest policyholders, Martin said, pushing up prices for young people so they are more likely to pay a penalty rather than buy insurance.
Martin said other regional companies also may leave their states’ exchanges.
“Maybe that’s enough to stimulate some more energy behind the need to stabilize the marketplaces and policies that will draw more young people, encourage people to stay and stop the gaming of the system,” he said.
U.S. Rep. Brad Ashford, D-Neb., said Martin has good ideas that would bring Blue Cross back to the marketplace next year. He said Congress and federal agencies should consider such changes to the Affordable Care Act and how it is administered by the government.
“The Blue Cross decision is the harbinger of change,” Ashford said. “We need to work with Blue Cross to get these matters resolved.”
A recent analysis of the Affordable Care Act marketplaces showed that they work better and have more competitive insurance policy offerings in states where leaders went along with the law’s call to expand Medicaid than in states, like Nebraska, where lawmakers did not expand Medicaid eligibility.
Gov. Pete Ricketts, other members of Nebraska’s congressional delegation and Don Bacon, the nominee for Congress opposing Ashford — all Republicans — said Friday that the Blue Cross departure is further evidence that Obamacare is a failure and can’t be fixed.
Bacon said Ashford has voted in favor of keeping the ACA, while he would have voted to repeal it.
State Sen. Sara Howard of Omaha, a supporter of the Affordable Care Act, said she was “very disappointed” in the decision, and she felt more should have been done to work through problems before pulling out of the marketplace. Howard said she asked a Blue Cross official if the Legislature could do something but was told the problems involved the federal government.
In an article earlier this month, U.S. Health and Human Services Secretary Sylvia Burwell wrote about the law’s “inevitable growing pains,” saying it has “issues and room for improvement” and 2017 will be a “transition year” for the marketplace.
“We can and should have a serious conversation about improvements to the law,” she wrote. “But the debate around the ACA should be about how — not whether — to make health care better. We welcome every idea that can advance that goal, but, for the sake of those Americans who are covered and otherwise helped by the law, we should recognize it is here to stay.”
Bruce Ramge, director of the State Department of Insurance, said Blue Cross’ departure will mean about one-third fewer choices for the people who buy insurance on the exchange. Federal officials may raise prices for the Aetna and Medica policies because Blue Cross won’t be assuming part of the risk of claims.
“We’re disappointed that Blue Cross has decided to exit the exchange, but we understand it was the result of a business decision they made,” Ramge said. “At the end of the day, a company can’t operate a portion of their business at a loss.”
Last month Aetna announced that it would drop out of the insurance marketplaces in 11 states because of losses, remaining only in Nebraska, Iowa, Virginia and Delaware.
UnitedHealth Group decided earlier this year to drop its Nebraska and Iowa individual coverage, and Humana went from 15 to 11 states, which did not include Nebraska or Iowa. More than a dozen insurance cooperatives have shut down in the past few years, including one that served Nebraska and Iowa.
Wellmark, the Iowa affiliate of the Blue Cross network, did not take part in the Iowa exchange in 2014, 2015 or 2016 but last October announced that it would offer policies on the exchange for 2017 in 47 of the state’s 99 counties — not including Pottawattamie County and Council Bluffs.
Other companies due to be on the Iowa exchange are Aetna, Gunderson Health and Medica.
CEO Martin said Blue Cross tries to make a 1 percent profit each year, about $25 million, out of its $2.5 billion annual insurance business, to add to its reserves. That means it sets its prices so it will spend 99 cents for medical care and administrative expenses out of each premium dollar it receives.
But for each dollar collected on the ACA marketplace, Blue Cross has paid out $1.56 in claims, which drove its overall expense to $1.01 per $1, missing its profit goal.
The current $370 million surplus is enough for epidemics or other unusual situations, Martin said, but can’t stand continuing losses. The company would have to raise other clients’ rates, pay marketplace policy claims, or cut costs and have its services decline.