Exiting the exchange: Insurers fleeing health-care exchanges nationwide

Health-insurance exchanges in Colorado, and across the country, haven’t quite worked out as expected since the Patient Protection and Affordable Care Act was fully implemented in 2014. Some large insurers have pulled out of the individual exchange market for the 2017 benefits year, and others are asking the Colorado Division of Insurance for as much as 40 percent increases to the premiums they charge to pay for expected increases in costs.

As changes are being set for 2017, it is clear that many individuals in the state will lack choice if they buy their health care on the exchange, as some areas are down to only one carrier. United Healthcare and Humana Insurance have announced that they are pulling out of the individual-plan market until they can find a way to make money. Rocky Mountain Health Plans is reducing its individual plan offerings next year, restricting its services to Mesa County through its Monument Health affiliate.

Anthem Blue Cross and Blue Shield will not offer its PPO individual plans for 2017 but will continue offering its HMO offering statewide. All of these companies will continue to offer small and large group plans.

SPONSORED CONTENT

Prioritizing mental health in hospice care

Prioritizing mental health support alongside physical comfort, Pathways hospice care aims to enhance the quality of life for patients and their families during one of life's most challenging transitions.

“I’d rather these companies continued in the individual market,” said Colorado Insurance Commissioner Marguerite Salazar in a statement. “But in the larger picture, what’s taking place is a market correction; the free market is at work. And it is important to recognize that this is a market correction taking place on a national scale, not just in Colorado. While it was good initially to have so many companies offering so many individual plans, this could be an indication that there were too many options for the market to support.”

About 20 percent of the 450,000 Coloradans who get their insurance through the individual exchange market are going to have to find a new insurer for 2017. That’s about 92,000 people. There is one new entrant into the Colorado market, Bright Health Plans, which plans to sell plans on and off the exchange.

“As we prepare for the fourth open enrollment of the Affordable Care Act, it’s worth noting that we’re still in the stabilization phase,” Salazar said. “Companies are still figuring it out — where to sell, how to sell, how to price — which is why we’re seeing some companies pull back on individual plans or requesting significant increases, while still other companies are coming into the market. Some companies have done a better job of figuring out how to operate in this new environment and compete for people’s business, while others must step back and reevaluate their approach.”

Golden Rule asked for a 40.6 percent increase in its individual plan premium; Colorado Choice asked for 36.33 percent; Rocky Mountain HMO asked for 34.6 percent, and Anthem BCBS asked for 26.8 percent.

The Division of Insurance has until the end of September or early October to determine if premium increases are too high and whether to approve them.

“The biggest driving factor is the risk of enrollees and who they expect to be enrollees,” said Chris Sloan, senior manager at Washington, D.C.-based health-care consulting firm Avalere Health. “This is one of the big issues.”

The reason large insurers are pulling out of the exchange market is because “people cost too much. They can’t raise their premiums high enough to cover their costs and be competitive,” he said.

Many companies have had to raise premiums to pay for the influx of higher cost individuals into their plans, he said. A company can’t make money charging $400 a month premiums if it is spending an average of $450 per month in health-care costs.

He points out that even if premiums go up 50 percent in a year, patients won’t feel it because the government grants them subsidies to pay for their care.

There needs to be structural changes to how the market works, he said. Currently, if a plan is serving a region that is full of healthy people, the insurer can get by with charging very low premiums. If the region next to the healthy region has a higher rate of cancer and other high-risk health problems, those insurers end up spending a lot more to cover those few patients. And while the health exchanges do have a risk-adjustment program in place, which is supposed to prevent insurers in one area being subjected to overwhelming risk while its neighbors are not, it has not worked as well as it should, Sloan said.

“What health plans are complaining about lately is that the way they do the risk-adjustment calculation doesn’t accurately compensate them for high cost individuals,” Sloan said. There needs to be a better way to incorporate the high cost of prescription drugs, he added.

There are also concerns about enrollees gaming the market. The exchanges have an open enrollment period just like any corporate benefits program. People can sign up for health-care coverage during a small window of time. Once the window is closed, they have to wait another year to sign up unless they have a qualifying event — such as getting married or having a baby — that would require them to change their health-care coverage.

The problem is that the “federal government and states are not sufficiently checking those sorts of things, and people are gaming the system,” Sloan said. They might lie and say they lost their job and need to buy insurance, but the real story may be that they chose not to buy health insurance during the open enrollment period because they were healthy. Something changed, they got really sick, and they decided to ask for a special enrollment period.

Then these folks take advantage of the insurance for a month or two and drop it when they are out of danger, costing insurance companies a lot of money in missed premiums.

“Special-enrollment enrollees are significantly sicker than open-enrollment enrollees,” Sloan said. “They want to tighten that — verify that something happened to them that they say happened to them.”

The third problem with the exchanges is that there aren’t a lot of young people signing up. The industry calls them the “young invincibles,” people in their 20s and 30s who are never sick. They don’t think they need insurance, so they don’t buy it.

To function correctly, the exchanges need healthy people to balance out the sick, he said. The industry needs to find new ways to attract these younger people into the exchanges.