The nation’s Blue Cross and Blue Shield plans fared worse than publicly traded health insurance companies, with many plans losing hundreds of millions of dollars last year on individual policies sold under the Affordable Care Act.
Blue Cross Plans Hit Hard By ObamaCare
Forbes – Bruce Japsen2/26/2016
The nation’s Blue Cross and Blue Shield plans fared worse than publicly traded health insurance companies, with many plans losing hundreds of millions of dollars last year on individual policies sold under the Affordable Care Act.
A new report from Fitch Ratings, which looked at earnings of nearly three dozen Blue Cross and Blue Shield companies, showed 23 had a decline in earnings and 16 had a net loss, largely related to losses from policies sold to newly insured Americans who bought subsidized individual policies on public exchanges. There were 23 Blue Cross companies that reported a “collective $1.9 billion decline in earnings” for the first nine months of 2015 and 16 of those companies had net losses.
It’s a significant development because these insurers are raising prices for this year to recover the losses and taking additional steps like slashing broker commissions and narrowing doctor and hospital choices to rebound in 2016.
Blue Cross plans also tend to be the dominant providers of individual policies in their states. In Illinois, for example, the Blue Cross plan owned by Health Care Service Corp. has about 80 percent of the customers who purchase coverage on the public exchanges.
The losses have problem has largely been a major increase in medical expenses from these new patients, who were previously uninsured. From an actuarial standpoint, the health plans say they didn’t know what they would be getting and therefore needed more healthy people to buy premiums to cover the costs of the sick. So far, medical expenses are getting the upper hand.
“Cost and utilization trends from the state insurance exchanges form the Affordable Care Act have been higher than anticipated and are the primary drivers of declining earnings,” Fitch said in its report.
Though Anthem, which is publicly traded, is included in the report most other companies that own Blue Cross and Blue Shield plans are nonprofit or mutual firms owned by policyholders. Fitch gathers the financial data from state insurance filings.
The companies with the biggest losses through nine months of 2015 were:
— $622 million at Blue Cross and Blue Shield of Michigan
— $442 million at Health Care Service Corp., which owns Blue Cross plans in Illinois, Texas, Oklahoma, New Mexico and Montana
— $266 million at Highmark Group
“Earnings declines, lower enrollment and moderate revenue growth were challenges for the Blue Cross and Blue Shield companies, however, Fitch believes earnings are likely to improve in 2016 due to premium rate increases and benefit redesign aimed at improving underwriting results and regulatory changes,” said Mark Rouck, senior director at Fitch and an author of the report.
