Insurers expanding

As I mentioned a couple of weeks ago, health insurance co-ops are expanding.  Co-ops from Massachusetts, Montana and Kentucky are crossing borders to operate in New Hampshire, Idaho and West Virginia.  Idaho has a competive exchange market in 2014. New Hampshire and West Virginia have non-competitive Exchange marketplaces as they each had only a single Blue offering plans. 

The Christian Science Monitor reports that it is not just non-profit public good orientated co-ops that are looking to expand their Exchange footprints.

“At this point not very many insurers [are] pulling out,” says Jenna Stento, a senior manager at Avalere Health in Washington, a provider of information and advisory services in the health-care industry. The trend “doesn’t seem to be going in the direction of less competition.”

She says the Blue Cross family of insurers, for example, looks likely to expand its presence from 47 states in the first year of the Affordable Care Act (ACA) exchanges to 49 states when enrollment starts for 2015.

Another straw in the wind: The directors of three state exchanges under the ACA told reporters on a recent conference call that they expect new insurance companies on the playing field for 2015. Those states were California, Kentucky, and Washington.

And in New Hampshire, with only one insurer selling on its exchange for 2014, two more firms are expected to offer coverage in 2015, according to news reports….

Insurers don’t have to disclose their preliminary plans for several more weeks.  At the end of April, preliminary networks, plan designs and premiums are due for plans that want to sell on the Federal exchange.  State based exchanges have different deadlines.  This is a soft deadline.  For instance, Mayhew Insurance last year threw seven major configurations at our regulators for approval.  We withdrew one configuration because our market research folks figured it would not be worth the set-up costs as it could not sell.  We withdrew another because half a dozen groups that had an MOU with us withdrew the understanding, thus blowing up the relevant network and pricing model. We only sold half of what we filed.

A broader example is Aetna.  Last year, Aetna filed preliminary plans in most states where it operated.  However in September when final filings were required, it withdrew from Exchanges in several large states.  It did not think it could make money on Exchanges, so it pulled out. 

One of the big questions that the early 2014 experience has raised is whether or not the insurers think they can make long-term money on the Exchanges.  There will be a few insurers leaving the market, but there looks like a significant number of new insurers entering the market.  This will be especially important in low-competition states and regions.  I don’t think insurance competition is a panacea for cost control purposes, as we’re basically pass through entities in a quasi-public regulated entity model now, so there is some area of savings.  Some regions will see significant cost savings because new entrants won’t have pre-exisiting relationships with high cost providers whom they have to keep happy.  The new entrants can tailor networks based solely on Exchange criteria instead of a multi-objective function of keeping a high cost provider happy for commercial and Medicare Advantage providers. 

As long as insurers think they can make money on Exchange, the Exchanges are healthy enough.

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24 replies
  1. 1
    wvng says:

    Thanks for keeping up posted on these issues. More good news is good news.

  2. 2
    negative 1 says:

    Why has not one reporter asked a republican what would define success in the health insurance market? At this point insurers, people without insurance, and taxpayers (via the revised CBO projections) all seem to be benefitting.

  3. 3
    Jack the Second says:

    Wasn’t Aetna one of the companies with the lowest MLR pre-ACA?

  4. 4
    Yatsuno says:

    @Jack the Second: I think so. CIGNA was down there as well. They used to be my insurer at my old job & they sucked hardcore.

  5. 5
    RAM says:

    Isn’t one of the GOP’s major planks in their “plan” to replace the ACA to allow insurance companies to operate across state lines? Shouldn’t they be applauding what’s happening now? I’ll hang up and wait for my answer…

  6. 6
    MomSense says:

    I can’t remember the exact numbers but during the pre-ACA passage debate there was a statistic about the percentage of markets (could be states) that had one dominant insurance option. It was a crazy number like 93% of insurance markets had one dominant insurance provider. I know that in Maine if you were self insured Anthem was pretty much your only option. For a while we had Dirigo but I think Anthem was the only insurer who contracted with them.

  7. 7
    mai naem says:

    There was a NPR report yesterday where they said the WH doesn’t count people who didn’t go through the exchange but went directly through the insurance company or broker. I was kind of surprised by this but it does make sense. At that same time, I think the WH should mention those numbers, especially if the numbers show a big spike over 2012/2013. I know a four people who did this through my little circle of friends. The NPR expert said that it’ll be about another 7 million people who did that.
    As far as NH, hasn’t NH always had an issue with too few insurers being there,I am assuming, because of the small population size. I hope more insurers go into NC. I heard NC has one of the highest rates because of the few number of insurers in the marketplace.

  8. 8
    mai naem says:

    There was a NPR report yesterday where they said the WH doesn’t count people who didn’t go through the exchange but went directly through the insurance company or broker. I was kind of surprised by this but it does make sense. At that same time, I think the WH should mention those numbers, especially if the numbers show a big spike over 2012/2013. I know a four people who did this through my little circle of friends. The NPR expert said that it’ll be about another 7 million people who did that.
    As far as NH, hasn’t NH always had an issue with too few insurers being there,I am assuming, because of the small population size. I hope more insurers go into NC. I heard NC has one of the highest rates because of the few number of insurers in the marketplace.

  9. 9
    japa21 says:

    @Jack the Second: I think United was actually the very worse for that. Roughly, IIRC, only 60% of what they collectyed in benefits went to pay for actual care. I may be wrong, but it is close.

    @mai naem: The WH does not yet, I believe, have those figures. There were some arrangements made where people could go direct to the insurer due to web site problems. The insurance companies will be providing the government with lists of those people who did that so the subsidies can be put into place. I doubt if it is 7 million, but it is a considerable number.

    @MomSense: In some states, Anthem/BCBS has as much, or had as much, as a 95% share of all group business and 90% of individual business. Alabama is one of those states.

  10. 10
    Gorgon Zola says:

    Richard, have you commented on this?

    Who might not like it? Some consumers, as they discover that, increasingly, the plans on offer don’t meet their understanding of what “health insurance” provides. High premiums are a barrier to access, but high deductibles and other out-of-pocket costs can be barriers to coverage, too. …, “They say, ‘You are expecting me to pay the premium every month and once I go to the doctor I have to pay $5,000 before there’s coverage?’” Then they walk away.

    It does seem a like a big deal that went under reported…

  11. 11
    WereBear says:

    @Gorgon Zola: I know folks like that… there’s some kind of disconnect with just how much anything costs these days. I ran one test and it got billed for over $300… things add up fast and when you get out of pocket at $5000 and it ends you’re whew.

    Those “back in the day we paid with chickens” people forget that, back in the day, they didn’t stick limbs back on or run an MRI on you. Doctors were limited in the kinds of bills they ran up. Do they want to go back to that?

  12. 12
    Richard Mayhew says:

    @Gorgon Zola: Yeah, I wrote about it, and that is one of the great questions — where does the value proposition of paying a premium versus seeing the insurance company not spend a dime on you but guaranteed coverage for hit by the bus/Congrats you have cancer circumstances comes into play.

  13. 13
    🌷 Martin says:

    Cliff Gold is a family friend and founded CoOportunity Health. It also spans Iowa and Nebraska. Cliff partnered with a former Iowa Insurance Commissioner and they saw a big opportunity in western Iowa which is rural and somewhat underserved. The farming community was a logical market because they’re already very comfortable with co-ops, with joining up with neighbors for a collective good, so they didn’t need to market through that particular hurdle.

    Wellmark is the BC/BS operator in Iowa and South Dakota and is the dominant player in the market. They also opted to not join the exchanges in the first year, which gave the coop a good opening. Nebraska had similar dynamics with a dominant BC/BS and a large farming community to draw on.

    Cliff is a marketing guy, and didn’t rely too heavily on the exchanges to bring in their customers, though he expects over time that will be where most of his customers come from. They exceeded their targets for the open enrollment period and brought in a lot of their policies off exchange. Farmers tend to be conservative and so many of them bypassed the exchanges and signed up directly. He was afraid they’d come up with too few young people, but it sounds like he did alright, somewhere in the 30% range (I haven’t talked to him personally in a few months – he’s been busy). Cliff is a strong Democrat and had already retired. He’s not making any real money off of this. Mostly he’s doing it to piss off his former employer, so low overhead, low rates, and good service to steal as much of their business is his goal. In the end he’s really motivated to do this right by the policyholders. Many of his partners have similar attitudes.

    Coincidentally from that same article, I also know the Molina family, but not as well and from a different connection. They started as a family local insurer out of Long Beach but have bought up a number of other small insurers and billing companies. The article is upbeat, but ACA may not work out as well for them. California is their primary market and things are going well here, but we have very good large insurers that are difficult for them to compete with. And with their acquisitions I think they’re a little concerned they can get the whole business running efficiently enough.

  14. 14
    Jack the Second says:

    @japa21: apparently Aetna managed 54% for their individual policies in 2010: link

    I don’t remember who it was, but someone sold a plan to college students with a 10% MLR. That’s the sort of profit margins that makes zombie Steve Jobs greener with envy.

  15. 15
    Sister Rail Gun of Warm Humanitarianism says:

    @mai naem: I was offered a choice of two insurers on the NC Exchange: BCBS and Coventry.

  16. 16
    Gorgon Zola says:

    @Richard Mayhew: thanks. I’ll find it…:)

  17. 17
    Mnemosyne says:


    Aetna’s worse. I once fought with them for three years because they refused to cover my hospital admit for possible appendicitis because I was sent there by a different doctor in the same practice as my PCP (who was on vacation at the time). Assholes.

    @🌷 Martin:

    Southern California is a tough market for healthcare, because there’s a LOT of competition. G works for a home infusion company and they’re always teetering on the edge of unprofitable because you have to spend a lot of money to send a bag of saline or a case of Ensure to a patient.

  18. 18
    JoyfulA says:

    I was just scheduled for a May focus group on Medicare Advantage. I’ll let you know if I learn anything interesting.

  19. 19
    jl says:

    @Richard Mayhew: Thanks for your recent and very useful columns, RM. And thanks to commenter Zola for the links.

    When I read in the the links provided by Zola, I start to gag at the word ‘costs’. The U.S. has health care system with a lower than average supply of MDs, with a higher proportion of MDs who are specialists, and specialists MDs who are extremely well paid compared to other high income industrial nations. And also extremely friendly treatment to rent seeking monopoly and oligopoly in medical equipment and drug manufacturers. This situation is the opposite of competition, and is in fact restraint of trade advocated by industry and professional groups.

    So, these ‘costs’ are often not really costs in an economic sense, but economic rents and transfer payments. And I think RM said in a post some time ago, that the ACA has to tame those rents and transfer payments over the medium and long run in order to succeed.

    The links provided by Zola make a point about the Rand research into the effect of high deductibles, that is usually overlooked, which is that people facing high deductibles forego treatment that may well increases costs in the long run due to undertreatment and underprevention of chronic disease. The original RAND Health Insurance Experiment strongly suggested that the decisions re care with high deductibles increased mortality, up to 10 percent as income fell below middle and working class.

    It seems to me that the U.S. approach to ‘more skin in the game’ and ‘consumer driven care’ (at least when it is used as a euphemism for high deductibles) has been a miserable failure in terms of long run cost control and population health. In other words, a miserable failure, period. I think that until we get away from the U.S.approach to controlling costs mainly through co-pays and deductibles, which has dominated over the last 30 years, this country will continue to see poor results. If that means moving away from the U.S. system of rigged crony capitalist idea of ‘free markets’ then that is just too bad.

  20. 20
    Another Holocene Human says:

    From a customer (sucker?) point of view, Aetna sucks. Always has. I hope they go bankrupt.

  21. 21
    wvng says:

    Richard, there is a story going around that people cannot buy insurance directly from insurers (not thru the exchanges) until the next enrollment period comes in. KOS just had a piece on it and Fox is flaming about it. Is this true?

  22. 22
    GHayduke (formerly lojasmo) says:

    LOL. Just got a bill from the county for detox, which, I find now, is not covered by most insurance plans.

    La sigh. 60 sober hours in detox = $1,015 out of pocket.

  23. 23
    billB says:

    RM, I appreciate all your work here. I am a CoverOregon poor person over 55. I have a horrific skin problem of seven years. I duly signed up and got approved last week. I called the approved Derm clinic all week, no one picked up. So I went there mon. Nice place, totally empty except the lady at the desk, ‘do you have an appointment? I would like to make one? Here is a card you call.’ I leave…. I call the number, a machine, says go on-line. I do. I click on the clinic, see lots of available times, I enter my ‘poor man insurance’ type, it says the doc is not available. Funny, he was a minute ago. So no actual help for us old college grad architect-out-of-work poors.

  24. 24
    sparrow says:

    F**k Aetna with a rusty pitchfork. They were the company providing our grad school medical insurance, which had a payout of 30 to 40 cents on the dollar. I’m convinced they paid off someone in the administration because that number was patently RIDICULOUS, and our insurance sucked. Still angry about that, and all the time I wasted trying to fix it.

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