Insurers leaving the Exchanges

Some drop-outs are more important than others.

We’ve seen some insurance companies drop out of the Exchanges this year. My take on a New York drop-out was that it was good news as the enrollment was miniscule and the products were not reasonably priced. The insurer was just too small to compete and there was minimial hope for significant membership gains to cover their back end costs:

384 people are too few people for an insurance company to offer a commercial or commercial like product for two significant reasons. Either reason is a good enough reason for a company to get out of this market segment….
From a policy point of view, unpopular and comparatively expensive plans exiting the marketplace is a good thing in states with deep markets and significant participation. It sucks that 384 people will need to find new policies next but they are highly likely to get better and cheaper policies instead.

This is not the case in Minnesota. A major insurer is dropping its participation from the Exchange on both the individual and SHOP side of the equation.

The insurer with the lowest rates and most customers on Minnesota’s health care exchange is pulling out…
According to a company statement, MNsure policies make up only a small percentage of PreferredOne’s entire enrollment but take up a significant amount of resources to support.
PreferredOne had 59 percent of the individual market for MNsure enrollees as of Aug. 6….

This is a significant disruption to the Minnesota market. It is not shocking though.

I am eyeballing the pricing for a 35 year old non-smoker in the Twin Cities on Health Sherpa and platinum plans without subsidy are cheaper from this provider than most baesline Silver plans. I think a few things are happening.

PreferredOne either was amazingly over optimistic on their acturial modeling or had decided to engage in an extremely aggressive loss leader pricing strategy to build membership. If this was a loss leader strategy, than it may have been too effective as the low cost platinum planss would have been very attractive to people with significant pre-exisiting medical conditions or known medical risk. People with high utilization and high complexity of cases are expensive on the medical side as they go to doctors/hospitals a lot AND they are administratively costly as they are calling in for help and care coordination on a frequent basis.

Secondly, the back-end infrastructure to support Exchange is extensive, especially as the risk spreading mechanisms such as risk adjustment require significant technical support. Building that type of infrastructure from scratch is painful and expensive. PreferredOneseems to have been only a commercial group insurer with a small staff before it decided to dip its toes into the water for individual Exchange.  It had no pre-exisiting model it could rip off to modify for Exchange.

It had aggressive pricing, a population that is higher need than normal, and not a lot of administrative/technical depth. On a quick glance at these basic facts, dropping Exchange makes sense. It sucks for the people who have to re-enroll in new plans at higher price points but 2014 was always a beta test year, and we know that companies would be entering and leaving different markets which is why the markets were never expected to stabilize until the 2016 open enrollment period. Preferred One is not the only significant exit, as Hawaii lost a large provider for the SHOP exchanges for the same basic reason.






22 replies
  1. 1
    Seanly says:

    Richard – you write a lot of great stuff here. I appreciate your measured and nuanced approach to this tricky & divisive issue. However, wouldn’t a lot of this just be 1000 times easier if we had single payer? I would like to see everyone in the United States have some form of universal coverage. It doesn’t matter so much to me if the high percent of my paycheck going for health care is going to a for-profit insurer or going for increased taxes.

  2. 2
    Corner Stone says:

    It sucks for the people who have to re-enroll in new plans at higher price points

    So essentially we should be prepared for a chorus of complaints on how Obamacare is bankrupting them due to higher medical costs. Etc.

  3. 3
    Violet says:

    @Corner Stone: Yep. Cue wingnut chorus.
    And this:

    2014 was always a beta test year,

    will be completely ignored. It should have worked first time out of the box, just like the website, just like every website and everything ever always works first time with no problems, updates or changes of any kind.

  4. 4
    debit says:

    I’m one of the people who’ll be shopping for a new plan in MN. But I don’t think it’s going to be a huge problem. If I can’t find a comparable Silver plan to the one I have now, I’ll just drop to a Bronze. Frankly, after years without any insurance at all I’m not going to bitch about a slightly higher monthly rate or deductible.

  5. 5
    Richard Mayhew says:

    @Seanly: yep

  6. 6
    Bubblegum Tate says:

    @Violet:

    Wingnut I know posted this story with the comment “The implosion begins!” I wasn’t sure whether to laugh at his assumption that one insurer bailing represents an “implosion,” point out that he’s been predicting “implosion” since before the ACA was even implemented and has yet to be right about it, or highlight the fact that he’s cackling with glee at the prospect of people losing health coverage. Whatever the case, I figured that if I came over here, Richard would lay out the actual facts, and he has, which is great.

  7. 7
    Felanius Kootea says:

    @Corner Stone: Most definitely. The people who have to pick new insurers will be majorly upset, as can be expected, the GOP will rub their hands with glee and scream about how Obamacare failed these people, and the media will be only too happy to forgo nuance and an explanation of how insurance works in order to spread GOP talking points as widely as possible.

  8. 8
    Wag says:

    I can hardly wait to hear the wing nuts complying about how the Invisable Hand of the Market has destroyed our society via Obamacare

  9. 9
    Jake Nelson says:

    Yeah, if I hadn’t qualified for Medical Assistance (expanded Medicaid), I would’ve gone with a Preferred One plan. I had them years back when I was on my dad’s insurance, they were great. And their Ultimate plans (They had a “select”, small-network, and “choice”, super-broad… and there was a “+” and no-plus version ($750 versus $1000 deductible/max out-of-pocket) were about $300/mo for me, $500/mo for my mother when we checked. $750 max out-of-pocket, no co-pay for prescriptions, absolutely everything covered, etc, etc. Best plan on the market, and way cheaper than anyone else’s Gold plans. I suppose it was too good to be true… I personally hoped they’d get like 100% market share on the Exchange and it’d be enough to carry them, but this is the problem with only certain people being on the Exchange… employer-based coverage is still the problem.

  10. 10
    CONGRATULATIONS! says:

    or highlight the fact that he’s cackling with glee at the prospect of people losing health coverage.

    @Bubblegum Tate: The sparrow/shower curtain hypothesis remains proven.

  11. 11
    Bobby B. says:

    The Prez did not bring his long spoon to supper when concocting the ACA.

  12. 12
    Tommy says:

    I say this over and over again in these threads and I will keep saying it. I work for myself and health care was tough before the ACA. I am paying far less for a much better plan. Far, far less.

    I know it might have caused some people problems, but I ask you to think of me. Or a lot of other people that this bill helped. Not that long ago I was scared of getting sick. I clearly don’t want to get sick, but not fearful it will bankrupt me if I do.

  13. 13
    bemused says:

    A rightwinger just informed me that healthcare is not a right.

  14. 14
    Tommy says:

    @bemused: There is a story I tell. My grandfather was a small town rural doctor. He was a racist. Far, far right. Not a really nice person. When we were cleaning out his medical practice I saw all these notecards with shorthand on them. I asked my father what these were. He said many times people couldn’t afford to pay him. So he’d take barter for his services because nobody should go without medical care. NOBODY. He’d take some apple pies or fried chicken for payment. That was what those notecards said.

  15. 15
    StringOnAStick says:

    @Tommy:

    I clearly don’t want to get sick, but not fearful it will bankrupt me if I do

    And that is the nut of the issue, isn’t it? No one who lives in any other western democracy can figure out why we are so insane about this topic; why would anyone want to have to worry about being able to get care when they are sick and not worry that it will bankrupt them? This just shows how effective the other side is at throwing up chaff to obscure the argument. A rational but not-politically involved citizen should be able to see that single payer or ACA is much better than having a portion of the population always at risk for medical debt-induced ruin, but the propaganda buries the real argument every damned time.

    The first fight my FOX-infected mother tried to start with me last June was “I don’t think Obamacare is right because Obama’s not on it!”, said with much smug self confidence that this was the most iron-clad argument ever. Followed by “of course we don’t have to worry since we have my Federal Retiree insurance”, so ha, ha, ha, screw everyone else not as lucky as us I guess. My mom and dad are both well down the alcohol-induced dementia path, and seeing plus hearing them spout every FOX talking point and expressing their deep, deep wells of resentment was more than just sad, it is the triumph of rich people propaganda and oligarchy.

  16. 16
    Tommy says:

    @StringOnAStick:

    I don’t think Obamacare is right because Obama’s not on it!”, said with much smug self confidence that this was the most iron-clad argument ever.

    Not sure what plan Obama is on but my father worked 30+ years for the DoD. Where he gets his retirement and health care. Mom got really sick last year. In the ICU for a month. Rehad clinic for physical therapy two weeks. She is better and got world class care.

    I asked him what the bill was. He said zero. Not a penny. l mentioned to him we agree to disagree on politics. Me being a hippie liberal and you not, but shouldn’t every American had what my mom had? He didn’t have a response.

  17. 17
    bemused says:

    @Tommy:

    Today, these are not your grandfather’s type of rightwingers.

  18. 18
    Tommy says:

    @bemused: To expand on what I said above, my dad asked if I recalled as a kid when people would come to the house and they’d say they were my distant uncle or aunt? They were not. That fried chicken or pie was payment but my grandparents didn’t want to “shame” them and say why they were coming over. Yeah I guess different type of Republicans :)!

  19. 19
    bemused says:

    @Tommy:

    Today rightwingers just call them moochers.

  20. 20
    RaflW says:

    For the record, for those who read the MPR link, Jeff Johnson is a conservative dickead. Blaming Gov. Dayton for the things Richard ably explains is par for the course, but MPR should be ashamed for parroting useless campaign crap.
    What the f&#k does Johnson think he’d do as Governor, cancel the exchanges? Really?!? I’m sure there’d be no blowback from 1,000s of families with pre-existing conditions or who are benefiting from subsidies. Asshole. And again, shame on MPR for not even touching that question since they give him 2 paragraphs to pointlessly bloviate.

  21. 21
    jl says:

    Thanks for another informative update on the insurance market action going on with PPACA.

    ” PreferredOne seems to have been only a commercial group insurer with a small staff before it decided to dip its toes into the water for individual Exchange. ”

    When I was doing research on ‘the business case’ for prevention and accountable care, and involved with ‘sharing’ and ‘interfacing’ and whatever buzzwords they used for researching on how the hell insurance companies made their decisions, this type or business model was more common than I expected. What what I often saw that concerned me was not a plucky corporate attempt to break into a new market, but a seeming cluelessness (or maybe a front of cluelessness) about what sort of information and analysis is required to monitor provider performance. Miles of very impressive binders with standards and protocols and regulatory filings, but little knowledge of what was required to understand what the providers were doing and implications for efficiency, risk management and quality. And sometimes a reluctance to know or allow others to know.

    “Weeelllll…. a guy has to get out there and talk with the management nurses to really get a handle on that.”

    “OK, great, whose your ‘guy’?”

    “Weellll…..”

    “We can get you a proposal to get some info….”

    “Weeelllll…”

    I have no idea whether this was what PreferredOne was trying to do, but I have seen several instances of that attitude.
    Which is one reason if we do not get single payer, we go Swiss on insurance companies asses, and impose some heavy regulation with teeth. Not fake Swiss the glibertarians were using as a red herring a while ago, but what the Swiss actually have to do to make their system with a large private sector involvement work as well as it has.

  22. 22

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