ACA Impact on Health Insurance Industry Financial Health

VII. Key Issues: Regulation & Reform >> C. Health Reform >> Affordable Care Act (ACA) >> ACA and the Health Sector >> ACA and Private Health Insurance >> ACA Impact on Health Insurance Industry Financial Health (last updated 7.7.17)
Lead Editor: Dana Beezley-Smith, Ph.D.


The Big Five 

  • Public Health Insurance Companies On The Obamacare Exchanges. “At full enrollment the Affordable Care Act could bring the private health insurance industry over 90 billion dollars in annual premiums. With the marketplace enrollment numbers already topping 2 million, a number of publicly traded health insurance companies are already benefiting from the exchanges… Even if the insurance companies initially lose money on the insurance marketplaces, this is outweighed by the long term profitability these consumers may present. When it comes to health insurance, policyholders who have become familiar with provider networks are very reluctant to switch companies even in the face of premium hikes.” (ValuePenguin, 2.1.14)
  • Obamacare Has Been A Boon For The Insurance Industry. “Five major publicly traded insurance carriers are Obamacare players: WellPoint, United, Aetna, CIGNA and Humana. All have taken somewhat different approaches to the opportunities created by the law, but they all share similar financial and stock market performance trends since Obamacare’s passage and implementation—steadily upward. Since mid-2013, these ‘managed care’ companies have been some of the brightest shining stars of Wall Street—and Obamacare is a major reason. Here’s why.” Haynes, Tom. (Forbes, 1.8.15)
  • Insurers Bullish On Obamacare, Despite Supreme Court Uncertainty. “As enrollment grows from the second year Americans can sign up for private coverage under the Affordable Care Act, health insurance companies are hinting at a 2015 that will also be lucrative to their bottom lines. Just last week, Anthem (ANTM) surprised some by once again raising its financial guidance for 2014.” Japsen, Bruce. (Forbes, 1.18.15)
  • Thanks, Obamacare! Health Insurer Stocks Soar. “Simply put, greater access to health insurance has led to more customers for the insurance giants. And UnitedHealth is not the only company to benefit. The other four members of the so-called Big Five health insurers — Aetna (AET), Cigna (CI), Humana (HUM), and Anthem (ANTM) (formerly WellPoint) — have all beaten the S&P 500 over the past five years or so as well.” (CNN Money, 1.21.15)

Profitability by Insurer


  • Aetna Says Demand Surging for Individual Obamacare Plans. “With the deadline approaching for individuals to renew healthcare plans purchased on, Aetna has begun to see a surge in customers for 2015, the insurer’s new president said on Thursday during a meeting with analysts and investors.” (Reuters, 12.12.14)
  • Aetna, More Bullish On Obamacare, Raises 2015 Profit Forecast. “Aetna (AET) chief executive officer Mark Bertolini said he now expects public exchange business under the Affordable Care Act to be an “attractive growth opportunity” that can generate a reasonable return for investors. In the past, Bertolini hasn’t been so bullish on the public exchanges saying it was a break-even opportunity at best. But a boost in individual customers buying subsidized plans, disclosed on the company’s first-quarter earnings call this morning, left Aetna with 950,000 members in coverage purchased on public exchanges from 17 states.The improved outlook in ACA-related business as well as other Aetna’s businesses contributed to an increase in the company’s 2015 earnings forecast to $7.20 to $7.40 per share from “at least $7 a share” before. Aetna is the second health insurer this quarter to boost its financial forecast following last week’s announcement by UnitedHealth Group (UNH) that its sales and profits would jump this year.” Japsen, Bruce. (Forbes, 4.28.15)


  • Humana (HUM) reported individual commercial membership is up 122 percent to more than 1.1 million thanks to the health law, helping the company maintain its financial forecasts for the rest of the year… At Humana, the company affirmed its earnings per share guidance of $7.25 to $7.75 for 2014.” (Forbes, 7.30.14)

United Health

  • UnitedHealth Plans to be Major Player in 2015. “UnitedHealth Group Inc, after wading cautiously into Obamacare insurance exchanges this year, on Thursday vowed to become a major player, participating in as many as two dozen state exchanges in 2015 and growing from there… ‘By participating moderately this year and then watching closely and listening, we have learned about pricing, networks, regulatory structure, distribution, and the consumer’s mindset regarding public exchanges,’ Hemsley said. UnitedHealth reported better than expected sales and earnings, fueled by cost cuts, the addition of 270,000 healthcare members and strong growth in its Optum health technology division. The company raised its full-year revenue forecast to about $130 billion, from $128 billion to $129 billion, citing strong second-quarter results and improving business trends.” (Medscape, 7.17.14)


  • Three Measures of Obamacare’s Success. “Executives at WellPoint, the Blue Cross Blue Shield behemoth that is a big player in the exchanges, said this month that its enrollment is right where it expected, as is the age of those signing up and the types of plans they selected. ‘I’m very optimistic as to where we are,’ Wellpoint executive Ken Goulet recently told investors. Other insurers also say enrollment is coming along as planned, though some are depending on the little-known off-exchange market to broaden their base.” (CNN Money, 3.30.14)
  • “Wellpoint (WLP), parent of several Blue Cross and Blue Shield plans across the country, enrolled more Americans than it thought via public exchanges under the Affordable Care Act and expects even more people to sign up to its Medicaid plans for the rest of the year… Wellpoint chief executive officer Joe Swedish said the company added 769,000 lives this year on public exchanges, which was far more than the 600,000 that the company thought it would sign up via government-run exchanges…The ‘company now expects medical enrollment to grow by 1.4 million to 1.5 million members,’ the company said in a statement.” (Forbes, 7.30.14)
  • Blue Cross Plans May Be Obamacare’s Fire Wall. “While Blue Cross plans have also lost several billion dollars, they have altered the kinds of products they have offered on the exchange to curtail the bleeding… And at least one major Blue Cross plan in Iowa said it will, for the first time, offer individual coverage on the public exchange in 2017 working closely with two large providers of medical care in Iowa, offering coverage in 40 of Iowa’s 99 counties through two newly created ventures. ‘In order to be successful in the individual segment as well as on the public exchange, Wellmark Blue Cross and Blue Shield has formed two new health insurance companies with providers who are committed to managing the care of our members – one with Mercy Health Network (Wellmark Value Health Plan, Inc.) and one with the University of Iowa Health System (Wellmark Synergy Health, Inc.)’ said Wellmark spokeswoman Traci McBee.” (Japsen, Bruce. (Forbes, 8.21.16)
  • Major Blue Cross Blue Shield Insurer Reverses ACA Losses. “Health Care Service Corp. — the parent company of the Blue Cross and Blue Shield affiliates in Illinois, Montana, New Mexico, Oklahoma and Texas — recorded an $869 million profit in the first quarter of 2017, according to the company’s latest financial documents. That was a $1.3 billion turnaround after HCSC lost $442 million in the first quarter of 2016… Many insurance companies continue to do well (like Florida Blue) or are turning things around (like HCSC). And HCSC carries a lot of weight, since it covers nearly 1.1 million people in ACA plans and is the largest Blue Cross and Blue Shield company after Anthem. What happened: A few one-time items inflated HCSC’s profit. For example, Congress suspended the Affordable Care Act’s health insurance tax for 2017, and accounting rules require an insurer to book the entire fee in the first quarter. But even without the one-time items, the insurer raised premium prices a lot, particularly for its ACA exchange plans, to offset costly medical claims.” (Axios, 5.23.17)


  • The White House is Bribing Insurance Companies. “Technically, the regulations don’t force health insurance companies to tamp down their premium spikes. But the White House isn’t asking nicely. The administration knows that insurance companies owe it. Obamacare’s architects made sure that these companies would be invested in the law’s success. The individual mandate is proof. It could bring insurers some 25 million new customers, according to the Congressional Budget Office. Each new customer comes with the monthly premiums that boost the industry’s bottom line. No wonder analysts now predict that the five major health insurance companies will see their profit margins increase by hundreds of millions, or even billions, of dollars in the next few years.” (Forbes, 7.14.14)
  • Health Care Law Recasts Insurers as Obama Allies. “The relationship between the Obama administration and insurers has evolved into a powerful, mutually beneficial partnership that has been a boon to the nation’s largest private health plans and led to a profitable surge in their Medicaid enrollment.” (New York Times, 11.17.14)
  • Private Health Insurance: Concentration of Enrollees among Individual, Small Group, and Large Group Insurers from 2010 through 2013 (12.1.14). The Government Accountability Office released an analysis of the aggregate market concentration of the insurers with the greatest enrollment in every state plus the District of Columbia. The analysis showed that market concentration has increased since the law passed. In 42 states, 75 percent of the individual market in 2013 was controlled by three or fewer companies. The average market share of the three largest insurers in each state’s individual market has increased from 83 percent in 2010 to 86 percent in 2013.
  • Health Insurers Watch Profits Soar as They Dump Small Business Customers. “UnitedHealth Group, the largest health insurer, reported last week that it made $10.3 billion in profits in 2014 on revenues of $130.5 billion. Both profits and revenues grew seven percent from 2013. To put that in perspective, United’s share price was $30.40 on March 23, 2010, the day President Obama signed the Affordable Care Act into law. Since then, the company’s price per share has increased an astonishing 375 percent. That’s way more than either the Dow Jones or Standard & Poors averages has grown during the same period….The other five have seen the price of their stock more than double or triple. Health Net’s share price has increased 224 percent since March 2010. Anthem’s is up 238 percent over the same time period.  Aetna’s 290 percent. Cigna’s 305 percent. And Humana’s 309 percent.” (Center for Public Integrity, 1.26.15)
  • Who’s Charging More for Obamacare Plans? Surprise … “A new analysis found that the largest insurer in each of the states served by raised their prices in 2015 much more sharply—by an average of 10 full percentage points—than smaller competitors on that federal Obamacare marketplace.” (CBNC, 8.28.15)
  • Editorial: Don’t Shed Tears for Health Insurers. “[I]f one looks not only at Obamacare exchanges but at the broad insurance market, insurance carriers are doing just fine. Their rates are holding remarkably steady in the face of healthcare costs that are growing at a rate at or only slightly ahead of the rest of the economy. Now it’s true that many individuals and families in high-deductible plans are paying more out of pocket. But that’s because they are picking up more of the overall burden for supporting the healthcare system. That has nothing to do with the insurance industry or healthcare providers. It is a reflection of workers’ declining bargaining power in the labor market… The problems of the individual market and skyrocketing drug prices can be addressed only by getting everyone insured and curbing the unparalleled pricing power of the drug industry. That requires a change of policies in Washington.” Goozner, Merrill. (Modern Healthcare, 7.23.16)
  • Understanding Recent Developments in the Individual Health Insurance Market. “There is significant potential for the level of competition in the individual market to increase in the years to come. With premiums returning to a sustainable level, incumbent insurers are likely to become less likely to exit markets and more likely to expand their participation into additional areas. Sustainable pricing will also create attractive opportunities for insurers to re-enter markets they may have left and for new insurers to enter markets for the first time.” (Obama White House Council of Economic Advisors, January 2017)



  • Hospitals Cash In on the Newly Insured – More Surgery, Maternity Care, ER Visits Boost Admissions—to Insurance Firms’ Chagrin. “Insurers, meanwhile, are still grappling with the health-law’s new marketplaces—and the costlier-than-expected patients some of them attracted. Some insurers, including Cigna Corp., said they spent a bigger share of the premiums they collected in the second quarter on medical expenses than last year. The ‘medical loss ratio’ is rising in part because enrollees under the health law—many of whom may previously have been uninsured—are seeking health services like surgeries at higher rates… Last week, Cigna told investors an initial wave of health-law enrollees used more oncology, orthopedic and maternity services than expected.” (Wall Street Journal, 8.4.14)
  • Fewer Uninsured Face Fines as Health Law’s Exemptions Swell. “Almost 90% of the nation’s 30 million uninsured won’t pay a penalty under the Affordable Care Act in 2016 because of a growing batch of exemptions to the health-coverage requirement… An analysis by the Congressional Budget Office and the Joint Committee on Taxation said most of the uninsured will qualify for one or more exemptions… Insurers are concerned that the exemptions could make it easier for younger, healthier people to forgo coverage, leaving the pools overly filled with old people or those with health problems.” (Wall Street Journal, 8.6.14)
  • Headwinds For Health Insurers As Obamacare Stumbles. “Medicaid managed care is the most attractive market, with Medicare Advantage running second. Obamacare exchanges are noticeable only by their absence… Politicians will look to health plans to finance Obamacare’s failures. I expect that profiting from Medicare and Medicaid, while offering unaffordable Obamacare policies – or exiting Obamacare exchanges entirely – will become politically unacceptable. State and federal politicians will seek reforms that force health plans to subsidize Obamacare if they want to make money from other government health programs. Graham, John. (Forbes, 5.28.15)
  • Health Law’s Strains Show: As Third Enrollment Season Kicks Off, Insurers Move to Curb Costs, Boost Premiums. “Under the ACA, insurers have seen an influx of new membership in individual plans and in Medicaid plans they administer for the government, expanding the industry’s total U.S. revenue to $743 billion in 2014, the year the law’s biggest changes took effect, from $641 billion the year before, according to a new analysis by consulting firm McKinsey & Co. But much of that growth has been unprofitable. Health insurers lost a total of $2.5 billion, or on average $163 per consumer enrolled, in the individual market in 2014, McKinsey found. A number are also expecting to lose money on their marketplace business for 2015… For larger companies, the losses were survivable. But rate increases create a risk that consumers may get sticker shock despite the availability of federal subsidies that reduce the cost sharply for many.” (Wall Street Journal, 11.1.15)
  • Exchanges Three Years In: Market Variations and Factors Affecting Performance. “Many carriers—both early-OEP entrants and ‘wait-and-see’ latecomers—believed this new market would achieve stability and sustainable margins in its third year. However, recent events—including carrier turnover (both entrances and exits), plan terminations, and pricing volatility—suggest the market is still in flux… Our initial perspective, based on emerging financial results reported for 2015,8 is that aggregate losses in the individual market may have more than doubled from 2014, with post-tax margins between –9% to –12% (Exhibit 6). The larger losses are most likely the result of two primary factors: higher year-over-year medical loss ratios (MLRs) (around 4.5% to 5% margin reduction) and lower reinsurance payments (another 3.5% to 4% margin reduction). The majority (around 60%) of carriers that filed financial results publicly (as of April 28, 2016) reported a higher MLR in 2015 than in 2014. A subset of carriers (close to one-quarter) did report positive margins in 2015, but there is some turnover between the two years in terms of which carriers generated a positive margin.” (McKinsey & Company, May 2016)
  • New Report Suggests Massive Insurer Losses In 2015 On Obamacare As Healthcare Spending Explodes. “A recent S&P Global Institute report showed that health care spending per individual market enrollee increased by nearly 70% in the first two years after the key provisions of the ACA took effect. As a result of much higher than expected per member per month costs—which is largely the result of younger, healthier, and middle class people generally avoiding coverage—insurers overall losses in 2015 were likely much larger than the sizeable losses they incurred in 2014. Back-of-the-envelope calculations show that insurers may have lost more than $1,000 per enrollee in 2015. These substantial losses, along with the expiration of two programs—reinsurance and risk corridors—that aided insurers from 2014 to 2016, suggest that premiums will rise considerably.” Blase, Brian. (Forbes, 5.11.16)
  • Obamacare Premiums Are Going Up. Again. Now What? Insurers’ rate-increase requests for 2017 are quite large… The usual caveat applies to these preliminary requests: Regulators might not approve them. But that caveat was hauled out last year by the law’s supporters, who seemed to think that this was simply the opening stage of a negotiation in which insurers asked for the stars in the hope of settling on the moon. In fact, regulators approved large rate hikes, and the state of Oregon actually made some insurers raise rates by more than they’d planned. Regulators dislike high insurance premiums, of course, but they also dislike insurance companies suddenly going out of business and leaving their customers without insurance. They are not going to approve rates that they believe will cause insurers to lose large sums of money. And thus far, everything we’ve heard from insurers indicates that they have lost large sums of money. Last year, it was possible to believe that this was simply a one-time problem… That has proven to be a false hope. If anything, losses have widened, and rates need an even bigger correction this year.” McArdle, Megan. (Bloomberg View, 6.21.16)
  • Obamacare Options? In Many Parts of Country, Only One Insurer Will Remain. “The exodus has left some states in flux, with regulators and remaining insurers trying to stabilize the market. In North Carolina, the exit of the UnitedHealth Group and Aetna has left BlueCross Blue Shield of North Carolina to serve the exchange. The plan says it lost $405 million in 2014 and 2015 on the exchanges, and its chief executive, Brad Wilson, is concerned about the market. The insurer has sought sharply higher premiums for next year. ‘Consistently losing money on these plans ultimately puts all of our customers and our business at risk,’ he said.” (New York Times, 8.19.16)


  • ‘Our individual commercial business ended the year with improved results,’ Aetna’s chief executive, Mark Bertolini, said Monday during an earnings conference call. ‘Despite our improved finish, this business remained unprofitable in 2015 and we continue to have serious concerns about the sustainability of the public exchanges.’” (National Public Radio, 2.3.16)
  • Aetna, the third-largest health insurer in the US, said Tuesday that it was reconsidering its offerings on the state exchanges that make up the backbone of the Affordable Care Act… Aetna will not expand its Obamacare offerings into the New Jersey and Indiana state exchanges in 2017, as it originally planned. Aetna’s CEO also said the company was ‘undertaking a complete evaluation’ of the Obamacare business. On its conference call, the company said it expected an annual loss on its ACA business ‘in excess of $300 million.’…  ‘Our initial action will be to withdraw our 2017 public exchange expansion plans. Additionally, given the deadline to attest to our final rate filings for 2017, we are also undertaking a complete evaluation of our current exchange footprint as the poor performance of these products warrants such an analysis.’ [HHS said] it has the ‘full confidence’ that the exchanges will be sustainable in the future and that insurers are simply ‘adapting to these changes at different rates.’” (Business Insider, 8.2.16)
  • Aetna CEO: Obamacare in “Death Spiral.” “Aetna Inc. Chief Executive Officer Mark Bertolini escalated his criticism of the Affordable Care Act, saying Obamacare’s markets are nearing failure as premiums climb and healthier individuals drop out. ‘It is in a death spiral,’ Bertolini said in a video interview with the Wall Street Journal that aired Wednesday on the newspaper’s website. He predicted that more insurers will drop out of the market for 2018, following Humana Inc.’s decision to quit Obamacare entirely for next year. Aetna, too, is mulling whether to further reduce its presence in the markets set up by the ACA. The company cut its footprint to four states for this year, from 15, after losing about $450 million on sales of ACA plans last year.” (Bloomberg, 2.15.17)
  • Aetna Not Very Bullish on Obamacare in 2018. “The health insurance giant announced Tuesday that enrollees in the individual market racked up bigger bills than expected in the first quarter, prompting Aetna (AET) to set aside $110 million to cover additional losses. In total, the company is expected to lose about half the $450 million it lost last year… ‘Looking beyond 2017, we continue to evaluate our footprint with a view toward significantly reducing our exposure to individual commercial products in 2018,’ Aetna’s Chief Financial Officer Shawn Guertin said on the company’s quarterly earnings call. The insurer had 255,000 individual market members in the first quarter, down from 964,000 at the end of last year. While that’s 15,000 more than it had projected, Aetna expects enrollment to decrease during the year as policyholders find jobs with benefits, stop paying premiums or withdraw for other reasons.” (CNN Money, 5.2.17)
  • Aetna Not Very Bullish on Obamacare in 2018. “The health insurance giant announced Tuesday that enrollees in the individual market racked up bigger bills than expected in the first quarter, prompting Aetna (AET) to set aside $110 million to cover additional losses. In total, the company is expected to lose about half the $450 million it lost last year… ‘Looking beyond 2017, we continue to evaluate our footprint with a view toward significantly reducing our exposure to individual commercial products in 2018,’ Aetna’s Chief Financial Officer Shawn Guertin said on the company’s quarterly earnings call. The insurer had 255,000 individual market members in the first quarter, down from 964,000 at the end of last year. While that’s 15,000 more than it had projected, Aetna expects enrollment to decrease during the year as policyholders find jobs with benefits, stop paying premiums or withdraw for other reasons.” (CNN Money, 5.2.17)


  • Anthem Inc., the nation’s second-largest health insurer, said last week that its exchange enrollment in California and 13 other states was running about 30 percent below expectations, but the business was still slightly profitable. (National Public Radio, 2.3.16)
  • This Insurer Used to Make Money on Obamacare Plans. Now It’s Losing Money. “Anthem, one of the country’s five largest insurers, was projected to be successful in its business on Obamacare exchanges earlier this year. But last week, the company announced it’s expecting to see ‘mid-single-digit’ losses on coverage sold on Obamacare’s exchanges. Joseph Swedish, Anthem’s CEO, told investors on a conference call it experienced higher medical costs than originally anticipated and would be looking to raise premiums substantially to make up for the losses. ‘We’re going to be very mindful of what price increases are awarded to us,’ Swedish said of rate increases ultimately decided by state regulators, according to The Wall Street Journal… To make up for its losses, Anthem has proposed significant increases to premium prices in some of the states where it’s selling on Obamacare’s exchanges.” (Daily Signal, 8.2.16)
  • Anthem Threatens Obamacare Retreat If Results Don’t Improve. “Health insurer Anthem Inc., which has so far stuck with the Obamacare markets as rivals pulled back, said it may retreat in 2018 if its financial results under the program don’t improve next year. Anthem’s comments up the stakes for the Obama administration as the enrollment season for 2017 Affordable Care Act plans begins, with consumers already facing fewer choices and higher premiums in many markets. ‘If we do not see clear evidence of an improving environment and a path towards sustainability in the marketplace, we will likely modify our strategy in 2018,’ Anthem Chief Executive Officer Joseph Swedish said on a call Wednesday discussing third-quarter results. ‘Clearly, 2017 is a critical year as we continue to assess the long-term viability of our exchange footprint.’” (Bloomberg, 11.2.16)
  • Anthem Says Obamacare Business Doing ‘Significantly Better.’ “The company, which has 1.1 million members on the Obamacare exchanges, said its individual market segment is doing ‘significantly better’ than last year. Although it said claims still ran slightly higher than expected. ‘All-in all, the individual business started out 2017 significantly better than it started out 2016,’ said Anthem CFO John Gallina. ‘However, [it remained] a little bit behind our expectations.’… Anthem increased premiums for 2017 by an average of about 20%. It also changed its product lineup, focusing more on its lower-cost bronze and silver plans. Its rates are now more in line with the claims filed by its customers, executives said. Gallina noted that the company has said it expects its individual market to break even or be slightly profitable in 2017. Anthem lost money last year, though it didn’t specify how much… Anthem (ANTX), however, said it is still assessing its participation and premiums for 2018. It plans to announce its decision in coming months… Anthem is one of the largest players on the Obamacare exchanges. If it were to pull out, some 256,000 people in Georgia, Kentucky, Missouri, Ohio and Virginia would be left with no options — unless another carrier steps in.” (CNN Money, 4.26.17)

Blue Cross/Blue Shield

  • BCBS NC Suffers First Financial Loss Since 1999. “This isn’t surprising, since the state’s largest insurer must accept all policyholders, regardless of chronic health conditions. Additionally, the company extended noncompliant Obamacare plans for customers until 2017 at the request of President Obama. As a result, many low-risk individuals have held onto these plans while the federal health law’s risk pools skew higher-risk.” (John Locke Foundation, 2.27.15)
  • Blue Cross Plans Hit Hard By Obamacare Losses. “The nation’s Blue Cross and Blue Shield plans have fared worse than publicly traded health insurance companies on the new health insurance exchanges, with many of these 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.” (Forbes, 2.26.16)
  • ObamaCare Now Has Blue Cross Singing The Blues. “Blue Cross Blue Shield of Michigan lost $622 million from January through September last year. Blue Cross plans in Texas, Oklahoma, New Mexico and Montana lost $442 billion. And those in Pennsylvania, Delaware and West Virginia lost $266 million. The reason is ObamaCare. Or as Fitch puts it: ‘Cost and utilization trends from state insurance exchanges from the Affordable Care Act have been higher than anticipated and are the primary drivers of declining earnings.’” (Investor’s Business Daily, 3.1.16)
  • Obamacare Patients Sicker and Pricier than Expected. “Patients in Obamacare are sicker and need significantly more medical care than those in employer-sponsored plans, according to a new Blue Cross Blue Shield Association report. This raises fresh concerns about the possibility of steep rate hikes for 2017 and of insurers leaving the Obamacare exchanges. The study, the first of its kind to look at millions of enrollees across the country, found that Obamacare members have higher rates of costly illnesses such as diabetes, depression, hypertension, heart disease, HIV and Hepatitis C. They also use more medical services — including emergency rooms, in-patient hospital care, doctors and prescriptions than patients in employer-sponsored plans. Their cost of care was 22% higher than those in work-based health plans in 2015, or $559 a month, on average, for Obamacare enrollees versus $457 for those in employer plans. ‘What we don’t know is where we go from here,’ said Alissa Fox, senior vice president at the Blue Cross association, which represents 36 independent Blue Cross Blue Shield insurers… the fact that these patients are sicker than expected is putting some insurers in a financial bind.” (CNN Money, 3.30.16)
  • Obamacare Disaster Will Be Obama’s Enduring Domestic Legacy. “In fact, commercial insurers across the country are hemorrhaging money on Obamacare at alarming rates. Health Care Service Corp. (which owns Blue Cross and Blue Shield affiliates in Illinois, Montana, New Mexico, Oklahoma and Texas) has lost ‘well north of $2 billion’ in its first two years — twice as much as UnitedHealth. Highmark, the nation’s fourth-largest Blue Cross plan, lost nearly $600 million in 2015. Blue Cross and Blue Shield of North Carolina has projected it will lose more than $400 million in the first two years, and the company has said it may leave the exchanges entirely next year… commercial insurers who stay in Obamacare are responding to massive losses by narrowing provider networks, with fewer doctors and hospitals to choose from. And those that quit are being replaced by Medicaid HMOs with even less doctor choice.” Thiessen, Mark. (Washington Post, 4.25.16)
  • One of Maryland’s Biggest Obamacare Insurers Wants to Hike Rates 50 Percent Next Year. “The head of the largest insurer in the Mid-Atlantic region warned Thursday that the Affordable Care Act marketplaces were in the early stages of a death spiral, a statement that came as the company announced its request for massive, double-digit premium increases for next year. Projecting that by year’s end the company will have lost a total of $600 million since it started selling plans in the marketplaces four years ago, CareFirst Blue Cross Blue Shield is requesting a greater than 50 percent rate increase in Maryland, a 35 percent increase in northern Virginia and a 29 percent increase in D.C. ‘What we’re seeing is greater sickness levels. The pool of beneficiaries is becoming sicker, in part because healthier people are not coming in at the same level we hoped.’” (Washington Post, 5.4.17)


Cigna Adds to Insurers’ Pressure on Lawmakers for Obamacare Fixes. “Cigna Chief Executive Officer David Cordani described the three-year-old market as ‘fragile at best,’ echoing concerns of top executives at Aetna Inc and Anthem Corp who said earlier this week they need tighter enrollment rules and requirements to create a better balance of healthy and sick customers… The Affordable Care Act, or Obamacare, has not delivered its promise, Aetna CEO Mark Bertolini said earlier this week… The various parties face a tight timetable. Cordani and other insurer CEOs need to decide in the next few months if they are going to prepare plans to submit to regulators before the April and May deadlines for 2018 plans. Cigna, which offers plans in seven states, will ‘fully assess whether we will participate, where, and how,’ Cordani told investors during a conference call… Cordani said the company has lost money each of the last three years, and expects to lose money this year, though less than in 2016.” (Reuters Health Information, 2.3.17)


  • Humana to Record 2016 Obamacare Shortfall, Membership Drops. “‘We expect Humana will exit Health Insurance Exchange marketplaces in 2017 in light of this data and focus on its Medicare Advantage book of business,’ Ana Gupte, an analyst with Leerink Partners, said in a note to clients Friday… Humana, which is being acquired by Aetna Inc., said in a regulatory filing that it’s still working to determine the size of the shortfall. The insurer said it also expects its individual commercial membership to decline by about 200,000 to 300,000 people by Dec. 31, 2016. The enrollment figure includes plans sold under Obamacare along with older policies. The company said it plans to provide more information on its 2016 outlook when it releases fourth-quarter earnings on Feb. 10.” (Bloomberg Business, 1.8.16)
  • Obamacare Insurer Reports 30 Percent Loss in Profits. “Major U.S. health insurer Humana reported Wednesday that its profits fell by 30 percent at the end of last year due to losses among new Obamacare customers. The insurance company, which is expected to merge with Aetna later this year, reported a net income of $101 million in the fourth quarter of 2015, down from $145 million a year earlier. The company said the decline resulted from setting aside $176 million to account for losses expected from new, expensive customers enrolling in health insurance plans offered on the marketplaces set up under President Obama’s Affordable Care Act. ‘The benefit ratio associated with many of the company’s individual commercial products, in particular ACA-compliant offerings, significantly exceeded its pricing expectations,’ Humana said in its earnings statement. ‘The company continues to evaluate its participation in the individual commercial business for 2017.’” (Washington Examiner, 2.10.16)

Molina Healthcare

Obamacare Causes Unexpected Losses for Molina Healthcare. “Molina Healthcare’s stock tumbled after hours Wednesday after the health insurer posted a fourth-quarter loss that was attributed to parts of Obamacare — a big problem for one of the health insurers that has had success in the program. However, the company didn’t lose money because it had sicker-than-expected enrollees. In fact, medical costs for its Obamacare enrollees were $120 million lower than Molina thought. Instead, Molina got slammed because it had healthier members and had to pay $325 million into an Obamacare program called risk adjustment, which pools money from insurers in a given state and redistributes it to those who had higher-cost enrollees.” (Axios, 2.15.17)

Oscar Insurance Corp.

Obamacare Startup Oscar Has $45 Million Loss in Three States. “Oscar Insurance Corp., the Silicon Valley-backed health-care startup, continued to lose tens of millions of dollars in the third quarter as the company exits some markets and works to diversify away from of its Obamacare business… Oscar is on track to post a bigger net loss this year than in 2015, when the insurer lost about $105 million. The year-to-date loss doesn’t include results from New Jersey, which doesn’t make quarterly filings public. In the third quarter of 2016, the company lost $26.7 million in New York, $13.5 million in Texas, and $4.7 million in California, according to the filings.” (Bloomberg, 11.15.16)

United Health

UnitedHealth’s Obamacare Excuses. “UnitedHealth reiterated its dour outlook for the exchange market when it announced quarterly results Jan. 19. The company said it has seen an influx of sicker patients during special enrollment, fewer healthy people signing up and costs rising as a result” (National Public Radio, 2.3.16)

Losses By State


  • Alaska Scrambles to Prevent Obamacare Collapse. “Alaska, one of the reddest states in the country, is essentially bailing out its insurance market to prevent Obamacare from collapsing… The legislation, originally proposed by Walker, sets up a $55 million fund — financed through an existing tax on all insurance companies — to subsidize enrollees’ costs as the state struggles with Obamacare price spikes and an exodus by all except one insurance company… state officials warned that the remaining company couldn’t realistically raise rates high enough to cover customers’ medical bills.”  (Politico, 6.10.16)


  • Kentucky Health Insurance Market in Death Spiral. “Kentucky’s insurance market is getting weaker and will likely see dramatic premium hikes and fewer insurance options for Kentuckians in the future. Welcome to the Kentucky death spiral. It is not a new rollercoaster but a reaction to individual incentives set up by ACA… Two primary features of ACA encourage the death spiral. First, all plans are available to applicants regardless of their health status. So, people who gamble and sign up for the bronze plan and then end up with a serious medical condition and large medical expenses can move up to the gold plan during the next open enrollment and pay the same premiums as others in that gold plan. Second, most people purchasing insurance from the Marketplace get taxpayer subsidies… The current design of the ACA encourages individuals to move among the plans leading to negative revenue and either premium hikes or insurers leaving the market. Expect higher premiums and less choice in the future.” (Lexington Herald Leader, 5.3.17)


  • Bracing for Medical Inflation. “This week three big insurance companies in Massachusetts announced they lost money in the first quarter, thanks to ObamaCare’s new taxes and fees. Blue Cross Blue Shield of Massachusetts reported a $59.3 million loss after it had to pay $73 million toward financing ObamaCare. Pilgrim Health paid $22.9 million in ObamaCare taxes, leading to a loss of $17.3 million. And the Tufts Health Plan would have broken even if not for ObamaCare. The main cost imposed on these insurers is ObamaCare’s ‘health insurance tax.’” (Investor’s Business Daily, 5.16.14)
  • Four Massachusetts Health Insurers Post Operating Losses in 2015. “Four of the state’s largest nonprofit health insurers suffered operating losses in 2015, blaming the rising cost of prescription drugs and fees they were charged under the Affordable Care Act. Blue Cross Blue Shield of Massachusetts, Fallon Health, Harvard Pilgrim Health Care, and Tufts Health Plan — which together insure nearly 7 million people in New England — released their 2015 financial results Tuesday. Harvard Pilgrim was hit worst, saying it had an operating loss of nearly $79 million and a net loss after factoring in other income of almost $55 million. That’s a step backward from 2014, when Harvard Pilgrim lost $18 million on its insurance business and overall posted a net surplus. Under the Affordable Care Act, or ACA, insurers that serve relatively healthy populations pay hefty fees to subsidize the insurance and care of riskier patients.” (Boston Globe, 3.1.16)
  • Minuteman Feels Obamacare Strain in Fiscal 2015 Finances. “Minuteman Health has been warning for weeks that Obamacare was putting a strain on its fiscal 2015 financials, but this week the insurer released details showing just how negative the impact has been. The Boston-based insurer had to set aside almost all of the $43 million it collected in premiums in fiscal 2015 to deal with Obamacare payouts it will have to make in 2016 and 2017… The payments are for a key Obamacare component known as risk adjustment, which requires insurers with healthy populations to offset higher costs incurred by insurers with sicker populations. The unintended result has been insurers dolling out millions to their competitors, as insurers say the calculation behind determining a member’s health doesn’t work well. In fiscal 2014, Minuteman had to pay 71 percent of its premiums to risk adjustment. (Boston Business Journal, 3.15.16)


  • Rural Nevada Left Without Obamacare Insurers After Two Carriers Exit. “Nevadans living in 14 of Nevada’s 17 counties who want to purchase coverage on the state’s Obamacare exchange won’t have any insurers to choose from next year, after two insurers decided to exit the marketplace for 2018. Anthem Blue Cross Blue Shield said Wednesday it has decided not to offer plans on the exchange in rural Nevada. The insurer cited uncertainty in ‘federal operations, rules and guidance, including cost-sharing reduction subsidies,’ and volatility in the individual market as its reasons for leaving. Prominence Health Plan, a smaller carrier, also announced it will leave the state entirely. Heather Korbulic, executive director of the Silver State Health Insurance Exchange, said that as a result, more than 8,000 Nevadans will lose coverage come Jan 1.” (Washington Examiner, 6.29.17)

New York

  • UnitedHealth Says N.Y. Obamacare Plans Could Be in Trouble. “UnitedHealth Group Inc., the largest U.S. health insurer, said its rates for Obamacare plans in New York may be too low because the failure of a competing insurer last year might lead to shortfalls in payments designed to stabilize Obamacare markets…UnitedHealth’s rates were set anticipating risk-sharing payments designed to stabilize the new insurance markets, William Golden, the company’s northeast region chief executive officer, said Wednesday at a state Senate round table in Albany. If the loss of a participant reduces the funds available to UnitedHealth, the company’s rates in New York’s Obamacare market may be insufficient, Golden said…The stabilization payments were thrown into doubt after regulators began shutting down Health Republic Insurance of New York in September because it was likely to become financially insolvent. With its failure, Health Republic won’t be able to pay into the risk-adjustment program, reducing the funds available to UnitedHealth and other plans in the state.” (Bloomberg Business, 1.6.16)
  • Oscar Loses Millions on Affordable Care Act Plans. “Oscar Insurance Corp. is facing financial losses tied to operating on the Affordable Care Act exchanges. In 2015, the company lost $92.4 million in New York, the state where it started out, Bloomberg reports. That was primarily because Oscar spent more on medical costs for its 52,800 members in the state than it took in through premiums, an issue experienced even by industry giants including UnitedHealth and major Blue Cross Blue Shield plans. In New Jersey, Oscar’s medical loss ratio was more in line with the standard industry target of spending about 85 percent of premiums on medical costs, Bloomberg notes. Yet the insurer still lost $12.8 million in 2015–mainly due to administrative spending and startup costs.” (Fierce Health Payer, 3.3.16)

North Carolina

  • “Blue Cross and Blue Shield of North Carolina has projected it will lose more than $400 million in the first two years, and the company has said it may leave the exchanges entirely next year… commercial insurers who stay in Obamacare are responding to massive losses by narrowing provider networks, with fewer doctors and hospitals to choose from. And those that quit are being replaced by Medicaid HMOs with even less doctor choice.” Thiessen, Mark. (Washington Post, 4.25.16)
  • “The exodus has left some states in flux, with regulators and remaining insurers trying to stabilize the market. In North Carolina, the exit of the UnitedHealth Group and Aetna has left BlueCross Blue Shield of North Carolina to serve the exchange. The plan says it lost $405 million in 2014 and 2015 on the exchanges, and its chief executive, Brad Wilson, is concerned about the market. The insurer has sought sharply higher premiums for next year. ‘Consistently losing money on these plans ultimately puts all of our customers and our business at risk,’ he said.” (New York Times, 8.19.16)


  • Tennessee Insurance Commissioner: Obamacare ‘Very Near Collapse.’ “ The increases—which include numbers as high as 62 percent for Blue Cross Blue Shield—come at a troubled time for local insurers. BCBS, Tennessee’s only statewide insurer, estimates that it will lose almost $500 million over a 3-year period by the end of 2016. Furthermore, Cigna and Humana may either shrink or pull out entirely depending on the market next year. McPeak’s move is thus meant to ensure every firm’s coverage area and solvency before open enrollment begins in November.” (Weekly Standard, 8.26.16)
  • Tennessee Official Not Chicken Little on Obamacare ‘Near Collapse.’ “On Tuesday, Commissioner Julie Mix McPeak, who runs Tennessee’s Department of Commerce and Insurance, announced that her department was approving massive premium increases for insurers providing individual health insurance policies through the Patient Protection and Affordable Care Act exchange in the state… In Tennessee, 57 of the 95 counties have only one insurer offering individual policies through the exchange, McPeak said. When McPeak took her concerns about the shrinking interest in providing coverage to state residents to the federal Department of Health and Human Services she said her concerns were brushed aside… ‘We agree with the assessment of the ACA marketplace in Tennessee,’ Vaughn said. ‘We appreciate the support of our request to close the gap between our rates and medical expenses for ACA marketplace plans. Beyond rates as we’ve discussed with the (TDCI), we continue to have concerns about uncertainty with the ACA at the federal level.’” (Tennessean, 8.27.16
  • The First Place Where Obamacare Could Fail. “Knoxville, Tennessee, may be the first place where Obamacare fails. Humana (HUM), the only insurer on the exchange there, is exiting the market in 2018… Tennessee already lost three other insurers in recent years. UnitedHealth and Assurant Health both pulled out, while Community Health Alliance, the state’s co-op insurer failed in 2015. Premiums jumped between 44% and 62% this year… If all carriers drop out of Obamacare, Knoxville-area consumers can still purchase individual market policies outside of the exchange. But they won’t receive subsidies to help them pay the premiums. There are three companies — Aetna, Freedom Life Insurance and Tennessee Rural Health — offering coverage there, although not all of them provide the same benefits and protections as Obamacare.” (CNN Money, 4.4.17)
  • An Insurer Just Stepped in to Save Tennessee’s Obamacare Market From Disaster. “After insurer Humana decided to step away from the Knoxville, Tennessee-area individual insurance marketplace, the Affordable Care Act’s exchange was left without an insurer for the 2018 plan year. In a letter on Tuesday, however, Blue Cross Blue Shield of Tennessee (BCBST) said it would step into the area and provide coverage next year. ‘With this in mind, I want to confirm that BlueCross is willing to serve the Knoxville region in the 2018 individual Marketplace,’ JD Hickey, CEO of BCBST, said in the letter.” (Business Insider, 5.9.17)


  • Aetna to Quit Virginia’s Obamacare Market. “Aetna Inc. is quitting Virginia’s Obamacare market for 2018, the second state that Chief Executive Officer Mark Bertolini is exiting as he seeks to limit his insurer’s risks from the beleaguered health law… With Aetna’s Virginia exit, the insurer will only be in Delaware and Nebraska next year, if it doesn’t leave those too. ‘We will communicate decisions on our remaining states as appropriate,’ Aetna said in the email.” (Bloomberg, 5.3.17)

Risk Distribution on the Exchanges

Insurers Signaling Withdrawal from the Exchanges

Aetna Inc.

  • Aetna, One of the Country’s Largest Health Insurers, is Ditching 70% of its Obamacare Business. “Aetna, one of the country’s five largest health insurers, announced on Monday evening that it would be pulling out of nearly 70% of the counties in which it offers coverage under the Affordable Care Act. The firm said that after a review of its public-health-exchange business it determined that the nearly $200 million in pretax loss it was sustaining on an annual basis was not worth the business. In its new plan, it will offer healthcare options through the public exchanges in just 242 of the 778 counties where it now operates. These will be mainly in Delaware, Iowa, Nebraska, and Virginia.” (Business Insider, 8.15.16)
  • Aetna Quits Iowa Obamacare Market, Is Second Insurer to Leave.Aetna Inc. said Thursday it will quit Iowa’s Obamacare market for individual health insurance plans, the second major insurer this week to say it will exit the state and blame uncertainty about the law’s future. ‘Earlier today we informed the appropriate federal and state regulators that Aetna will not participate in the Iowa individual public exchange for 2018 as a result of financial risk and an uncertain outlook for the marketplace,’ Aetna spokesman T.J. Crawford said in an email. ‘We are still evaluating Aetna’s 2018 individual product presence in our remaining states.’” (Bloomberg, 4.6.17)
  • Aetna to Quit Virginia’s Obamacare Market. “Aetna Inc. is quitting Virginia’s Obamacare market for 2018, the second state that Chief Executive Officer Mark Bertolini is exiting as he seeks to limit his insurer’s risks from the beleaguered health law… With Aetna’s Virginia exit, the insurer will only be in Delaware and Nebraska next year, if it doesn’t leave those too. ‘We will communicate decisions on our remaining states as appropriate,’ Aetna said in the email.” (Bloomberg, 5.3.17)
  • Aetna Is Latest Health Insurer to Quit Obamacare Markets. “While the move is likely to attract outsize political attention, the decision affects just Delaware and Nebraska. The Hartford, Connecticut-based insurer already said last year it would pull out of 11 states, and in the last month announced plans to exit Iowa and Virginia. ‘At this time have completely exited the exchanges,’ Aetna said in a statement Wednesday. The insurer will also stop selling non-Obamacare individual plans in Delaware and Nebraska… Aetna’s decision could leave Nebraska with just one insurer, Medica. Medica has pulled back as well, saying it may exit the program in Iowa, leaving much of the state without insurance options under Obamacare… In Delaware, the Blue Cross and Blue Shield company Highmark would be the lone Obamacare insurer, assuming no other company enters. Highmark didn’t return a request for comment.” (Bloomberg Politics, 5.10.17)

Anthem Inc.

  • Obamacare Stalwart Anthem Seen Likely to Retreat for 2018. Anthem Inc. is likely to pull back from Obamacare’s individual insurance markets in a big way for next year, according to a report from analysts who said they met with the company, a move that could limit coverage options for consumers at a politically crucial time for the law. Anthem ‘is leaning toward exiting a high percentage of the 144 rating regions in which it currently participates,’ Jefferies analysts David Windley and David Styblo said Thursday in a research note. An exit by Anthem might be devastating to insurance markets created by the Affordable Care Act, which is often called Obamacare. The company, which sells coverage under the Blue Cross and Blue Shield brand in 14 states, is one of the few big insurers that has stuck with the ACA. UnitedHealth Group Inc. and Aetna Inc. have already exited most states, and Humana Inc. is planning to stop offering individual ACA plans entirely for 2018. If Anthem quits, consumers in parts of Colorado, Kentucky, Missouri and Ohio would be at risk of having no Obamacare insurers for next year, according to an analysis from Axios, a news website.” (Bloomberg, 3.30.17)
  • Anthem, Obamacare Stalwart, Pulls Out of Two More States. Anthem Inc., the stalwart that has stuck with Obamacare longer than most other large health insurers, is shrinking its participation in the program and pulling out of two more states’ marketplaces. Anthem announced its exit from Wisconsin and Indiana on Wednesday, the deadline in many states for U.S. insurers to file their premium rates if they wish to participate in the Affordable Care Act next year. The insurer said it will leave the two individual insurance markets because uncertainty has become too great to continue offering plans… ‘the individual market remains volatile,’ Anthem said in a statement.” (Bloomberg, 6.21.17)
  • Rural Nevada Left Without Obamacare Insurers After Two Carriers Exit. “Nevadans living in 14 of Nevada’s 17 counties who want to purchase coverage on the state’s Obamacare exchange won’t have any insurers to choose from next year, after two insurers decided to exit the marketplace for 2018. Anthem Blue Cross Blue Shield said Wednesday it has decided not to offer plans on the exchange in rural Nevada. The insurer cited uncertainty in ‘federal operations, rules and guidance, including cost-sharing reduction subsidies,’ and volatility in the individual market as its reasons for leaving. Prominence Health Plan, a smaller carrier, also announced it will leave the state entirely. Heather Korbulic, executive director of the Silver State Health Insurance Exchange, said that as a result, more than 8,000 Nevadans will lose coverage come Jan 1.” (Washington Examiner, 6.29.17)

Assurant Health

  • Assurant Joins Ranks of Companies Hurt by Obamacare. “After losing millions of dollars, Assurant Health has announced it will exit the health insurance market by the end of next year… ‘Approximately half of the loss is attributable to a reduction in 2014 estimated recoveries from the Affordable Care Act (ACA) risk mitigation programs. The remainder reflects elevated claims on 2015 ACA policies.’ Assurant raised premiums by 20 percent in an effort to stop the bleeding without success. Assurant Health will either be sold by parent company Assurant Inc. or it will exit the insurance market entirely.” (NFIB, 4.19.15)
  • Assurant to Exit Health Insurance Business. “Assurant Health, which insured 967,000 people and had $1.9 billion in revenue last year, has struggled to adjust to changes in the health insurance market imposed by the Affordable Care Act. Assurant Health was known for its skill at underwriting — the task of determining which prospective customers are the riskiest to insure. That skill was rendered obsolete when the Affordable Care Act required insurers to cover people with pre-existing conditions. ‘For insurers who relied on the ability to find good risks and avoid bad risks, the Affordable Care Act just destroyed their business model,’ said William Custer, a health economist at Georgia State University and director of the Center for Health Services Research.” (Journal Sentinel, 6.10.15)
  • An Obamacare Lesson for Small Health Insurers? “By standardizing insurance offerings—reducing or eliminating carriers’ ability to create niche markets through innovative product designs—Obamacare heightened the focus on insurers’ provider networks… But smaller insurers that don’t have that clout may find themselves squeezed—and other carriers could face a similar fate to Assurant Health. Obamacare standardizes offerings in the name of increasing competition, but doing so could end up reducing competition by creating an environment in which large insurers compete with large hospital and doctor networks in a battle of health-care oligopolies. Supporters of the law have worried about this for years—and Assurant’s impending closure appears to give more reason to do so.” (Wall Street Journal Blog, 5.7.15)

Blue Cross/Blue Shield


  • Wellmark to Pull out of Iowa Obamacare Exchange. “Wellmark Blue Cross Blue Shield announced that it would not be participating in Obamacare’s Iowa exchange next year, citing $90 million in losses during the last three years. The company said in a statement that its customers had endured “double-digit premium increases” and noted that 21,400 Iowans would be affected… Wellmark left the exchange in South Dakota — the only other state where it participated in the individual exchanges — last year and joins other insurers in deciding not to participate in the exchanges in 2018.” (Washington Examiner, 4.4.17)
  • Medica, the Last insurer Selling Individual Health policies in Most of Iowa, Likely to Exit.  “Tens of thousands of Iowans could be left with no health insurance options next year, after the last carrier for most of the state announced Wednesday that it likely would stop selling individual health policies here. Medica, a Minnesota-based health insurer, released a statement suggesting it was close to following two larger carriers in deciding not to sell such policies in Iowa for 2018, due to instability in the market… Medica’s announcement comes on the heels of word last month that Aetna and Wellmark Blue Cross & Blue Shield would pull out of Iowa’s individual health insurance market for 2018. Those are the only three choices for individual health insurance in most areas of the state this year… the carriers’ exit could leave more than 70,000 Iowans who buy their own coverage without any options for 2018… The three carriers’ decisions to pull out will affect Iowans who buy individual health insurance either on or off the federal government’s online marketplace.” (Des Moines Register, 5.3.17)


  • Blue Cross Pulls Out of Obamacare Markets in Kansas, Missouri. “Blue Cross and Blue Shield of Kansas City is pulling out of 32 counties in Kansas and Missouri next year because the insurer says it has lost more than $100 million on Obamacare… The decision announced Tuesday would affect about 67,000 customers and plans sold on and off Obamacare’s exchanges. It will not affect 2017 plans.” (Washington Examiner, 5.24.17)


  • Blue Cross Delivers Major Blow to Health Reform in Minnesota.Minnesota’s largest health insurer, Blue Cross and Blue Shield of Minnesota, has decided to stop selling health plans to individuals and families in Minnesota starting next year. The insurance carrier’s parent company, which goes by the same name, will continue to sell a much more limited offering on the individual market through its Blue Plus HMO. The insurer explained extraordinary financial losses drove the decision. ‘Based on current medical claim trends, Blue Cross is projecting a total loss of more than $500 million in the individual [health plan] segment over three years,’ BCBSM said in a statement. The Blues reported a loss of $265 million on insurance operations from individual market plans in 2015. The insurer said claims for medical care far exceeded premium revenue for those plans… Blue Cross and Blue Shield says the change will affect about, ‘103,000 Minnesotans [who] have purchased Blue Cross coverage on their own, through an agent or broker, or on MNsure.’” (MPR News, 6.24.16)


  • Blue Cross Blue Shield Out of Nebraska’s Obamacare Marketplace. “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.’” (Omaha World-Herald, 10.17.16)
  • Blue Cross Blue Shield Drops Out of Nebraska Individual Market. “Health insurer Blue Cross Blue Shield announced Thursday that it would not be participating in the individual market in Nebraska next year, and the remaining insurer hasn’t decided if it will leave also. Blue Cross Blue Shield is projected to lose $12 million this year from offering plans in the state, and the company would need to increase its price for premiums next year by 50 percent. The company previously participated in the Obamacare exchanges, which resulted in $150 million in losses. Medica is the other insurer offering plans on the exchange in Nebraska. ‘Things are still changing daily,’ Geoff Bartsh, vice president for Medica’s individual and family business, told the Omaha World-Herald. ‘We’re still looking at changes and will continue to evaluate things. We are still planning to participate in the Nebraska market for 2018. We haven’t made any final decisions on that yet.’ Aetna announced its decision in May to exit the exchange in Nebraska for 2018.” (Washington Examiner, 6.2.17)

New Mexico

  • New Mexico Insurer Does The ObamaCare 3-Step. “Earlier this year BCBSNM requested a rate hike of over 50 percent for policies in the individual market, including the exchange, after it lost about $19.2 million. In early August, the Dept. of Insurance rejected the rate request, offering a 24 percent one instead.  In late August, BCBSNM said it was discontinuing its business on the New Mexico individual market, including the exchange, at the end of 2015. According to news reports, BCBSNM “covered 35,000 people in [New Mexico] last year. That number amounted to just below one-third of people in New Mexico on individual plans.” Hogberg, David. (National Center Blog, 9.24.15)

North Carolina

  • Blue Cross CEO Says Insurer May Leave ACA Market in NC in 2017. “Wilson warned that Blue Cross cannot continue sustaining financial losses indefinitely in North Carolina and may have to decide later this year whether to get out of the ACA market in 2017. Blue Cross raised rates by an average 32.5 percent this year in the state, but Wilson said that wasn’t enough to stem losses. ‘We can’t offer something for sale in this marketplace that we know every time it’s purchased we’re losing money,’ Wilson said.” (News & Observer, 2.10.16)
  • North Carolina’s Largest Health Insurance Provider Could Leave ACA Market. “Blue Cross and Blue Shield, the state’s largest health insurer, expects to report its second consecutive financial loss in the coming weeks, as the company contends with continuing cost overruns under the Affordable Care Act, CEO Brad Wilson said Wednesday. Wilson warned that Blue Cross cannot continue sustaining financial losses indefinitely in North Carolina and may have to decide later this year whether to get out of the ACA market in 2017. Blue Cross raised rates by an average 32.5 percent this year in the state, but Wilson said that wasn’t enough to stem losses.”  ‘In year one [2014], five percent of our ACA customers consumed $830 million in health care costs. That’s how much money went out of our door to pay for the heath care for the sickest five percent of the ACA population that we had; we collected $75 million in premiums–between what they could contribute and the government subsidy. Any way you cut it that’s an unsustainable business model.’” (Townhall, 2.12.16)


  • Humana to Leave ‘Substantially All’ ObamaCare Markets. “Humana, one of the nation’s top health insurers, is pulling out of ObamaCare plans in all but a handful of states after a year of nearly $1 billion in losses. The company plans to exit nearly half of the markets next year, it announced during an earnings report Thursday. It will take part in ‘no more’ than 11 state marketplaces, down from 19 states this year, the company said… In the earnings report released Thursday, officials underscored the sharp declines in healthcare premiums from the exchanges. The company expects to pull in between $750 million and $1 billion in premiums this year, compared to $3.4 billion projected over the last year.” (The Hill, 7.21.16)
  • Humana To Abandon Obamacare Patients In 1,200 U.S. Counties.“‘The company expects its 2017 geographic presence for individual commercial offerings to cover no more than 156 counties, down from its 2016 presence in 1,351 counties ,’ Humana said Wednesday in its second-quarter earnings. ‘We are pleased that our year-to-date financial results are demonstrating consistently strong operational execution across our core businesses, though challenges in our Individual Commercial business remain,’ Humana chief financial officer Brian Kane said in the release.” (Forbes, 8.3.16)
  • Humana pulls out of Obamacare for 2018. “Humana (HUM) announced it is pulling out of Obamacare for 2018 on Tuesday, the same day it ended a merger agreement with Aetna (AET). The company said in a press release it has tried for the past several years to keep selling policies where it could offer ‘a viable product.’ It said it increased premiums, exited markets and tightened provider networks in hopes of stabilizing its individual market business. But an initial analysis of its 2017 consumer base found that it remained riskier than Humana could tolerate. So the company is exiting all 11 states where it sells individual policies, both on the Obamacare exchange and outside of it. Humana is the first major insurer to exit Obamacare under President Trump, who has promised to repeal the law. On Twitter, the president pointed to the announcement as another example of how the Affordable Care Act is failing.” (CNN Money, 2.14.17)

Molina Healthcare

Another Insurer Threatens to Pull Out of ObamaCare. “‘There are simply too many unknowns with the marketplace program to commit to our participation beyond 2017,’ Molina CEO J. Mario Molina said Wednesday during a conference call with investors, Bloomberg News reported. The health insurer put the blame for massive losses on former President Obama’s signature Affordable Care Act, a law President Trump has vowed to repeal. ‘While we experienced strong enrollment growth across our business and have made progress on our cost cutting efforts, [Wednesday’s] results highlight the continuing challenges we face in the ACA marketplace,’ the company said in a statement. The Medicaid-focused company reported a net loss of $91 million for the fourth quarter compared with a profit of $30 million the year before. The company’s threat to drop out of ObamaCare came hours after the Aetna CEO Mark Bertolini said the Affordable Care Act markets were ‘in a death spiral.’” (New York Post, 2.16.17)


  • Nation’s Largest Insurer May Exit Obamacare Due to Losses. “UnitedHealth Group, the largest insurance company in the U.S., on Thursday slashed its earnings outlook, citing new problems related to Obamacare, and told investors it may exit the program’s exchanges. ‘In recent weeks, growth expectations for individual exchange participation have tempered industrywide, co-operatives have failed, and market data has signaled higher risks and more difficulties while our own claims experience has deteriorated,’ Stephen J. Hemsley, chief executive officer of UnitedHealth Group, explained in a press release…If UnitedHealth and other insurers decide to exit, remaining insurers will be forced to take on even more high-risk enrollees, prompting them to either raise rates further or exit themselves. That in turn would deprive individuals of choices and remove competition, a key purpose of the exchanges.” (Washington Examiner, 11.19.15)
  • Biggest Health Insurer Leaves Obamacare Markets. “The biggest insurer in the nation has exited the Obamacare exchanges in Arkansas and Georgia, as insurers struggle financially in the exchanges. UnitedHealth will leave the two states and not sell plans in Arkansas and Georgia. The move comes as UnitedHealth has detailed more than $400 million in losses in the Obamacare exchanges and threatened to leave the exchanges altogether. Other major insurers such as Cigna have said they are losing money but have remained committed to the exchanges. The reason is that they hope the markets will stabilize and the exchanges eventually will become profitable.” (Washington Examiner, 4.8.16)
  • Beleaguered Insurers to Provide Key Update on Obamacare. “Insurers will be announcing their financial results for the first quarter of the year over the next several weeks. Recently, UnitedHealth, the largest U.S. insurer, announced it was pulling out of Obamacare exchanges in Michigan, Georgia and Arkansas. The move comes as UnitedHealth posted a $425 million loss last year in the exchange business.” (Washington Examiner, 4.17.16)
  • Five Things ACA Supporters Don’t Want You to Know About UnitedHealth’s Withdrawal from Obamacare. “UnitedHealth is withdrawing from most of the 34 ObamaCare Exchanges in which it currently sells, citing losses of $650 million in 2016. A recent Kaiser Family Foundation report indicates UnitedHealth’s departure will leave consumers on Oklahoma’s Exchange with only one choice of insurance carriers. Were UnitedHealth to exit all 34 states, the share of counties with only one or two carriers on the Exchange would rise from 36% to 52%, while the share of enrollees with only one or two carriers from which to choose would nearly double from 15% to 29%. The next carriers to leave the Exchanges, like UnitedHealth, will not be the ones offering low-priced plans, but those offering the most comprehensive coverage (at moderate or high premiums)… Obamacare hasn’t yet collapsed in a ball of flames. But UnitedHealth’s withdrawal from Obamacare’s Exchanges is more ominous than the administration wants you to know.” Cannon, Michael. (Forbes, 4.19.16)
  • Further analysis of the 2015 UnitedHealth announcement is found here.

Other Insurers

  • PreferredOne, Leading Plan in Minnesota, Leaving State Exchange. The Minnesota-based insurer—owned by Fairview Health Services, North Memorial Health Care and PreferredOne Physician Associates —currently has 53% of the state’s individual-market enrollment, according to state statistics. It offered some of the lowest premiums on the exchange for 2014, and its share of the individual market significantly beat out legacy insurers such as Blue Cross and Blue Shield of Minnesota. It had been seen as one of the most successful provider-owned plans in the country in capturing exchange business… A PreferredOne spokesman told KSTP-TV in St. Paul that selling plans through MNsure is ‘taking a significant amount of our resources to support administratively.’” (Modern Healthcare, 9.16.14)
  • Nonprofit Health Insurance Pioneer Closes its Doors Due to Obamacare Costs. “Freelancers Insurance Company, the pioneering nonprofit health insurer that was once hailed as a model for the Affordable Care Act, is closing its doors because of the high cost of complying with Obamacare regulations. The New York nonprofit announced Sept. 30 that it would have to raise premiums 14 percent to comply with Obamacare regulations. Federal officials had granted a special one-year waiver to Freelancers in 2013 to meet the new rules. The waiver expires Dec. 31.” (Washington Examiner, 10.8.14)
  • WINhealth Exiting Wyoming Market. “WINhealth, one of Wyoming’s only health insurance providers, is closing for good. The news comes not quite two weeks after WINhealth announced that it was dropping out of the individual market and federal exchange program. ‘We got a notification today (Oct. 20) that WINhealth is shutting its doors, not just individuals, but the entire business,’ the Cheyenne company tells Pitchengine.” The exit means that only Blue Cross Blue Shield policies will be available on the Wyoming exchange. (ReBoot, 10.21.15)
  • Ohio’s HealthSpan Drops Kaiser Model, ACA Policies. “HealthSpan’s decision to ditch ACA policies also represents another dig at the law’s nascent insurance markets, which have been more unstable than originally expected. Insurers have been re-evaluating whether they should wait out the turbulent, early years of the exchanges…But HealthSpan lost $116 million in the first nine months of 2015, according to Mercy Health financial documents (PDF). That compared with a $30 million operating loss in the same time frame last year. HealthSpan lost thousands of members after switching from the Kaiser brand, which led to a dwindled risk pool, and it also experienced more medical claims than expected. Consequently, HealthSpan said last week it is shedding the unprofitable parts of the business to get back on track. Its medical group will be dissolved by April 1, 2016, and the insurance company will no longer be involved with the direct delivery of care. The company expects many physicians will move to other area systems, including its parent, Mercy, Summa Health or MetroHealth System.” (Modern Healthcare, 12.14.15)
  • Moda Exiting Individual Market. “On January 28, the Alaska Division of Insurance announced that Moda Health’s financial losses and dwindling capital reserves had reached the point where the carrier could no longer sell or renew policies in the individual market in Alaska (Oregon, the only other state where Moda was still operating, came to the same conclusion). In 2015, Moda lost $58 million, and ended the year with lower enrollment than they had projected.” (, 1.30.16)
    • Alaska, Oregon Lift Suspension of Moda Health Plan Inc.  “Insurance regulators in Alaska and Oregon announced Monday that a company that had been suspended from offering health insurance policies in the states over concerns with its financial condition will be allowed to resume that business…About 10,000 Alaskans are enrolled by Moda on the individual market and about 7,500 on the small group market, Wing-Heier has said. About 244,000 Oregon residents were enrolled in Moda plans in the individual, small group and large group markets as of Sept. 30, according to the Oregon Department of Consumer and Business Services.” (Associated Press, 2.8.16)
    • According to Timothy Jost (6.16.16), Moda, one of the two insurers in the Alaska market, has announced it will not operate in the state in 2017, leaving Premara as the sole insurer.
  • Four Carriers Leaving Colorado Market. “UnitedHealthcare and Humana Insurance will not offer  individual plans in 2017, which impacts approximately 20,000 consumers in Colorado (UnitedHealthcare – 10,549; Humana – 9,914). In addition, Rocky Mountain Health Plans (RMHP) determined that it will reduce individual plan offerings for 2017, offering individual plans only in Mesa County, only via its Monument Health affiliate. Approximately 10,000 people currently enrolled in an individual RMHP plan will have to find another plan for 2017. In addition, Anthem Blue Cross and Blue Shield decided it will not offer its PPO (Preferred Provider Organization) individual plans for 2017, which impacts 62,310 people. Around 92,000 people with individual plans from UnitedHealthcare, Humana Insurance, RMHP and Anthem will need to find other coverage for 2017 during open enrollment…’In general, the companies have indicated that the people enrolled in individual plans have used more healthcare services and with greater frequency than anticipated,’ said Commissioner Salazar.” (Division of Insurance, 6.6.16)
  • Obamacare’s Markets will be Less Competitive Next Year. Here’s Why. ‘Under any likely scenario, there will be less insurer participation in the exchanges in 2017 than there was in 2016,’ says Michael Adelberg, a senior director at FaegreBD Consulting who previously worked in the Obama administration helping to manage the marketplaces’ launch. ‘It seems pretty clear at this point there will be less competition in the marketplaces next year, particularly in rural areas,’ says Larry Levitt, senior vice president for special initiatives at the Kaiser Family Foundation… A recent analysis shows that Obamacare’s marketplaces will have twice as many exits as entrants in 2017… it’s not clear how well Obamacare will deliver on the president’s promise of ‘more competition.’… The Kaiser Family Foundation estimates that 664 counties will have a single marketplace insurer in 2017, up from 225 of these counties in 2016… So it is possible that what we’re seeing right now is that the more expensive plans — the ones that offer wide networks of doctors, low deductibles, and brand-name hospitals — are getting edged out of the market. And that the type of insurance sold through Obamacare will be much more homogeneous than we realized.” (Vox, 8.4.16)
  • Health Insurers Trying To Survive The Obamacare Wasteland.Larry Levitt of the Kaiser Family Foundation has been quoted as saying, ‘Something has to give. Either insurers will drop out or insurers will raise premiums.’ And that’s exactly what we’re seeing. Nationwide, there was a 12 percent decline in plans in 2016 as compared to 2015, and that includes a 40 percent decline in PPO plans. There will be even more exits in 2017. Prior to Obamacare there were 18 insurers offering individual coverage in Kansas. Today there are three. The Obama administration initially praised health insurance competition in Maricopa County, Arizona. This year there were eight plans available on the Obamacare exchange; next year there will only be four—unless Aetna drops out, too. And insurers that choose to remain are increasing premiums. Texas Blue Cross has requested an increase of up to 60 percent for its 2017 premiums, and Arizona Blue Cross requested a 65 percent increase.” Matthews, Merrill. (Forbes, 8.8.16)
  • Smith and White Exits Texas Exchange.Effective in 2017, we will exit the federal health care Marketplace and refine our off-Marketplace plans to reflect the changing market. Scott and White Health Plan (SWHP) will continue to offer selected bronze off-Marketplace HMO individual and family plans, and the Insurance Company of Scott and White (ICSW) will offer selected bronze off-Marketplace PPO plans. Gold, silver and selected bronze benefit plans will no longer be available through SWHP or ICSW… At Scott and White Health Plan, we are committed to supporting the Affordable Care Act by offering affordable medical insurance to consumers in North and Central Texas. However, the market for our individual Marketplace plans carries higher risk than other plans, Like many other health insurers, we have determined that we cannot currently serve Marketplace plans on an effective and financially sustainable basis. Exiting the federal health care Marketplace and refining our off-Marketplace plans is the most effective way for us to uphold our commitment to offering affordable plans that are complemented by a renowned network of Baylor Scott and White Health facilities, clinics and physicians.” (SWHP, August, 2016)
  • Insurance Startup Oscar Quits Two Markets, Rethinks Obamacare Plans. “Health insurance startup Oscar Insurance Corp. will reevaluate its approach to Obamacare after suffering significant losses under the U.S. program and will pull out of two markets next year. Oscar, which pitches itself as a tech-savvy alternative to traditional health insurers, plans to end sales of Affordable Care Act plans in Dallas, a market it entered this year, and New Jersey… ‘The individual market isn’t working as intended and there are weaknesses in the way it’s been set up,’ Chief Executive Officer Mario Schlosser said in an interview… It lost about $105 million in 2015, and has posted losses of $83 million in New York, California and Texas in the first half of 2016… Oscar has about 130,000 customers, including 7,000 people in Dallas during its first year in the market there. In New Jersey, it covered 26,000.” (Bloomberg Technology, 8.23.16)
  • Medica, the Last insurer Selling Individual Health policies in Most of Iowa, Likely to Exit.  “Tens of thousands of Iowans could be left with no health insurance options next year, after the last carrier for most of the state announced Wednesday that it likely would stop selling individual health policies here. Medica, a Minnesota-based health insurer, released a statement suggesting it was close to following two larger carriers in deciding not to sell such policies in Iowa for 2018, due to instability in the market… Medica’s announcement comes on the heels of word last month that Aetna and Wellmark Blue Cross & Blue Shield would pull out of Iowa’s individual health insurance market for 2018… The three carriers’ decisions to pull out will affect Iowans who buy individual health insurance either on or off the federal government’s online marketplace.” (Des Moines Register, 5.3.17)

Nonprofit Consumer Operated and Oriented Plan Organizations (CO-OPs) 

CO-OP plans initially were to have been available in at least 25 states, but many shuttered their doors in 2015 and 2016. See main page for  a discussion of the impact of CO-OPs on plan choice. See Failed CO-OPs for a discussion of the impact of the failure of CO-OPs on the number of plans now available in the states.

Analysis of the ACA’s Exchange Model

  • The Obamacare Insurance Business Model Does Not Work. In the wake of the UnitedHealth Group announcement, industry expert Robert Laszewski summarized the findings of several reports. “UnitedHealth Group just announced they expect to lose $450 million in the Obamacare exchanges and are seriously considering withdrawing from the program in the coming year. This morning, the Wall Street Journal reported just about everybody else is losing their shirts in Obamacare as well.
    • A Goldman Sachs Group Inc. analysis of state filings for 30 not-for-profit Blue Cross and Blue Shield insurers found that their overall company wide results were ‘barely break-even’ for the first half of 2015. Goldman analysts projected the group would post an aggregate loss for the full year–the first since the late 1980s.
    • The analysis said the health-law exchanges appeared to be a ‘key driver’ for the faltering corporate results, and the medical-loss ratio for the Blue insurers’ individual business was 99% in the first half of 2015–up from 91% at that point in 2014, and 82% for the first six months of 2013.
    • From the Robert Wood Johnson Foundation (RWJF) and The Urban Institute (UI) in their October 2015 policy brief regarding the Obamacare insurance exchange enrollment: By the end of June, 2015, 8.6 million had actually enrolled in marketplace coverage with tax credits, representing an enrollment rate of 35 percent.
    • Health insurers lost an aggregate $2.5 billion in the individual health insurance market in 2014–an average of $163 per enrollee. They reported that only 36% of health plans in the individual market made money in 2014–and that was before they found out that the federal government was only going to pay off on 12.6% of the risk corridor reinsurance payments the carriers expected and many had already booked.
    • An Avalere Consulting analysis that showed that while three-quarters of the poorest of those eligible for the exchange subsidies have signed up, only 20% of those making between 251% and 300% of the poverty level had so far enrolled.
    • Many people who shopped for marketplace coverage did not choose a plan, considered the available options to be unaffordable. Here is an op-ed I did on the subject of the complete overhaul Obamacare needs at USAToday.” (Health Care Policy and Marketplace Review, 11.19.15)
  • Obamacare: United Healthcare Concerns. Robert Laszewski explains the potential impact on the Affordable Care Act and for millions of Americans with insurance through the public insurance exchanges. (Video) (Full Measure, 11.29.15)
  • United Healthcare Leaving the Obamacare Exchanges Is Not the Point––What’s Happening to the People Who Have No Choice But to Buy Their Health Insurance Under Obamacare Is. “United’s financial results in the Obamacare exchanges are more than a blip, they are indicative of what is happening in almost all of the states to almost all of the health plans operating in the insurance exchanges. You have heard the litany: In 2015 the not-for-profit Blue Cross plans lost money in the aggregate for the first time since the 1980s because of their Obamacare exchange losses, more than half of the Obamacare co-ops are already broke and the vast majority of the rest are on solvency watch, Health Care Services Corporation alone (which includes Blue Cross in Illinois and Texas) says they lost $1.5 billion in 2015 and $767 million in 2014, Humana’s profits fell 30% in the fourth quarter primarily driven by the $176 million reserve they set up on account of Obamacare. Virtually every insurance company participating in Obamacare is losing money three years into this.” Laszewski, Robert. (Health Care Policy and Marketplace Review, 4.21.16)
  • Exchanges’ Success Dependent on Government Subsidies.  “The individual market has little risk of entering a classic insurance ‘death spiral’ as long as the federal government continues to offer subsidies to those with incomes below 400% of the federal poverty level. Given the unique regulatory conditions of this market, the key determinants of its stability are not the traditional factors (risk and cost of care for this segment), but rather the ongoing subsidy payments.” (McKinsey & Company, May 2016)
  • ACA Enrollees Twice As Expensive As Other Individual Market Enrollees. Insurers’ loss ratio in the individual QHP market was about a third higher than the loss ratio in each of the other three markets. The higher loss ratio was driven by much higher average medical claims for the individual QHP market, and indicates that insurers did not enroll enough younger and healthier consumers to create a balanced risk pool in 2014. Comparing results across markets suggests that the ACA’s rules and price controls may be incompatible with a well-functioning individual market. Large premium increases both in 2016 and 2017 will further reduce the attractiveness of individual market QHPs to younger and healthier enrollees, particularly individuals who do not qualify for large subsidies. Without significant revision to the ACA that makes insurance more attractive to younger and healthier people and that significantly reduces the incentive for people to wait until they are sick to purchase coverage, the individual market looks increasingly likely to morph into a highly subsidized high risk pool.” (Mercatus Center, 6.28.16)
  • Fixing the Insurance Exchanges. “Like basketball players who are sick of losing a game, many health insurers who ventured into the new marketplaces are sending a clear message: We’re taking our ball and going home. And if the government wants them to play again, they want more of the rules changed… But many health policy experts say the Obama administration will alter the still-nascent exchanges to make them more financially palatable for insurers. The marketplaces also will shift to even more high-deductible, narrow-network plans that are common in managed Medicaid… Medicaid insurers Centene Corp. and Molina Healthcare, however, have profited on their ACA plans. Their high-deductible, limited-network plans appeal to healthy people who want the cheapest coverage… That represents one of the ways the ACA works against itself. The exchanges need healthier people who don’t use a lot of care to sign up, but many are receiving minimum coverage because of the employer mandate.” (Modern Healthcare, 8.6.16)
  • Obamacare is Unsustainable — The Backbone Could Collapse, Expert Warns.If politicians don’t fix the Affordable Care Act, then the vulnerable Blue Cross and local HMO plans — which serve as the backbone of Obamacare — must exit, said Robert Laszewski, the President of Health Policy and Strategy Associates. ‘What the politicians need to do is to understand they have got about a year to fix this,’ he said in an interview with CNBC’s ‘Closing Bell.’ Republicans do not want to fix the existing flaws for Obamacare, Laszewski said. Instead, they want to repeal and replace it. He added that Democrats are now stating that they would rather go to a single-payer insurance plan or a public option within a government-run plan. Thus, the political system remains fragmented. Laszewski added that regardless of the outcome of the 2016 presidential election, the Republicans won’t have enough votes to repeal or replace Obamacare. Likewise, Democrats won’t have the votes to pass a public or single-payer option.” (CNBC, 8.17.16)
  • ‘Those Whining Obamacare Insurers.’ “The not-for-profit community based health plans, the Blues and regional HMOs, have a tradition of being there for their communities–sometimes as the ‘carrier of last resort.’ But they are almost all losing incredible amounts of money–most of the smaller plans often well north of $100 million a year each. They can’t sustain these losses without threatening their own solvency and they can’t pass these losses onto the rest of their customers. What should they do? Obamacare supporters need to understand that if we don’t quickly move on to a robust conversation about how to fundamentally make the individual health insurance market viable these not-for-profit plans will also have to walk away. Then where will these millions of people who finally have health insurance be?” Laszewski, Robert. (Forbes, 8.18.16)
  • Aetna Has Revealed Obamacare’s Many Broken Promises.The health-insurance giant Aetna has announced it will exit 11 of the 15 health-insurance exchanges where it sells Obamacare plans. Aetna’s announcement comes on the heels of news that UnitedHealthcare, Humana, Blue Cross and Blue Shield of New Mexico, Blue Cross and Blue Shield of Minnesota, and Texas’ Scott and White Health Plan, and 70% of Obamacare’s failed Co-Ops, and other insurers will exit many or all of the exchanges for which they had previously shown such enthusiasm. The ongoing and nationwide exodus of insurers is just the latest piece of evidence that Obamacare is a failed law built on false promises. Obamacare’s only real selling point was that it supposedly guarantees access to care for people with expensive illnesses. President Obama repeatedly boasted that under Obamacare, it will be illegal for insurance companies to deny coverage to the sick because ‘all discrimination against pre-existing conditions will be prohibited.’ On the contrary, Obamacare itself is denying coverage to people with preexisting conditions.” Cannon, M.F. (TIME, 8.25.16)
  • How to Rescue Obamacare as Insurers Drop Out. “If too many insurers jump the Obamacare ship, customers will be left adrift. Fortunately, there is a simple way to reduce this risk. It was crafted in the District of Columbia by the D.C. Health Benefit Exchange Authority: Make the Obamacare exchange one big marketplace for everyone buying individual health insurance coverage. Nationwide, this would merge the 12 million people who get their insurance through Obamacare with the roughly 9 million who buy their policies outside the exchanges.” Aaron, Henry. (Brookings Institute, 8.22.16)
  • S&P Global (12.22.16). The ACA Individual Market: 2016 Will Be Better Than 2015, But Achieving Target Profitability Will Take Longer. “Most insurers so far have suffered persistent underwriting losses in the ACA individual market. 2014 was painful in terms of profitability, and 2015 only aggravated those losses for most insurers. But 2016 is going to be the first year to start reversing the trend. S&P Global Ratings expects U.S. health insurers to report improved underwriting performance in the individual market in 2016 versus 2015. Although most insurers will still report an underwriting loss for 2016, the losses will be smaller than in 2015. This means the changes made to network design and premium pricing are gaining traction, though more still needs to be done. For 2017, we expect continued improvement, with more insurers reporting close to break-even or better results for this segment. Our 2017 forecast takes into account the impact of a maturing risk pool, premium rate increases, network changes, and regulatory changes such as stricter rules around special enrollment periods (SEP). Of course, unanticipated consumer behavior, such as higher-than-priced medical service utilization in response to uncertainty around the future of healthcare could throw a wrench in works.”

Impact of Risk Adjustment Program

  • ‘Risk Adjustment’ Threatens Obamacare. [Opinion] “The single biggest threat to the survival of the Affordable Care Act (ACA) is not the Republican-led legislative effort to repeal it. Nor is it inadequate enrollment. It is inaction by the administration’s own agency that is tasked with implementing Obamacare… While well-intended, the implementation of this safeguard has had the unintended consequence of a ‘reverse Robin Hood effect’— taking money from predominantly new, small, innovative plans (the new competitors that the ACA hoped would add both choice and innovation to health insurance markets around the country) and giving it to the big, established insurance carriers. The enormous risk adjustment windfall that went to the big multi-state insurance corporations is partly responsible for the current merger frenzy that will certainly result in less choice for Americans in insurance markets nationwide.” (Baltimore Sun, 2.10.16)
  • ACA’s Risk Adjustment Hammers Small Plans Again. The data also show payouts for the ACA’s reinsurance program. For ACA plans sold in 2015, the reinsurance payments total $7.8 billion. The temporary reinsurance program, which expires at the end of this year, protects health insurers against costly claims… Blue Shield of California, a not-for-profit plan that has been heavily criticized over its tax-exempt status and large reserves, received almost $484 million in reinsurance and risk adjustment payouts. Three-quarters of that amount, or about $363 million, came from the reinsurance program.” (Modern Healthcare, 6.30.16)
  • The Obamacare Risk Adjustment Trap.Many insurers, particularly smaller and newer ones, point to a study from the former top actuary for the Centers for Medicare and Medicaid Services, to argue that well-established, larger insurers knew how to better work the formula and have reaped major, undeserved, fruits through the program. Kaiser Health News, reporting on a Virginia insurer ending its bronze plans, suggested that some insurers may stop selling bronze plans to avoid risk adjustment payments since they attract healthier people. Another significant problem, discussed by Seth Chandler, is that the risk adjustment formula left 80% of the variation in medical expenses unexplained in 2014. This problem produces arbitrary transfers of funds among insurers.” Blase, Brian. (Forbes, 7.6.16)
  • Aetna Now Seeks Government Bailouts, Saying That Obamacare Exchanges Don’t Work. “In an interview with Bloomberg, Aetna’s CEO, Mark Bertolini, explained the company’s major concern with Obamacare implementation: Bertolini said big changes are needed to make the exchanges viable. Risk adjustment, a mechanism that transfers funds from insurers with healthier clients to those with sick ones, ‘doesn’t work,’ he said. Rather than transferring money among insurers, the law should be changed to subsidize insurers with government funds, Bertolini said. ‘It needs to be a non-zero sum pool in order to fix it,’ Bertolini said. Right now, insurers ‘that are less worse off pay for those that are worse worse off.’” (National Review, 8.4.16)
  • Three Ways the ACA Individual Health Market Foundation Cracked. “Frederick Busch, a consulting actuary at Milliman, and three colleagues at the Seattle-based actuarial and consulting firm, have used the program performance figures available for 2014, and the preliminary numbers available for 2015, to size up the program.
    • Swings in health risk hit 14 percent of the issuers hard. For about three-quarters of the individual health issuers, the risk-adjustment program was somewhat predictable: If they were supposed to pay money into the program in 2014, they also had to pay into the program in 2015. If they received money in 2014, they also received money in 2015. But the Milliman analysts found that about 14 percent of the issuers flipped from getting cash from program in 2014 to paying cash into the program in 2015.
    • Issuers were stuck using stale data to set their 2016 premiums. By the time individual health insurance issuers had access to a full year of 2014 Affordable Care Act risk-adjustment program data, they were already half-way into the 2015 plan year and had no ability to change 2015 plan premiums or benefits, the Milliman analysts say. By that point, the issuers had already filed plan design and rate information with insurance regulators and ACA exchange program managers.
    • The Milliman analysts are not really sure what happened what went on inside the program, or what rules will apply going forward. ‘Our results could be affected at any time by the shifting legislative environment,’ the analysts write. ‘Since full implementation of the ACA, aspects of the risk adjustment program alone have been modified several times. Should any salient feature of the ACA change, our conclusions may no longer apply.’” Bell, Allison. (Life Health Pro, 8.22.16)
  • A New Obamacare Proposal Might Not Be Legal. “The Obama administration proposed this week new rules for its Risk Adjustment program, a critical component of the Affordable Care Act. There are actually some better-late-than-never parts of the proposal. Most notably the new rules will try to compensate for the extra expense insurers incur when people exploit ACA regulatory and enforcement weaknesses to time their insurance purchases to cover only expensive medical emergencies. Unfortunately, the better parts of the new Risk Adjustment proposal are contaminated by an illegal component: one that would transfer money among insurers in different states. Under this part of the proposed rules, which will take effect in 2018, insurers who sell policies in states where medical costs have gotten under a modicum of control such as Utah or Georgia will end up subsidizing insurers who sell policies in states where medical costs continue to be sky-high.” Chandler, Seth. (Forbes, 9.1.16)

Rick Adjustment Litigation

  • Maryland’s Health Co-op Sues Over Health Law’s Risk-Adjustment Formula. “Maryland’s health cooperative filed a lawsuit Monday seeking to block the federal government from requiring it to pay more than $22 million in fees for a program designed to cover insurance company shortfalls. The Maryland co-op, in its lawsuit filed in U.S. District Court in Maryland, says the formula—known as ‘risk adjustment’—is arbitrary and unlawful. The Centers for Medicare and Medicaid Services, which oversees the program, declined to comment. Officials have previously said the formula doesn’t discriminate against small insurers.” (Wall Street Journal, 6.13.16)
  • New Mexico Insurer Poised to Join Others Suing Over ObamaCare Payments. New Mexico Health Connections CEO Dr. Martin Hickey said in a phone interview that the insurer plans to file a lawsuit in the coming weeks claiming that it is being over-billed by the administration on certain payments and that it has not received other promised payments from the federal government. Several other insurance companies in different states are planning to sue as well. New Mexico Health Connections owes the Centers for Medicare and Medicaid Services (CMS) $16.4 million under the risk-adjustment methodology, which Hickey said was more than the insurer expected. New Mexico is also still waiting for $23 million in risk-corridor payments from the CMS… If the New Mexico CO-OP files suit as planned, it would be the seventh insurer to do so. Five are suing over missing risk-corridor payments.” (The Hill, 7.12.16)

Impact of Reinsurance Program

  • ACA’s Reinsurance and Small Plans.The data also show payouts for the ACA’s reinsurance program. For ACA plans sold in 2015, the reinsurance payments total $7.8 billion. The temporary reinsurance program, which expires at the end of this year, protects health insurers against costly claims… Blue Shield of California, a not-for-profit plan that has been heavily criticized over its tax-exempt status and large reserves, received almost $484 million in reinsurance and risk adjustment payouts. Three-quarters of that amount, or about $363 million, came from the reinsurance program.” (Modern Healthcare, 6.30.16)
  • $7.7 Billion in Reinsurance Payments Headed to Insurers for 2015 Enrollment, CMS Says. “Health insurers who sold plans through the marketplaces in 2015, and who covered high cost individuals can expect to get $7.7 billion this year through the federal reinsurance program established under the Affordable Care Act, the Centers for Medicare and Medicaid Services announced Feb. 12. An initial early payment at a rate of 25 percent will go out starting in March 2016, CMS said. The final estimated reinsurance payment amounts will be announced on June 30.” (Healthcare Finance, 2.15.16)

Concerns about Program Payouts

Items are in reverse chronological order.

  • House Subpoenas Documents on $3.5 Billion in Obamacare Payments. “The subpoena is in response to the administration refusing to produce the documents. The committee said in a press release that the administration wouldn’t produce them due to ‘confidentiality interests’… Republicans have said that a portion of the funding, $3.5 billion, was supposed to go to the Treasury Department. However, Republican lawmakers said during an April hearing that the Centers for Medicare and Medicaid Services changed its position on the payments and diverted them to insurers. CMS Acting Director Andy Slavitt said at the hearing the program isn’t funded by taxpayers, but insurers. He said that such a reinsurance program is quite common to ensure that people with large claims get covered.” (Washington Examiner, 6.29.16)
  • CRS: Obamacare Payments To Insurance Companies “Would Appear to be in Conflict with a Plain Reading” of the Law. “The House of Representatives requested that the Congressional Research Service investigate this issue. What did CRS find? That CMS’s decision to give $0 to the Treasury, and instead give it to insurance companies, ‘would appear to be in conflict with a plain reading’ of the statute, and is ‘not entitled to deference under Chevron.’… As I have noted more times than I can count, the President does not get to ignore the law when Congress is gridlocked. If this is the best defense he can make, then the policy is in trouble. The government officials involved in making these payments in flat violation of the statute should consider retaining their own counsel. DOJ will not have their best interests at heart.” (Blackman, Josh. 3.11.16)
  • Will HHS Get Away With A $3.5 Billion Heist? “The Department of Health and Human Services (HHS) announced Friday night that it was in the process of shorting the U.S. Treasury $3.5 billion. Well, they didn’t exactly announce it. You had to read between the lines. The theft of $3.5 billion will help prop up insurers that have agreed to sell Obamacare policies in the individual market. Behind all the happy talk from Administration officials about the program’s success lies an unpleasant truth: insurers that participate in Obamacare exchanges are bleeding money. Those losses are coming despite billions of dollars in handouts the government is providing the industry. Some of those handouts are entirely lawful; others, not so much. The so-called ‘reinsurance’ program falls into the latter category.” (Badger, Doug, 2.18.16)
  • According to health policy expert Doug Badger (2.15.16), “Section 1341 of PPACA (AKA Obamacare, ACA) required the federal government to return $2 billion in reinsurance assessments to the Treasury for the 2014 benefit year and another $2 billion for 2015. CMS decided to stiff the Treasury and instead provide the entire sum for 2014 to health insurers. Thus, the $1.7 billion in reinsurance payments that it ‘rolled over’ into 2015. For 2015, the assessments raised $6.5 billion. CMS has graciously decided to provide $0.5 billion of that to Treasury. So, over two years, CMS is distributing a total of $3.5 billion to insurers that the Obamacare statute forbids it from spending. Obamacare is a dumpster fire. Even with corporate welfare payments (reinsurance and risk corridors), insurers are losing money. That CMS is violating the text of the statute (1341(b)(3)(B)(iv)) to provide $3.5 billion to its corporate partners instead of remitting it to the Treasury really is an outrage.”
  • How the Obama Administration Raided the Treasury to Pay Off Insurers. “The transitional reinsurance program as implemented, however, has become entirely unmoored from the statute that created it. It has instead embarked on a progressively stranger course in which two of the most recent diversions were underassessing health insurers to pay for the program and then using the first $2 billion collected not to pay the United States Treasury as called for by the statute but instead to pay off insurers selling individual health insurance policies on the Exchange and, some times, off the Exchange… In violation of the statute, its own earlier regulations and its earlier statement that it had no legal authority to defer payments to Treasury,  it just shorted the Treasury and the entire $8.7 billion to the insurance industry. Not only did it give the insurers the $7.9 billion they were promised for 2014, it set aside the remaining $800 billion not for the Treasury for the insurance industry in 2015.” Chandler, Seth. (Forbes, 1.18.16)

Reinsurance Litigation

  • South Carolina’s Chief Regulator Suing Federal Government Over Collapse of Obamacare Co-op.  “For two years, tens of thousands of patients in South Carolina purchased policies through from a health insurance co-op called Consumers’ Choice Health Plan… But in late 2015, Consumers’ Choice abruptly closed. Farmer, the designated ‘liquidator’ of Consumers’ Choice, filed the lawsuit this week, arguing the federal government owes Consumers’ Choice nearly $37 million and that ‘(a)bsent the recovery of this amount … this cost will be shouldered by the taxpayers of South Carolina.’ The lawsuit specifically alleges the federal government owes the defunct co-op $36.9 million under the Affordable Care Act’s ‘reinsurance program,’ which was designed to stabilize premiums during Obamacare’s early years.” (Post and Courier, 4.15.17)

Impact of Risk Corridor Program

ACA’s risk corridors program is a 2014-2016 effort to protect insurers against pricing uncertainty by sharing gains and losses between plans and the federal government for qualified health plans (QHPs) sold in the individual and small group markets. HHS signaled in early 2014 that it planned to operate the risk corridors program in a budget neutral way. The agency later indicated that it would provide other sources of funding if the program’s funds were insufficient. Calling this “a taxpayer-funded bailout for insurance companies,” Sen. Marco Rubio inserted language into the Consolidated and Further Continuing Appropriations Act, 2015 (Cromnibus), that prevented HHS from using general funds to reimburse carriers with losses.

  • Federal Funds Earmarked to Offset ACA Insurer Losses. “The Obama administration has quietly adjusted key provisions of its signature healthcare law to potentially make billions of additional taxpayer dollars available to the insurance industry if companies providing coverage through the Affordable Care Act lose money. The move was buried in hundreds of pages of new regulations issued late last week…The change in regulations essentially provides insurers with another backup: If they keep rate increases modest over the next couple of years but lose money, the administration will tap federal funds as needed to cover shortfalls… Big premium increases in states with tightly contested races could prove politically disastrous for Democrats.” (Los Angeles Times, 5.21.14)
  • Insurers Granted Taxpayer Subsidy. “Chet Burrell, president and CEO of Care First Blue Cross Blue Shield, wrote personally to Jarrett in March 2014 that insurers would need taxpayer funding from Obamacare’s risk corridor program in order to cut back on substantial losses, according to a House Oversight and Government Reform Committee report released Monday. Burrell warned that companies may hike premiums by “20 percent or more” due to the Obama administration’s initial policy that the risk corridor program not be augmented with taxpayer dollars… The next month, the Obama administration issued rules that would permit taxpayer funding to be doled out to insurers through the risk corridor program, which was originally supposed to be budget neutral.” (Daily Caller, 7.28.14)
  • Risk Corridor Program May Hurt Insurers, Cause Market Uncertainty. “Insurers that have business outside of the ACA exchanges may be able to handle not receiving their anticipated risk corridor payments, reported CNBC. For insurers that have a heavy presence on the exchanges, not getting the money they hope to get will have a much larger impact for their business. This shortfall could translate into higher premiums and may negatively impact smaller insurers.” (Fierce Health Payer, 5.7.15)
  • Insurers Face Health Overhaul Losses for 2014. “Health insurers will lose about $2.5 billion because patients covered through President Barack Obama’s health law last year were sicker than expected, according to government figures released late Thursday… For 2014, insurers that had sicker-than-expected patients requested nearly $2.9 billion in payments, HHS said. But the government has collected only $362 million from insurers that did well. That means insurers who requested payments will get less than 13 percent of what they sought.” (Associated Press, 10.1.15)
  • Risk Corridor Claims By Insurers Far Exceed Contributions (Updated). “On October 1, 2015, the Centers for Medicare and Medicaid Services announced the total of collections and payouts under the risk corridor premium stabilization program for 2014… Amounts claimed for 2014 that exceed $362 million will be paid from 2015 collections in 2016 if possible. Shortfalls for 2015 will in turn be covered from 2016 collections in 2017. If the three-year program ends up in the red in 2017, CMS states that it will ‘work with Congress’ to secure funding, if possible.” (Health Affairs Blog, 10.1.15)
  • Report: Insurers ‘Lost a Lot of Money’ Selling Obamacare Plans. “Insurers lost at least 12 percent on Affordable Care Act plans in 2014, according to a new report. The author of the report, Brian Blase, a senior research fellow at the Mercatus Center at George Mason University, told The Daily Signal in an interview that the losses will mean higher premiums for consumers. He said that his estimate of 12 percent is ‘conservative.’” (The Daily Signal, 10.15.15)
  • Risk Corridor Limits a Credit Negative, Moody’s Says. “Moody’s has signaled that the risk corridor fund limits included in the new budget represent a credit negative for those insurers doing business on the public exchanges. ‘The $1.1 trillion government spending bill that Congress passed this past weekend includes a provision that weakens the protection provided by the risk corridor program under the Affordable Care Act. The provision is credit negative for health insurers because it risks limiting what the US Department of Health and Human Services can distribute to insurers that incur losses from policies sold on the health insurance exchanges,’ Moody’s said. ‘With many insurers projecting losses on this business, the provision will reduce the amount of funds that companies expected to receive for polices sold on the exchanges in 2014 and 2015.’” (Benefits Pro, 12.18.14)
  • S&P Sees PPACA Risk Corridors Program Funding Gap. “Analysts at Standard & Poor’s Ratings Services say the effects of funding restrictions on the Patient Protection and Affordable Care Act (PPACA) risk corridors program may cause the program to hurt small and midsize health insurers… A risk corridors program failure would be a nuisance for the big national carriers but could wipe out more than 50 percent of the recorded capital of some of the newer, smaller insurers, the analysts say. A risk corridors program failure could reduce capital levels at some well-known nonprofit regional carriers by about 20 percent, the analysts estimate.” (LifeHealthPro, 5.1.15)
  • Ten Largest CMS Risk Corridor Payments for 2014 and 2015. (Modern HealthCare, December, 2016) 

Risk Corridor Litigation

  • Obamacare Insurers Could Get Billions From Controversial Government Fund. “A $5 billion lawsuit filed by a nonprofit insurer against the Obama administration for a program implemented under Obamacare is raising questions about the use of a fund available for settlements with the government and whether Congress can, and should, intervene. According to legal experts, if the Obama administration decided to settle its class action lawsuit with Health Republic Insurance of Oregon, one of 23 co-ops started under Obamacare, and other insurers for all or part of the $5 billion it’s seeking, the money would come from the Judgment Fund, an indefinite appropriation created by Congress and administered by the Department of Treasury… ‘the court is going to have to award a judgment since the administration, under the direction of Congress, is violating the law,’ Timothy Jost, a law professor at Washington and Lee University School of Law, told The Daily Signal of the lawsuit.” (Daily Signal, 3.16.16)
  • Another Insurer, BCBS of North Carolina, Files Risk-Corridor Lawsuit. The number of health insurers suing the Obama administration over the Affordable Care Act’s hampered risk-corridor program continues to grow. Blue Cross and Blue Shield of North Carolina filed a lawsuit Thursday, arguing it is owed $129 million in unpaid risk-corridor payments for the 2014 calendar year. The not-for-profit health plan also demanded the federal government pay legal costs and interest, according to a copy of the lawsuit. Blue Cross and Blue Shield of North Carolina recorded more than $147 million in risk-corridor payments. However, the federal government has only been allowed to pay out 12.6% of insurers’ requests. The insurer, which has experienced high medical costs from its ACA exchange population, expects it is owed another $175 million for the 2015 benefits year as as well. The North Carolina Blues’ lawsuit comes just one day after Moda Health, an insurer based in Portland, Ore., filed its own risk-corridor lawsuit. Moda sued for $180 million that it says it is owed for 2014 and 2015. Moda has abandoned several exchanges, and Moda’s ACA plans have engulfed the insurer in financial turmoil. Both of those suits follow Highmark’s move from last month. Highmark was the first major insurance company to sue the federal government over the risk-corridor program. A co-op in Oregon was the first insurer to pursue litigation over its risk-corridor payments.(Modern Healthcare, 6.2.16)
  • Lawyers Cast Doubt on Insurers’ ObamaCare Lawsuits. “But both Barnes and University of Michigan law professor Nicholas Bagley believe the insurers will be paid at some point. ‘Insurers are likely — eventually — to prevail in the risk-corridor lawsuits,’ Bagley told The Hill. ‘The federal government made a promise to pay them and that promise is enforceable in court.’ The insurers suing over risk corridors might be paid through the U.S. Judgment Fund in the event of a settlement or an adverse ruling against the government, Barnes said, which would resolve that portion of the budget battle raging between Congress and the administration. The Judgment Fund is a permanent appropriation of the Department of the Treasury.” (The Hill, 7.13.16)
  • To Save Obamacare, the President Plots a Massive Bailout of Health Insurers. “Currently, insurers are suing HHS for more than $2.5 billion promised them under ACA’s ‘risk corridor’ program, which was designed to redistribute earnings from more profitable insurers in ACA exchanges to less profitable insurers… Acting CMS administrator Andy Slavitt now says the federal government plans to bail out the insurers for at least some of their losses. ‘HHS will record risk-corridors payments due as an obligation of the United States Government for which full payment is required,’ he announced in a September 9 memo. Slavitt suggested the funds to cover these costs would most likely come from the DOJ’s Judgment Fund, a virtually limitless fund reserved for resolving legal disputes involving the federal government. Paying off ACA insurers with the Judgment Fund would amount to a covert, multibillion-dollar taxpayer bailout of the health-insurance industry. That bailout would circumvent Congress in order to pay for an ACA program that federal law requires to pay for itself.” (National Review, 11.14.16)
  • Another Challenge to U.S. on Risk Corridor Payments. “Molina Healthcare has joined the long line of insurers suing the government for failure to honor its obligations under the Affordable Care Act’s ‘risk corridor’ program.  According to Molina’s 84-page complaint filed Jan. 23, the U.S. owes it a whopping $52.3 million… Molina, like 15 other insurers, is suing the government for allegedly reneging on risk corridor commitments in two basic ways: (1) promising to pay the plans annually but then saying it would wait until 2017, after the three-year program ends, and (2) promising to compensate them fully for their losses but then saying that it would pay in a ‘budget-neutral’ manner… The case is Molina Healthcare v. United States, No. 1:17-cv-00097 (Fed. Cl.)” (JD Supra, 2.2.17)
  • Legal Challenges Could Leave U.S. On the Hook for Obamacare ‘Risk Corridor’ Payments. “A recent ruling by a federal judge that the U.S. government must pay more than $200 million to an Oregon insurer could mean serious financial and political headaches for the Trump administration in the months to come. The decision last week by a judge on the U.S. Court of Federal Claims requires the government to pay Moda Health Plan Inc. money it said it was owed under an Affordable Care Act provision intended to cover insurers financial shortfalls. That initiative, known as ‘risk corridors,’ was set up under the 2010 health law to spread risk by collecting money from insurers with healthier populations and distributing it to those with older, sicker clienteles… The sharply worded decision in the Moda lawsuit is a troubling sign for the federal government, which could appeal. Other insurers could feel emboldened to file lawsuits, asking for their share of funds. And significant amount is at stake: Insurers are owed roughly $8 billion that the federal government did not pay.” (Wall Street Journal, 2.13.17)

Rulings in Risk Corridor Litigation

  • Court Rejects Land of Lincoln Lawsuit Seeking More Than $70 Million. “A federal judge has tossed out Land of Lincoln’s lawsuit seeking more than $70 million that the now-defunct health insurer says it’s owed by the federal government. The insurer shut down at the end of September amid financial woes, sending 49,000 Illinoisans scrambling to find new coverage for the last three months of the year. Shortly before the insurer’s closure was announced, it sued the federal government in June for more than $70 million… Last week, a federal claims court judge sided with the government, saying the U.S. Department of Health and Human Services reasonably interpreted the law in determining the payments and that the government did not break any contract with Land of Lincoln.” (Chicago Tribune, 11.15.16)
  • Judge Rejects North Carolina Blue’s $130M ACA Program Claim. “Judge Lydia Kay Griggsby of the U.S. Court of Federal Claims in Washington, on Tuesday rejected a lawsuit brought last June by Blue Cross and Blue Shield of North Carolina. The company had accused the U.S. Department of Health and Human Services of failing to make good on its obligation to pay nearly $130 million under the ACA risk corridors program… Griggsby agreed with HHS regulators that neither the ACA nor the regulations implementing the government’s obligation to make risk corridor payments under the statute requires HHS to make full risk corridor payments on an annual basis. ACA provisions demonstrate that the statute ‘neither addresses, nor establishes, a deadline for the payment of the Risk Corridors Program payments,’ the judge wrote. ‘And so, this statute is silent and, thus, ambiguous with respect to the timing of the Risk Corridors Program payments.’” (Think Advisor, 4.20.17)

Impact of the 2016 Elections

Risk Corridor Litigation

  • According to law professor Nicholas Bagley, the election may negatively impact insurers’ risk corridor lawsuits. “The risk corridor program runs from 2014 through this year, and the balance for the 2016 plan year won’t be calculated until next fall. But the federal government has just released figures for 2015, and they’re eye-popping. Insurers are owed $5.9 billion (h/t Charles Gaba) on top of $2.4 billion that they’re still owed for 2014. That means that the risk corridor lawsuits, taken together, are some of the largest ever brought against the United States. If 2016 looks the same as 2015, the government’s liability will swell to $14.2 billion, or about $43 for every man, woman, and child in the country. But the lawsuits may not be long for this world. A handful of senators, including Marco Rubio, are sponsoring a bill with the inaccurate but hilarious title of the HHS Slush Fund Elimination Act. If it passes, the bill would sew up the Judgment Fund… So this is shaping up to be another installment in the long-running reality show called Elections Have Consequences. If Hillary Clinton had been elected, the insurers probably would have gotten paid. But she didn’t, and they likely won’t.” (Yale J. On Reg, 11.25.16)

Efforts to Shore Up Insurers

According to Fox News (2.16.17), the new administration took steps “intended to help calm jittery insurance companies… For consumers, the proposed rules mean tighter scrutiny of anyone trying to sign up for coverage outside of open enrollment by claiming a ‘special enrollment period’ due to a change in life circumstances such as the birth of a child, marriage, or the loss of job-based insurance. Also, sign-up season will be 45 days, down from the current three months… Insurers also would gain more flexibility to design low-cost coverage tailored to younger people. In another move aimed at consumers who move in and out of coverage, insurers would be able to collect back premiums from customers who had stopped paying, then tried to sign up again for another year.”

  • Trump’s Obamacare Fix Gives Insurance Industry Exactly What It Wants.  “The insurance industry cheered the Trump administration’s proposed rule to shorten the sign-up period for Americans to choose health plans under the Affordable Care Act while also allowing premiums to be put toward past unpaid debts. And why wouldn’t insurers be thrilled? The Trump administration did exactly what Aetna, Anthem, Blue Cross and Blue Shield plans and other insurers asked.” Japsen, Bruce. (Forbes, 2.16.17)
  • HHS Hits the Brakes on ACA Death Spiral. “Yesterday, the Department of Health and Human Services (HHS) issued a proposed rule designed to lay the groundwork for stabilizing the individual and small group health insurance markets… The changes in this rule are not drastic, nor will they be sufficient to solve all of the problems currently plaguing the individual market, but they are common sense solutions that will begin the process of stabilizing the market until legislative changes can be made.” (American Action Forum, 2.16.17)

Transformation of the Health Insurance Industry 

  • Insurance Companies as We Know Them Are About to Die. And Here’s What’s Going to Replace Them. Emanuel, Ezekiel. “As they gain more experience in managing groups of patients, such contracts between health systems and employers—cutting out insurance companies—will become more common. At that time the health systems will make the jump to offering coverage in the exchanges. In turn, the health insurance companies will have three possible responses. First, they can refuse to change, in which case they will eventually go out of business. Second, they can shift their business to focus on offering services they have expertise in, particularly analytics, actuarial modeling, risk management, and other management services…The third evolutionary path is that health insurance companies may transform themselves into integrated delivery systems.” (New Republic, 3.2.14)
  • Unplugged Accountable Care. “The successful ACOs, particularly those owned by large health systems, have a new mantra: forget shared risk, let’s take it all and become a health insurance plan! As mega-hospital systems continue to acquire physician practices (42% of doctors are practicing as salaried employees of hospitals) more will become licensed insurers to take control of the complete patient lifecycle. Coast-to-coast we’ve seen multiple examples of hospital system ACOs enter the fully insured markets by introducing Medicare Advantage and/or ACA Marketplace individual medical plans ready to sell directly to consumers.” (Lindsay Resnick, 12.1.14)

Insurance Company Mergers

  • Will Mergers Stifle Healthcare Reform? “The insurance industry is going through a wave of mergers that threatens to leave consumers with fewer choices. There’s no single motivation behind the mergers, although they all reflect the changing economics of healthcare. In some, the buyers are seeking bigger stakes in privately run Medicaid and Medicare plans, whose ranks are burgeoning because the 2010 law extended Medicaid to more low-income Americans and because the baby boom generation has reached retirement age. Two examples are Centene’s $6.3-billion purchase of HealthNet, combining two big players in Medicaid managed care, and Aetna’s $37-billion purchase of Humana, the second-largest provider of Medicare Advantage policies. Others, such as Anthem’s pursuit of Cigna, seek to consolidate power in the market for employer health plans… The obvious risk posed by the current merger wave is that the Medicare Advantage and Medicaid HMO markets in some states could become dominated by a single insurer, raising prices for consumers and potentially driving doctors out.” (Los Angeles Times, 7.9.15)
  • AMA Calls for Regulatory Review of Health Insurance Companies. “In July, Aetna agreed to buy Humana, the second-largest provider of private Medicare insurance, for $37 billion in cash and stock as an effort to broaden its health care coverage. That same month, Anthem announced it will purchase Cigna for $48.4 billion. The combined impact of proposed mergers would exceed federal antitrust guidelines designed to preserve competition, according to new special analyses of commercial health insurance markets issued Sept. 8 by the American Medical Association. In all, the two mergers would diminish competition in up to 154 metropolitan areas within 23 states, the AMA says. ‘A lack of competition in health insurer markets is not in the best interests of patients or physicians,’ said AMA President Steven J. Stack. ‘If a health insurer merger is likely to erode competition, employers and patients may be charged higher than competitive premiums, and physicians may be pressured to accept unfair terms that undermine their role as patient advocates and their ability to provide high-quality care.’” (Employee Benefit Advisor, 9.10.15)
  • Insurers Again at Odds With Hospitals and Physicians. “The longest running battle in medical care is heating up again. I refer, of course, to the struggle between insurers and physicians, hospitals, and pharmaceutical companies. Recently, Aetna and Humana announced their intention to merge, as did Anthem and Cigna. If these mergers go through, the ‘big 5’ health insurers will be down to the ‘big 3.’ Physicians and hospitals were not happy with the news…it seems unlikely that either insurers or clinicians and hospitals are poised for a major victory. What happens then? One possibility is that state and federal governments will get even more involved in health care than they are already.” Cutler, D. (JAMA, 10.16.15)
  • Getting to the Root of the Merger and Acquisition Frenzy. “In short, we seem to be returning to a monopoly industry, where big companies are buying up smaller ones to achieve efficiencies of scale that not even the state-run nonprofit exchanges can touch. When you go into any of the 100 or more metropolitan areas across the nation, you will inevitably find only a handful of payers. The name brands, such as UnitedHealth and BlueCross/Blue Shield, are insuring 80 percent of the population. When you add Medicare Advantage into the mix, you see that a significant portion of the population gets its insurance from one of just three providers. This represents a radical departure from a multifaceted and complex network of insurers of all sizes that characterized the pre-ACA health insurance landscape, even as recently as six or seven years ago.” (Insurance News Net, 12.4.15)
  • Merger Mania is Sweeping the Hospital and Insurance Sectors. “Over a period of just a few weeks this summer, three mergers valued at a total of nearly $100 billion were announced by six large health insurers…. critics fear that industry consolidation could undermine the goal of more competition. Hospital groups, meanwhile, are looking for merger partners so they can counter the consolidated insurers with which they may have to negotiate reimbursements. Whether consumers will benefit from combat between big providers and big insurers is an open question, but some experts aren’t optimistic. Thomas Greaney, a healthcare antitrust expert at St. Louis University, labels the idea that insurers have to get big to counter the pricing power of ‘must have’ medical centers and specialty physician groups the ‘sumo wrestler theory.’ But as he wrote at Health Affairs this summer, ‘a showdown between the Sumo Wrestlers may result in a handshake rather than a serious wrestling match,’ in which a dominant insurer may bargain successfully with a dominant provider, but feel no incentive to pass its savings on to consumers.” (Los Angeles Times, 12.25.15)
  • Obamacare Architect Kathleen Sebelius Questions Proposed Healthcare Insurance Mergers. “In an interview this week with International Business Times about the pending Anthem-Cigna and Aetna-Humana mergers, former Health and Human Services Secretary Kathleen Sebelius asserted that mergers have tended to reduce competition and raise costs for consumers. ‘I am concerned about the possibility that mergers of these companies will lead to less competition which in historic perspective means higher prices and fewer choices,’ said Sebelius, who before serving in Obama’s cabinet was a Kansas insurance commissioner and governor. ‘To go from five major insurance companies to three insurance companies is a dramatically different playing field across the board, so this will impact every state, every population, just given the size of these mergers.’”  (International Business Times, 6.10.16)
  • Humana pulls out of Obamacare for 2018. “The news comes hours after Aetna and Humana said they’re calling off their $34 billion merger. Just hours later Cigna (CI) said it’s calling off its $54 billion deal with Anthem. Both deals were targeted by the Justice Department and were recently blocked by federal judges, citing antitrust concerns. Aetna said it will pay Humana a $1 billion breakup fee.” (CNN Money, 2.14.17)

Anti-merger Litigation

  • Fight or Run Is Choice for Health Insurers After DOJ Suit. Hours after the U.S. government sued to block two major health insurance mergers, one deal appears headed for the courthouse while the other could be headed to the graveyard. Within minutes of the Justice Department filing its case in federal court, Aetna Inc. and Humana Inc. issued a joint statement, promising they’d fight in lockstep and ‘vigorously defend the companies’ pending merger.’ It’s the sort of statement that’s typical at the start of such antitrust suits. Yet Cigna Corp. seemed to use a related lawsuit also filed Thursday as a potential escape from Anthem Inc.’s $48 billion takeover of the company. Instead of a joint statement promising to fight, it quickly e-mailed its own comment to reporters, without Anthem, saying it didn’t know when a deal would close, ‘if at all.’ ‘Cigna is saying, ‘We’d like to walk,’ Ana Gupte, an analyst at Leerink Partners, said by phone. ‘If there’s any opportunity for a settlement between Anthem and Cigna around the breakup fee and being able to walk away, they will try to do that.’” (Bloomberg, 7.21.16)
  • ObamaCare and Big Insurance: The Justice Department Tries to Block the Mergers that Obama’s Health Law Intended.ObamaCare was designed to create government-directed oligopolies, but now its authors claim to be alarmed by less competition. Last week federal and 11 state antitrust regulators filed a double lawsuit to block the pending $54 billion insurance tie-up between Anthem and Cigna and the $37 billion acquisition of Humana byAetna. The mergers would reduce the national commercial insurers to three from five, and Attorney General Loretta Lynch says the government won’t cede such ‘tremendous power’ over health care to a more concentrated industry. Has she checked with the White House? The logic of ObamaCare is that larger and more integrated conglomerates are superior to a market with many insurers, doctors and hospitals vying for consumer business. The law promotes corporatism on the theory that larger systems are more efficient, but also because giants are easier to control politically and will standardize care as ordered.” (Wall Street Journal, 7.24.16)
  • When Health Insurers Merge Consumers Often Lose. “Health industry executives, including those at Aetna, Humana, Anthem and Cigna, have typically defended these mergers by arguing that they are necessary to make the health care system more efficient. They also say they allow doctors and hospitals to better coordinate medical care by, for example, having different specialists working for the same hospital or covered under the same insurance policy — something they argue is encouraged by the Affordable Care Act, the 2010 health reform law… And rather than making the system more efficient, recent research has found that increased concentration has driven up the cost of health care. One 2012 study published in the American Economic Review found that consolidation in the health insurance industry between 1998 and 2006 was responsible for a seven percentage point increase in premiums, or about $34 billion a year. And a study by the Robert Wood Johnson Foundation found that hospital mergers also increase costs, sometimes by more than 20 percent.” (The New York Times, 7.25.16
  • Obama Justice Department Makes Case Against Single-payer Healthcare. “They didn’t mean to, but officials at the Obama Justice Department have laid out the case against government-run healthcare. In filing suit against mammoth health insurance mergers, they’ve explained that reduced competition limits options for consumers, raises costs, and threatens access to care.  That’s exactly why a single-payer system would be a disaster for America… But the Justice Department intervened against billion-dollar mergers between Cigna and Anthem, Humana and Aetna— together four of the largest insurers in the country — to try to preserve options for consumers.  The public should applaud this move and support more actions to reform public policies and foster greater competition.” Manning, Hadley. (The Hill, 7.28.16)