Illinois residents who buy Blue Cross and Blue Shield health care coverage through the state insurance exchange may be in for Obamacare sticker shock, if proposed rate hikes by the largest insurers in Texas and Oklahoma are any indication.
Texas and Oklahoma are possible harbingers of Blue Cross’ prices on the Illinois exchange because all three health plans are owned by the same company, Chicago-based Health Care Service Corp. Blue Cross is the most popular insurer on the Illinois exchange.
In Texas, Blue Cross and Blue Shield is seeking increases averaging 53.7 percent across its Affordable Care Act plans, according to documents posted online by the federal government. In Oklahoma, Blue Cross and Blue Shield is seeking rate increases that average 49.2 percent. It is far from certain if the rate increases will hold up on review, or how much they might change.
Illinois’ proposed rates haven’t been made public by the state so it would be premature to discuss, said HCSC spokesman Mark Spencer. But he cautioned against speculating on the company’s prices in the 2017 Illinois individual market because there are differences between states and health insurance is priced locally.
Likewise, the Illinois Department of Insurance said it could not comment on rate plans filed by Blue Cross and other insurers because the proposals are under review. The federal government will make the ACA rates filed in Illinois public on Aug. 1, said Anjali Julka, department spokeswoman.
Still, HCSC’s recent history in ACA marketplaces shows a pattern across its markets. Last year, for example, the Blue Cross plans in Illinois, Texas and Oklahoma eliminated the PPO coverage sold on those exchanges because the policies no longer made financial sense for the company.
A rate increase in Illinois similar to the proposed price spikes in Texas and Oklahoma would have consequences on the affordability of health care for some. Federal tax credits would soften the impact of higher premiums, but the sharp increases being proposed for next year will likely stir up more opposition to the health law, one of President Barack Obama’s signature policy achievements.
Federal officials say the proposed premium changes are not a reliable indicator of what typical consumers will actually pay next year because regulators will review rate requests to make sure they are justified and exchanges allow people to shop for the best deal.
In addition, tax credits, which are pegged to incomes, could go up along with premiums. In Illinois, 75 percent of consumers who bought 2016 coverage on the exchange received tax credits.
HCSC, which operates Blue’s plans in five states, bet big on the online exchanges, one of the signature elements of Obamacare. The strategy was based on a long history of selling direct-to-consumer health coverage — the kind that is offered on the exchanges. The company went all-in on Obamacare to protect its market share and to avoid signing up a disproportionate share of the sick, analysts said.
Blue Cross is the most popular insurer in Illinois’ individual market, and by a wide margin. At the end of last year, the company had more than 500,000 enrollees, about 83 percent of the market. The membership includes pre-Obamacare enrollees who were allowed to keep the health plans they had before the first ACA plans went into effect in 2014.
HCSC’s total individual membership nearly doubled to 1.63 million, from 868,863, between 2013 and 2015, according to its regulatory filings. At the end of last year, the company had the most individual members of any U.S. insurer, more than UnitedHealthcare, Anthem, Humana and Aetna, according to Mark Farrah Associates, a health industry data aggregator and web publisher.
But HCSC, like some insurers, has been stung by heavy losses in its ACA plans. Under the health law, insurers must provide a basic set of benefits and cannot turn away consumers, even if they are sick.
It’s not too surprising then that Obamacare enrollees, some of whom were denied coverage in the past because of their medical histories, are using the health care system a lot. Newer customers have higher rates of diabetes, depression and high blood pressure than pre-Obamacare individual members, according to the Blue Cross Blue Shield Association, the national federation of Blue insurance companies.
HCSC’s medical costs have outpaced premium rate increases by a wider margin compared with other big health plans, according to Mark Farrah’s analysis. Between 2013 and 2015, HCSC has seen a 107.4 percent jump in its average claim per member per month. But its premiums over that time went up 45 percent.
HCSC and other insurers were counting on an Obamacare program to reimburse them for some of the business risk of selling ACA plans. But those federal payments fell far short of expectations.
HCSC said it lost $1.5 billion last year on its individual business, up from $767 million in 2014. In Texas, where HCSC has nearly 603,000 members on ACA plans, the company lost $592 million last year and $416 million in 2014 on its individual business, Spencer said.
In Illinois, Blue Cross lost about $375 million last year on its individual business, despite an average increase in premiums of 17.8 percent on ACA plans.
To stem the losses, some insurers are pulling out of the exchanges. In 2017, UnitedHealthcare, the nation’s largest health insurer, plans to offer policies in only three of the 34 states in which it currently operates. Humana also is considering stopping the sale of Obamacare plans in some states.
More than 12 million people have signed up for health insurance on the exchanges. Insurers say the market is smaller than predicted and there are not enough healthy people to cover the costs.
But HCSC intends to stick with Obamacare. The company filed rate plans in all five of its markets: Illinois, Texas, Oklahoma, New Mexico and Montana, Spencer said.
“We are working on a path toward a stable and competitive individual marketplace for our policyholders and for everyone else in the states where we provide coverage,” he said.
But that path will be painful for consumers, judging by the proposed rate increases filed by HCSC.
“I think it’s clear that we need to more accurately price those plans to cover those costs,” Spencer said. He added that the rate requests are based on strong financial principles, science and data.
But consumer advocates question some of the big rate increases HCSC and other insurers are seeking. There was a lot of pent-up demand for medical services in the first two years of the ACA exchanges. Some expect the usage rates to stabilize.
“They can’t be raising rates to make up for losses in past years,” said Dena Mendelsohn, a staff attorney at Consumers Union, the advocacy and policy division of Consumer Reports. “We want to see what they are proposing and what they’re doing to avoid increases in health care costs.”
HCSC’s proposed rate hikes in Texas and Oklahoma appear to exceed increases in other states. A recent analysis by the consulting firm Avalere Health of rate filings in nine states found that the average proposed increases across the most popular plans range from 5 percent in Washington to 44 percent in Vermont.
Spencer declined to comment on what would happen if the company does not get the rate increases it seeks. Last year, HCSC pulled out of New Mexico’s exchange after state regulators denied the company’s proposed 51 percent rate increase.