Colorado’s Health Insurance Markets, Explained

Ryan Warner: This is Colorado Matters from CPR News. I'm Ryan Warner. Tens of thousands of Coloradans are waiting to see if their health insurance company will offer plans on the state's Exchange next year. They include retiree Darla Vulgamore, in Delta County. She's 64, diabetic and struggled to find a plan that would cover her pre-existing condition. 

Darla Vulgamore: Yes, I was very thankful I was able to getting insurance that I could afford.

RW: And she got it through Anthem, which is the only carrier in fourteen Western Slope counties that offers health plans thorough the state's Exchange. Anthem and other insurers have until Monday to tell the state if they'll stick around. But why are there so few options on the state's Exchange in some places and what will happen if carriers pull out? Caroline Pearson is with the non-partisan health care consulting firm, Avalere Health. And Caroline, welcome to the program. 

Caroline Pearson: Thanks so much for having me, Ryan. 

RW: When you look across the country, are a lot of companies leaving the health insurance markets created by Obamacare right now?

CP: Unfortunately yes. We're definitely anticipating that there will be fewer insurers that are participating on the Obamacare Exchanges in 2018. We've already had a number of large, national insurers pull out of the markets altogether. Others have signaled that they're still making decisions so while that's not universal, we do have a few health plans saying that they're going to expand participation but, by and large, we expect there to be fewer choices next year.

RW: All right. And Anthem, all eyes are on that company here in Colorado. It just pulled out of the Exchange in Ohio, leaving about eighteen counties there without an insurer. What happens when insurers pull out of the marketplaces? I mean do you see other companies backfilling or states finding other ways to give people options?

CP: Sure. Well unfortunately the Affordable Care Act doesn't actually have a solution for this scenario. There's no legal mechanism to ensure that there are plans available in every county. We've seen a variety of responses from the states. The most common is really for insurance regulators to go to other health plans participating in the state and try to encourage them to expand their footprint, step into those counties where other health insurers have exited and that's been pretty successful in previous years, as well as in some states this year. We've seen some other states taking more radical approaches. Iowa proposed a major change. They're going to try to overhaul their system before next year to try to save participation. New York is thinking about trying to link participation to other programs like Medicaid or perhaps even the state employee plans. So states are trying to be creative about this but there's no obvious solution at this time.  

RW: Yeah. So I'd like to hone in just a bit on New York and this idea of essentially telling insurers if you pull out of the Exchange and the individual plans, we aren't going to allow you to take part in Medicaid, thus shrinking essentially your client base in a particular state. We asked our governor, John Hickenlooper, if he was considering something like that in Colorado.

Governor John Hickenlooper: Well we have certainly talked about that. 

RW: You have.

JH: Yes. Absolutely. As a way to try to provide motivation that more insurers cover all parts of the state, or at least a number of parts of the state. 

RW: And why haven't you decided to go down that avenue?

JH: Well because there are a lot of complications, there are pros and cons. Are you going to ask every insurer that does Medicaid to cover all parts of the state?

RW: And we asked him if there are other options on the table and indeed there are. So here are some of the other choices that he's looking at.

JH: I do believe that we should hold ourselves to a level where every part of the state has some level of coverage. I think one backup possibility would be to try and find a non-profit provider that would come in with some incentives from the government. You know, have Kaiser Permanente expand statewide so they become kind of a blanket coverage. 

RW: I'll say that he said he was not yet in conversation with Kaiser specifically about that. I think it's a really critical question though to ask, Caroline, if any county in this country has gone without an insurer altogether. That is to say has there ever been a true lapse or are solutions always found so far?

CP: So far solutions have always been found. We've had this threat occur in previous years on a very limited basis and regulators have always gotten another health plan to step in to those markets. So we've never been in the situation but the threat is definitely greater this year than it's ever been before. 

RW: What can a state do to sort of sweeten the pot to attract another insurer if one leaves? I mean you've looked at other insurers in Colorado like Rocky Mountain Health Plans. What indication do you have, if any, in this state that someone else might pick up the slack so to speak.

CP: Well I think that certainly that would be the first route that the state would take to try to expand coverage, reach out to some of those local health plans that are deeply entrenched in the market and may be more apt to stay in or even expand their footprint. One of the challenges with Rocky Mountain Health Plan, Kaiser Permanente and others is many of these plans are tied closely to their provider groups. The physicians and hospitals that are delivering services and for a plan to go statewide, they need to be able to build a network of providers across the whole state so not all of the local Colorado plans may be equipped to do that throughout the region and in fact it may need to be sort of a patchwork approach where if you could get multiple insurers to expand their footprint to a few more counties than they're in, perhaps the state could cover it that way. 

RW: Kind of knitting together a solution. 

CP: Precisely.

RW: Why would Anthem, Blue Cross Blue Shield be the last carrier in this area of Colorado on the Western Slope? Why are they offering plans now when no other insurer wants to get into this market?

CP: Sure. Well Anthem, as well as the independent Blue Cross Blue Shield plans that operate in many other states around the country have historically been the number one provider of individual insurance, insurance that's not sold through an employer group plan. And that's been a huge part of their business model. Historically they've been entrenched in it, they know how to put together products that are attractive to consumers and hopefully affordable. And so this is really, they're the backbone of this insurance market across the country and it's not just Colorado where you see Anthem as the only carrier in many counties around the country.

RW: Ok, so they have a special relationship, if you will, with these individual plans. I want to say that CPR has requested an interview with Anthem. The company said that it wanted to submit its decision to the state, again the deadline looming Monday, before commenting. They did say in a written statement that they are "maintaining an active dialogue with state leaders and regulators regarding the stability of Colorado's individual market and our participation in ConnectforHealth Colorado." That's the state's Exchange. But what has changed this year that has made companies like Anthem reevaluate their participation? What's the calculation right now?

CP: Well it's a complicated one. We are four years into these Obamacare markets existing and at this point we continue to see lower than expected enrollment in these markets as well as higher than anticipated health needs among the people that are enrolled. So you've got a relatively small, relatively sick, high need population and that has made it really hard for insurers to develop and price health plans that are affordable and attractive and also can be profitable. So plans continue to struggle. And this year we have the added complication of a high degree of political uncertainty. Both due to the negotiations going on in Congress about ACA repeal as well as uncertainty about whether the subsidies in this market are going to continue to be paid and those subsidies are critical for most enrollees to afford their insurance. So you've got health plans sort of looking out at the market saying I don’t know if this market's going to be here a year or two down the line. I don’t know if my consumers, my enrollees are going to be able to afford this coverage and do I want to continue to sustain losses or the risk of losses if I don’t have some future upside. And that's a hard thing for any business to decide.

RW: Is what I hear you saying is that Republicans in Congress who are saying Obamacare isn't working, it's a failure, we need something else, that that very dialogue is adding to the uncertainty that might mean failures in the system. 

CP: That's absolutely the case. And you know as an insurer, they were playing the long game. They were thinking about this as a new, growing market and they were willing to take losses and bear a lot of risk for long-term gain, to really build a footprint in this market. And if they don’t think that the market is going to be around, it's hard to argue as a business decision that they should stay in with the degree of uncertainty that's looming in future years. 

RW: You talked about unhealthy populations being a part of this and the risk being part of the calculation. There was a provision in Obamacare to deal with this, something called 'Risk Corridors'. Republicans in Congress referred to these as bailouts for insurance companies and didn't fund these risk corridors to the tune that Obamacare originally called for. Is that adding to the calculus here?

CP: That is adding and there's another program called 'Reinsurance' that also underpinned these markets and made them more attractive for insurers. Both of those programs officially ended last year and we saw big premium increases in 2017 as a result of their end and unfortunately we believe that that risk still hasn't stabilized and in fact we're probably going to see big premium increases again in 2018, as soon as rates are filed next week.

RW: One point of contention too is what are called ‘cost sharing reductions’. Lots of heady language here in the healthcare realm but can you briefly explain what that is?

CP: Yeah, so the Affordable Care Act included both premium subsidies to reduce the monthly payments that people make to access insurance and what we call cost sharing reductions to enhance those products, to reduce deductibles, reduce co pays and coinsurance for services and they're very important for many relatively low income people that are enrolled in these markets in order to make them be able to afford accessing their care.  Those are at the heart of a lawsuit that's brewing at the federal level right now. They haven't been properly appropriated by Congress and fundamentally it's up to the Trump administration to decide whether they're going to continue to pay those cost sharing reductions. They've been unwilling to make a long term commitment about whether those cost sharing reductions will continue to flow to the health plans. Without them, coverage would become unaffordable very quickly for many, many millions of enrollees and that again is something that is a huge concern to the plans that are participating in the market.

RW: Essentially Congress here isn't funding those subsidies as much as Obamacare had committed. Here's what Colorado's Insurance Commissioner, Marguerite Salazar told CPR's health reporter John Daley about the importance of those cost sharing reductions, those government subsidies for insurers.

Marguerite Salazar: Actually three plans told me that they would get out of the individual market if the cost sharing reductions were taken away, if the individual mandate was done away with. They said, "We can't stay in the market. We will get out."

RW: Of course in April you had Anthem's CEO talking about the possibility of the company exiting the market. He spoke on an investor call, a very public forum. Is it possible that all of this is just about trying to put political pressure on Congress and the President to restore these subsidies or to bring more stability? Is this political theater in some regards?

CP: Well I think there are many things going on. I think that plans are very seriously considering their participation and it's not just theater because we've seen lots of insurers exiting in other states, so we know it's a real decision, but absolutely the health plans are also trying to communicate to the Trump administration and other federal officials that these decisions that they are making have a big impact on plans business and on their future decisions to participate. So political pressure is one of many components here on top of trying to really decide where they're going to enroll people next year.

RW: I want to say thought that Anthem, this company that is deciding whether or not to stay on the Exchange in Colorado is having a great year. Forbes reported that the company's profits were up 44% in the first quarter. Why would this be so contentious if a company like Anthem is seeing profit?

CP: Sure. Well, what we have to keep in mind is that these Exchanges are really a small fraction of the total business that any given health plan is doing.

RW: Ah.

CP: Nationwide, there's only about 10 million people in the Exchanges, about 200,000 in Colorado, and so this business line could be losing money while other business lines are doing better.

RW: Okay. So it's only a part of the pie. Meanwhile, insurance premiums on the exchange are expected to go up again in Colorado next year, as much as 25% according to the insurance commissioner. I realize you could probably write a dissertation on this question but briefly what can we say about why premiums are going up? In addition, I suppose to the uncertainty you've already talked about.

CP: Well I do think it comes back to those factors. I think we had expected that as these Exchange markets grew, more and more young, healthy people would enroll and they would help to balance what we call the risk pool. You've got people who are sicker and have higher health needs and people who are younger and healthier and they together bring down premiums. But we really haven't seen those young healthy people enrolling at nearly the numbers that policy makers had hoped for and as a result, premiums continue to go up in the market, in order to cover the costs for people who have really serious pre-existing conditions and are depending on this insurance.

RW: Let's say that Obamacare supporters would contend that out of pocket expenses would have gone up more without the health care law and last year about two-thirds of patients on Colorado’s Exchange qualified for subsidies so they didn’t pay the full increases. Caroline, thank you for being with us. 

CP: Thanks for having me. 

RW: Caroline Pearson, Senior Vice President at the health consulting company, Avalere Health. We talked about the upcoming deadline, it’s Monday, for health insurers to notify the state whether they will offer plans on the Health Exchange next year. This is Colorado Matters from CPR News.