The Sunshine Economy: Health Insurance Markets and Money

Nov 21, 2017

This year is six weeks shorter than last year.

Not on the calendar, or course, but there are six fewer weeks this year for people getting their health insurance through the Affordable Care Act -- otherwise known as Obamacare or ACA-- to sign up for 2018.

This year’s open enrollment period to sign-up for the coverage is six weeks long and it’s already underway. It ends December 15th. Last year, participants had three months to buy the health insurance or face a fine.

  

It comes as no surprise that the cost of health insurance continues rising. For insurance plans on Healthcare.gov, where more than 1 million Floridians are expected to buy their health insurance for 2018, the average premium is up 38 percent for coverage from Florida Blue. But very few patients will see their monthly premium go up by that much, or at all.

That’s because there are two separate subsidies that bring down the cost to the patient and help pay the insurance companies for the cost of the risk they’re taking. One subsidy is called the advance premium tax credit. That’s the tax credit enrollees can see if they qualify for when the shop for Obamacare health insurance. More than nine out of 10 Floridians who buy Affordable Care Act insurance plans qualify for that tax subsidy. It immediately lowers the monthly premium for the patient.

The second subsidy is called the cost-sharing reduction. This is the subsidy that President Trump stopped paying last month. As this open enrollment season approached, the Florida Office of Insurance Regulation told health insurers here to assume the cost-reduction payments won’t be coming when proposing 2018 premiums.

 

Florida Blue's ACA Individual Health Coverage Premiums

WLRN spoke with Florida Blue Senior Vice President of Health Insurance Markets Jon Urbanek about the company's ACA business and the employer-provided health insurance market.

WLRN: Has the shorter ACA enrollment period changed Florida Blue's expectations for sign-ups?

URBANEK:  The timeframe really didn't change what we thought the numbers would be. 

How do the plans customers are choosing this year compare to the past few years?

When the ACA was designed, the silver level plans were the ones that the subsidies were based on. That's really been where almost 90 percent of the membership has been. We expected that to maybe change a bit this year. So far, we haven't seen it change very much. The plans are predominantly silver that are being chosen.

What are the contributors to the 38 percent average premium increase for 2018?

Health care costs are so high that it's getting to a point to where we have a huge affordability issue - Jon Urbanek, Florida Blue

  

 The Florida Office of Insurance Regulation asked all carriers to look at the absence of the cost-sharing reductions subsidy and to make sure that the plans that we're using were priced to represent a plan that doesn't have that subsidy any longer. So that's where a good bit of that 38 percent came from. Close to 30 percent.

It's not as though every single plan that's being offered has a 38 percent increase. The increase is different by plan but the majority of those high increases happened to those silver plans that had the cost reduction component to them.

Shrinking ACA Plan Options

We've seen fewer ACA plans as Florida Blue has gained more expertise in the kinds of plans out there and that are financially supportive.

 Now that we've got a few years behind us, we can really see what plans people are choosing. We can get a better feel for why they're looking for. And it's helped us really compress this down.

It's good to have choices, but at the same time too much choice creates confusion. In insurance plans, you really want to get to where you have a good stable risk pool. Having the right number of plans is really optimal for us. We keep trying to get to that right number. That's driven by member choice helping us configure the right set of plans to put out there in the marketplace.

Is the ACA a good business? Is it a sustainable business?

 When we went into the Affordable Care Act, one of the things that we talked about was Florida is our only market. We have a mission that says we want to help people in communities achieve better health. So we said, "This is going to be a significant market for us. We can not go into this just thinking we'll survive. We have to find a way to thrive."

(The ACA) has been a good business for us - Jon Urbanek, Florida Blue

  

  Axios reported Florida Blue's ACA gross profit in 2015 was $533 million and in 2016 was $1.1 billion. That doesn't include expenses for Florida Blue employees like yourself and others, but it does include the cost of providing the medical care. Are those accurate numbers?

 I will say that this has been a good business for us, but it's hard for me to even come through with the calculations of exactly where we sit every year with this.

The chief financial officer at Florida Blue told Axios the individual market net profit margin he estimated was in the high single digits. Does that sound about right to you?

That's about right.

And how does that compare to other health insurance markets that Florida Blue is involved in?

It's really running about the same for our commercial markets. Medicare is running a bit less than that at this point. 

How's the pricing for health insurance for small and large groups?

 The pricing in group business right now is very stable. Small business, for the first time in several years, we're seeing that grow. We're in our second year of seeing some pretty nice growth in small group and we've had some favorable pricing. So that's been good for us.

The employers for the large groups are really wanting to have us help them find better solutions moving forward. They're looking to us to find creative ways to help them curb costs. Health insurance is still important to them. It's something that they use to attract and retain good talent. 

Florida Blue Senior Vice President of Health Insurance Markets Jon Urbanek.
Credit courtesy: Florida Blue

  Describe the negotiating environment between insurers and healthcare providers.

Traditionally, health plans and providers sat across the table from each other each year and argued over pricing. What you'll  found is that we sort of reached the end of that line. We (now) see a partnership. We feel like we can work with providers. We can jointly set targets for cost savings for quality.

What we're starting to see now are relationships where we're not in an illness model just looking at the fee-for-service and getting paid for each activity. We're looking more at a model that's going to say, "How do I understand the health goals of a particular patient? How do I have a reimbursement situation where (patients are) adequately rewarded for good outcomes?" That's a complicated deal. It's been talked about for years.

What's contributed to that move from a more adversarial relationship to something you describe as more of a partnership?

The fact is healthcare deductibles have gotten so high. Health care costs are so high that it's getting to a point to where we have a huge affordability issue. We've had it for years and we've talked about it. Now you're starting to feel the effects of it.

This affordability issue is real and it's really impacting us. What we've been doing worked for a while, but it's not working anymore. We've got to take a different approach here.