Featured in Health Business Daily, Feb. 7, 2017

2017 Outlook: Blues Plan CEOs Look to 2017 With Mix of Hope, Concern About Health Care Reform

Reprinted from THE AIS REPORT ON BLUE CROSS AND BLUE SHIELD PLANS, a hard-hitting independent monthly newsletter on new products, market share, management strategies, profitability, strategic alliances and executive compensation of BC/BS plans. (Not affiliated with the Blue Cross and Blue Shield Association or its member companies.) Sign up for a $72 two-month trial subscription today.

By Jill Brown, Executive Editor
January 2017Volume 16Issue 1

Leaders at four Blue Cross and Blue Shield plans say they are wary of proposals to replace the Affordable Care Act (ACA), and warn that efforts to contain health care costs must be front and center in any initiative.

“Like all carriers, we’re eager to understand the plans the new leadership in Washington has to make health care, and health insurance, more affordable and accessible,” Bob Marino, chairman, president and CEO of Horizon Blue Cross Blue Shield of New Jersey, tells The AIS Report. “The rising cost of care continues to be the most urgent issue facing everyone involved in delivering and paying for health care.”

Horizon, like many Blues plans, has made significant investments in value-based care programs (see story, p. 5). “While we are confident that the collaborative, patient-centered platform we’re building can deliver value and quality, whatever comes from Washington will likely require us to adapt in some way,” he says.

The AIS Report on Blue Cross and Blue Shield Plans

When asked what keeps him up at night, Don Antonucci, president of Regence BlueShield in Washington state, points to the movement to replace the ACA. “I think the nation’s health insurers, myself included, are concerned about turbulence in the health care system following the expected repeal of the Affordable Care Act. Right now there are many more questions than answers, from timing and sequencing to what stays and what goes,” he says. “Health reform changes can either begin the smooth transition to another approach, or they can bring about uncertainty and instability.”

Blues CEOs Look Ahead to 2017

As chairman of the Blue Cross and Blue Shield Association Board of Directors — as well as president and CEO of Independence Blue Cross — Daniel Hilferty says he intends to “make sure Blues have a strong voice…wherever the Trump administration and the new Congress choose to go” with health care reform. He points out that the ACA, whatever its flaws, did help 20 million more Americans get health coverage. “Although it’s not a perfect law by any means, it’s a start. And now you’ve got a fresh set of eyes, a new perspective from the Trump administration that is looking to at the very least do a great deal of modification to the ACA.”

Given the losses insurers have seen in exchanges (see box, p. 11), they may need some incentives to remain in the individual insurance market while it is in transition.

“I think the best possible incentive would be if you look at the structure of the ACA,” Hilferty says, including ways to address the cumbersome enrollment process, the Special Enrollment Periods that disadvantage insurers, and issues around third-party payments.

Before the ACA was enacted, several Blues plans participated in high-risk insurance pools. Hilferty says the “jury is out on what individual states in collaboration with the federal government may or may not do” around the pools. Likewise, Independence Blue Cross is in a wait-and-see mode in deciding whether it would take on a role in a new insurance program for high-medical-cost individuals. “We have to determine what’s best for the membership and what’s best for the company as a whole.”

Brad Wilson, CEO of Blue Cross and Blue Shield of North Carolina, says his company wants a seat at the table in ACA replacement negotiations. “In a year that is likely to bring major public policy changes in health care, we are in a position to engage actively in discussions on how to get health care reform right for consumers. We must work together to ensure the smoothest possible transition to a better, more consumer-focused health care system — without jeopardizing access to health insurance and care.”

Health insurers’ biggest challenge in 2017 “is also a great opportunity...to tackle the most fundamental problem in our industry: unsustainable health care costs. This will be a priority in 2017 and for years after it,” Wilson says. “Any reform that does not address the underlying cost of medical care will fail the people of North Carolina. Quality health care is virtually meaningless if no one can afford it.”

He warns that Congress and the Trump administration must “avoid actions that create more instability in the individual insurance markets.” Wilson calls out specific area where “inappropriate actions, or inaction,…will undercut stability and disrupt coverage,” such as proposals to eliminate ACA subsidies. “Cost-sharing reductions are critical in helping make insurance coverage possible for millions of Americans. About two-thirds of our ACA members who receive subsidies also are on plans with cost-sharing reductions. Eliminating cost-sharing reductions payments will have impacts that carry into future years.”

Wilson also points to the ACA’s reinsurance program as an area where Congress and the Trump administration should be cautious in reform. “The temporary reinsurance program was put in place to keep premiums affordable and ease the transition to a system in which everyone can obtain health insurance, regardless of their health condition,” he says. “Insurers paid into this program in good faith and the government should meet its obligation to help our industry make up for substantial losses arising from our service to customers in individual markets.”

According to a Sept. 29 report (B-328016) from the Government Accountability Office, HHS inappropriately hung on to $1.7 billion collected through the reinsurance program rather than pay it to the Dept. of Treasury as required by the ACA.

The temporary program, part of the ACA’s three-pronged risk-mitigation program, was created to shield carriers from high-cost claims during the first three years of the public insurance exchanges. The program is funded by contributions collected from insurers and self-insured employer plans.

The ACA envisioned HHS would collect and distribute $10 billion to carriers for 2014, $6 billion for 2015, and $4 billion for 2016. But insurers requested less than projected. For the 2014 plan year, HHS had intended to use its surplus of $1.7 billion to fund insurer payments in future years.

But GAO concluded that HHS lacked the authority to keep the funds for carriers rather than turn it over to Treasury as required by statute. “This prioritization of collections for payments to issuers over payments to the Treasury is not authorized,” according to GAO’s report.

It’s unlikely a lawsuit would be able to recoup money already paid to carriers for 2014, or funds already earmarked for 2015, but they could lose billions from the 2016 plan year, the final year of the program. While reinsurance distributions for 2016 are supposed to be $4 billion, limiting payment through the program could result in a financial hit for some insurers. For a large carrier, payments from the last year of the program could be $50 million or more.

Finally, Wilson cites the ACA’s risk-corridor program. The insurer was one of several carriers that filed suit against HHS for paying only a small share of the funds owed under the program, which is part of the ACA’s so-called 3Rs — also including the risk adjustment and reinsurance programs meant to backstop drastic carrier losses on the marketplaces.

Plaintiffs in other suits include Blue Cross of Idaho, Highmark Inc., Moda Health and the now-defunct Consumer Operated and Oriented Plan (CO-OP) Health Republic of Oregon.

For the 2014 plan year, exchange carriers were paid only 12.6% or $362 million of the $2.87 billion in total claims. And CMS on Sept. 9 released a preliminary update on risk corridors payments for 2015, telling insurers that all the funds collected for last year will be allocated to pay any remaining deficits for 2014.

Wilson says the insurer is owed about $147 million in 2014 payments and more than $175 million in payments for 2015.

Although the focus now is on Trump and Republican congressional leaders, Wilson says health insurers also have an important role to play. “I do not believe any legislation can magically make health care affordable and accessible to all Americans. Meaningful change has to come from our industry and it has to come now.”

Meanwhile, Antonucci points to some of the other challenges facing insurers in 2017. “While we can’t predict the future of the ACA or speculate on what might happen in the coming months, there are a number of other issues [that] are still at the forefront of the conversation. For example, concerns over data breaches are a very real threat and can impact any industry — as we have seen, that includes health care. Personal health care data in the wrong hands can be damaging and it’s recommended that the health care ecosystem…each take equal responsibility in safeguarding patient information.”

He also cites opportunities to make health care more affordable and accessible.

“At Regence, we have been working over the past decade to educate and empower people with the tools they need to make informed choices on their health care decisions — helping them save time and money. An example of this is our treatment cost estimator, an online tool showing average treatment costs in a specific hospital or provider network. For example, imagine you need to have knee replacement surgery — this tool can provide average estimates by region and also shows quality measures,” he says. And “depending on your plan design, [it] can highlight the prices of the most common, elective services.”

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