As the dominant players on many state health insurance exchanges, Blue Cross and Blue Shield plans are particularly vulnerable to negative financial conditions on the marketplaces. But Blues plans (excluding publicly traded Anthem, Inc. and Triple-S Management Corp.) actually showed “continued improvement in their ACA exchange margins,” reported Matthew Borsch and colleagues at Goldman Sachs Equity Research in a recent report on Blues plans’ third-quarter 2016 financial results.
Blues plans’ aggregate medical cost ratio (MCR) for exchange business improved dramatically, from 106.4% for the third quarter of 2015 to 92.8% for the most recent period. Borsch predicted that the full-year 2016 MCR for exchange products would be 93%, versus 105% in 2015 and 102% in 2014.
Individual enrollment among non-publicly traded Blues plans also fell over the past year, according to Goldman Sachs. It stood at 6.7 million at the close of 2015’s first quarter, but fell to 6.0 million at the end of 2015 and 5.3 million on Sept. 30, 2016. “This appears to reflect the strength of [not-for-profit Blues plans’] price discipline in this segment with 3Q2016 premium per member up 18% [year over year], far outpacing a 6% increase in underlying medical cost per member, which in turn is reflected in the sharp MCR improvement,” the report said.
In general, not-for-profit Blues plans are performing better in 2016 than in the previous year, Borsch said. Still, the companies are on track for a margin of just 0.5%, compared with almost 5% 10 years ago. He attributed the drop in profitability to the Affordable Care Act’s (ACA) public exchanges as well as its medical loss ratio provisions.
The tight margins likely will make Blues plans more conservative in rate-setting as well. “It may take several years of margin recovery…before we have to worry about [not-for-profit] Blue pressure on non-ACA commercial pricing (or MA),” Borsch predicted.
In most business lines, not-for-profit Blues plans had similar experiences compared with publicly traded insurers. But Borsch pointed to one area where the two diverged. “The one real surprise was the deterioration on the group insured side [for publicly traded insurers], which was across the board and ran counter to the trend we observed among the [not-for-profit] Blue Cross plans.”