Reform Update: Some big names take pass on Calif. insurance exchange

In California, the most populous state in the country, one might think that insurers would be tripping over themselves to get plans on Covered California, the state's health insurance exchange. But that would be wrong.

Despite the fact that 20% of the state's population is uninsured, according to 2011 data from the Kaiser Family Foundation, several large insurers, including Aetna, Cigna Corp. and UnitedHealth Group, are all taking a pass on the Golden State's exchange—at least initially.

Anthem Blue Cross of California, Blue Shield of California and Kaiser Permanente, three of California's largest insurers, are among the 13 that will participate in Covered California, the state's exchange, exchange officials said Thursday.

While the decision of three of the largest national insurers may come as a surprise to some, there has been writing on the wall. For example, during its first-quarter earnings call in April, UnitedHealth CEO Stephen Hemsley said, “We will be very selective in where we participate and do not believe the exchanges will be a significant factor for us.”

And earlier this month, Aetna President and CEO Mark Bertolini and Humana Chief Operating Officer James Murray each said his company would likely offer plans in only 14 states.

Despite the promise of health exchanges to bring increased competition through exchanges, the insurance executives' comments indicate that may not happen everywhere. And part of the reason, as an American Medical Association survey pointed out last year, is that many markets are controlled by a handful of insurers, who use their dominance to get better contract rates from providers, and thus, more competitive premium rates for members.

However, does fewer insurers necessarily mean fewer plan options for consumers? Colorado, which Thursday released proposed health insurance plans and premiums from carriers for 2014, has received information from 11 insurers who want to offer about 250 plans in the state.

And earlier this month, officials in Illinois said six carriers have applied to offer 165 qualified health plans on its health insurance exchange. But that is far from the 260 plans from 16 carriers the Illinois Department of Insurance projected last year.

Another question is how the proposed rates for 2014 compare with the same rates for 2013. While 2014 plans are required to be richer in terms of benefits due to reform-law mandates, many of the states that have released their proposed rates have had some of those provisions in effect for years. Robin Lunge, director of healthcare reform for Vermont Gov. Pete Shumlin, a Democrat, says that of the proposed rates and plans offered by insurers in the Green Mountain State for 2014, some have increases and other are lower compared with similar policies offered for 2013. But overall, she says the proposed rate increases from carriers are akin to what they were this time last year.

New Mexico, which previously said it would operate its own exchange, has had a change of plans. On Monday, the state exchange's governing board said that it plans to run a marketplace for small businesses, but will use a federally facilitated exchange to offer coverage to individuals next year. J.R. Damron, chairman of the governing board, told the Associated Press that the “hybrid” approach is needed as the state is unable to implement its own computer system for the individual market before federal deadlines.

More than one in four Americans who would qualify for premium tax credits under the reform law do not have a checking account, which could hamper their ability to pay for premiums, according to a study released Tuesday by income tax preparation firm Jackson Hewitt. Since many carriers require customers to pay for their premiums through direct debits from a checking account, it could undermine efforts to expand coverage, according to Jackson Hewitt. In addition, the firm found that this “unbanked” status will especially impact African-Americans and Hispanics, and will be disproportionately large in states with federally run exchanges.

Follow Jonathan Block on Twitter: @MHjblock