Troubled exchange rollout has insurers tempering expectations

It was a high-pressure summer and fall for health insurance companies as they prepared for the rollout of the exchanges, negotiated contracts with healthcare providers, finalized premiums for their new exchange products, and fretted about how the new marketplaces would affect their bottom lines.

Among the new market entrants were a growing number of Medicaid managed-care companies that stepped forward to offer plans on the exchanges, prompting questions about whether consumers would opt for their economy-class coverage. Many insurers of all types indicated they would offer plans with narrow provider networks as a way to keep premiums down. But providers and consumer advocates worried whether patients would have adequate access to high-quality care.

While there were concerns in the summer about how many insurers would offer plans in the exchanges, it turned out that many insurers did jump in and consumers in many markets had lots of choices. The level of competition, however, varied greatly by market, with urban areas generally featuring lots more choices than rural ones. Several major commercial insurers, including UnitedHealthcare, limited their exchange participation, while Blues plans decided to be major exchange players. But all that wasn't clear until September, when HHS finally announced the plans that would be offered in the 36 states served by the federal HealthCare.gov marketplace.

Just a week before the Oct. 1 start of open enrollment on the exchanges, HHS released a report showing premiums across states and plan tiers, as well as the number of health plans being offered. According to the report, average premiums were 16% lower than Congressional Budget Office projections, and the number of local plan choices ranged from one to 13.

Meanwhile, publicly traded insurers reported strong second-quarter profits leading up to the launch of the exchanges. Cigna Corp. saw quarterly profits jump to $505 million, up 33% compared with $380 million in the year-ago quarter. Second-quarter profits for Aetna rose to $536 million, up 17% from $457 million in the same quarter in 2012.

To ensure choice of plans, federal officials in September awarded the Blue Cross and Blue Shield Association the first multistate insurance contract, enabling Blues plans to offer more than 150 plan options in 30 states plus the District of Columbia.

Despite all the Obama administration promises of consumer bliss, the rollout of the federal marketplace and several of the state-run exchanges turned into a fiasco because of severe technical problems with the websites. While the exchanges in some states, such as Kentucky and Washington, proved relatively successful in letting people shop and enroll in private plans, the federal marketplace gave millions of consumers nightmares, and very few people were thought to have enrolled as of early November.

But in nine states plus the District of Columbia that are operating their own exchanges, 60,648 people had enrolled in private plans as of Nov. 7, according to a Modern Healthcare count. HHS has promised to release federal exchange enrollment numbers this week.

Insurers have spent the weeks since the Oct. 1 launch puzzling over incomplete or inaccurate enrollment data, highlighting problems with the standard for electronic submission and verification forms, known as 834s. In late October, 14 insurance industry leaders were summoned to the White House to provide guidance on how to fix the dysfunctional federal enrollment process.

In their earnings reports in late October and early November, publicly traded insurers tempered expectations for 2014 because of uncertainty about how the federal healthcare overhaul will play out. Humana said it had cut by half its previous 500,000 estimate for how many new members it will enroll in exchange plans.

Meanwhile, insurers are bracing to see whether the severe problems with the federal exchange will be fixed by the Nov. 30 date promised by HHS. In October, the Obama administration extended the deadline to March 31 for Americans to obtain coverage without incurring the Obamacare tax penalty for not getting it.

Experts predict that further delays in the individual insurance mandate would mean fewer young and healthy enrollees in 2014, which could spell big problems for insurers' risk pools and necessitate higher premiums in 2015.

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