Blue Cross and Blue Shield health plans dominated the opening act of Obamacare's insurance exchanges. But that could cause some short-term pain for their bottom lines, a Standard & Poor's report says.
Blue Cross plans enrolled the most people in 12 out of 15 state and federal insurance exchanges, according to a September report from consulting firm Avalere Health.
That applied to the not-for-profit licensees as well as Anthem, the publicly traded insurer previously known as WellPoint. In some cases, the Blues had a near-monopoly. At least 90% of residents in the District of Columbia, Maryland, Michigan, Rhode Island and Vermont bought a Blue Cross option, for example.
The high market share could be a double-edged sword for the Blues, S&P said.
That's because people in the exchanges could be more costly for insurers (PDF). They are more likely to be smokers and less likely to say they are in excellent, very good or good health compared with those who have employer-sponsored insurance.
Although S&P thinks the tenuous nature of the exchanges may hurt the surpluses of Blue Cross plans in 2014 and 2015, longer-term, their strong brand name and provider networks give them a leg up, S&P said.
And their dominance in the exchanges may be short-lived as more insurers sell plans to individuals and families. Competitors like consumer-governed co-op plans, established by the Patient Protection and Affordable Care Act, have been adding large numbers of members in states such as Maine and Colorado by aggressively pricing their plans.
“The Blue brand, which we consider to have a competitive advantage, will be tested in the public exchanges in coming years as it goes head-to-head with public for-profit insurers and some lower-priced, not-for-profit (non-Blue) insurers,” S&P's report said.
Not all Blues plans have openly embraced the exchanges. Wellmark Blue Cross and Blue Shield does not participate on the exchanges in Iowa or South Dakota, the states where it is licensed. Iowa is the site of the first potential co-op casualty. Iowa regulators took over CoOportunity Health after the health plan faced serious financial challenges, some of which stemmed from high utilization from members.
In a statement, Wellmark said it has not jumped on the exchanges because it was worried about the technological issues for consumers. The Blues plan also said many of its members took advantage of keeping non-grandfathered health plans until 2016.
“Although we sold our ACA plans off of the exchange, we are seeing the same costly medical trends in our ACA plans as other health insurers on the exchange,” Wellmark said.
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