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September 15, 2015 01:00 AM

Premium subsidies flow heavily to populous, poor states

Bob Herman
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    More than half of this year's $27 billion in Affordable Care Act premium subsidies are going to five states, which has created a big but risky business opportunity for health insurers.

    Many Republican-led states with high numbers of low-income residents are also among the leading recipients of the law's premium subsidies, according to recent CMS data.

    California, Florida and Texas not surprisingly lead the list of states receiving the most in premium subsidies, which are provided to consumers as tax credits to help pay down the monthly cost of their health insurance. Insurers in California, Florida and Texas—the most populous states in the U.S.—will receive $4.45 billion, $4.27 billion and $2.36 billion, respectively, this year.

    North Carolina and Georgia, two poor Southern states (PDF) led by Republican governors, rounded out the top five with $1.59 billion and $1.24 billion of consumer premium subsidies for 2015, according to data the CMS released last week. That data showed about 9.9 million people paid for their health plans, based on figures from state exchanges and the federal HealthCare.gov portal.

    California, Florida and Texas have attracted several new insurers for 2015 and next year, such as tech-based Oscar Insurance Corp. and national giant UnitedHealthcare, because of the sheer size of their individual markets. Analysts say the fact that a portion of premiums is guaranteed through the ACA's federal subsidies adds to the business allure.

    Subsidies are also flowing more to Republican states with high volumes of poor, unhealthy people. Wisconsin ranks 20th in the country in population, according to Census Bureau data, but health insurers in Wisconsin are receiving $616 million in premium subsidies this year, 11th-most in the country. Louisiana is the 25th most populous state, but companies are collecting $497 million in premium subsidies this year, 15th among all states. Tax credits are also plentiful in Alabama, Mississippi and South Carolina.

    The health status of the newly insured has forced some insurers to pull back on their exchange investments. For instance, Health Care Service Corp., the parent of Blue Cross and Blue Shield of New Mexico and four other state Blues plans, pulled out of New Mexico's exchange in August after the state did not approve higher prices for premiums. The insurer said premiums did not cover the cost of care.

    HCSC's Texas subsidiary also eliminated some individual plan products for 2016, citing more financial difficulties. HCSC lost $282 million in 2014, due in large part to the costs of exchange plan members. However, the ACA included some risk mitigation programs to help pay for the uncertainty of expanding coverage to a new group of people.

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