The Affordable Care Act's exchanges have not been a bust for every health insurer. Florida's Blue Cross and Blue Shield affiliate made a profit of almost a half-billion dollars on the ACA's new individual plans last year.
The substantial ACA exchange losses exhibited by large health insurers—such as Health Care Service Corp., Highmark, Humana and UnitedHealth Group—have emboldened the law's critics and worried investors about whether the new marketplaces will ever achieve sustainability.
Yet many other companies, including Medicaid insurers Centene Corp. and Molina Healthcare and now Florida Blue, have had no difficulties making money on the new ACA plans, which often have narrow networks of hospitals and doctors as well as high deductibles.
The Florida Blues recorded a $471 million gross profit on ACA-compliant individual plans in 2015, compared with a $124 million gross profit from those policies in 2014, according to the insurer's financial filings. Those figures represent the underwriting profit and don't subtract the administrative expenses associated with those plans. The Florida Blues enrolled approximately 500,000 people in ACA plans by the end of 2015.
The ACA's medical-loss ratio requires insurers spend at least 80% of premiums on medical care, and a maximum of 20% can be spent on administrative functions, salaries and other operating expenses. Florida Blue's $471 million profit last year represented 17% of the premiums collected.
More than 90% of Floridians receive premium tax credits that reduce the cost of monthly coverage, and another 70% qualify for cost-sharing reductions that lower their copays and deductibles—meaning a lot of Florida Blue's profit comes in the form of federal subsidies.
In a statement, a Florida Blue spokesman said the insurer's ACA marketplace success could be attributed to its retail centers, which provide one-on-one enrollment help, and its high-deductible plans. The financial filings indicate increased premium revenue and money from the ACA's risk adjustment program helped boost its individual business. Risk adjustment has been a sore spot for many smaller insurers that argue bigger legacy insurers are disproportionately benefiting from the program.
Despite the massive surplus for Florida Blue, which sells individual plans in a competitive ACA exchange, the insurer is requesting somewhat high premium rate increases for 2017, although its requests fall well below the higher proposals of other insurers. The Florida Blues asked for rate hikes of 9.8% for individual plans and 8.7% for small-group plans that have the broadest provider networks. Rate hikes for the insurer's HMO network products range from 9.5% to 16.5%.
The average rate request of the most common silver-level ACA plans will go up by 10% next year, according to a new analysis by the Kaiser Family Foundation. Insurance regulators usually approve smaller rate bumps.
ACA plans limit out-of-pocket spending and provide several types of preventive care for free, welcome protections for many Americans. But premiums and deductibles have been viewed by many consumers and families as difficult to afford, especially if they don't receive subsidies and are paying full freight.