Indiana University Health Plans, the insurance arm of the IU Health provider system, will not offer plans on the state's Affordable Care Act marketplace in 2017, the company said Monday.
Although the exchange plans appeared to drag down the earnings of for-profit insurer IU Health Plans, its not-for-profit parent organization still remains solidly in the black.
IU Health Plans will not completely exit Indiana's individual insurance market. The company will still sell off-exchange plans. However, the roughly 27,000 people who bought an IU Health Plan product through the exchange as of June 30 will have to look elsewhere for coverage during the next open enrollment, which begins Nov. 1.
The decision to exit the marketplace was “necessary to adapt to new market dynamics and potential federal responses to withdrawals by many companies nationally from the federally facilitated marketplace,” IU Health Plans President James Parker said in a news release. Aetna, Humana, UnitedHealth Group and some not-for-profit plans, most recently Blue Cross and Blue Shield of Nebraska, have drastically curtailed their exchange presence for next year.
Parker also mentioned that the ACA's risk-adjustment program, a permanent program that shifts money from profitable health plans to those that incurred higher medical claims, was problematic. IU Health Plans executives were not available for interviews Monday.
IU Health Plans—which also has Medicare Advantage, Medicaid and employer plans—posted a net loss of $7.23 million on $41.3 million of revenue from its fully insured products in the first six months of 2016, according to financial documents filed with the National Association of Insurance Commissioners. The insurer essentially broke even in the first half of 2015, the first year it participated on the exchange.
However, IU Health's finances have remained strong, raising questions about the positioning of a for-profit insurer within a not-for-profit organization. IU Health posted a 9.3% operating margin in the first six months of 2016, down from 11.7% in the same period of 2015 but still well above the median for not-for-profit health systems. IU Health finished 2015 with a 12.8% operating margin.