The individual health insurance marketplace is not a small capillary for Blue Cross and Blue Shield of Arkansas, the dominant insurer in the fourth-poorest state in the country. It's a main artery.
And the good news for the Arkansas Blues is that the individual market—a “disaster” according to presidential hopeful Donald Trump—is pumping black ink, not the blood-red ink reported by some insurers selling individual plans on the Affordable Care Act exchanges across the country.
The insurer, a not-for-profit mutual owned by USAble Mutual Insurance Co., captured nearly 90% of Arkansas' individual health plan market, which includes policies sold on and off the exchange as well as private-option Medicaid plans. The company invested in plans that had cheaper premiums but limited networks of hospitals, doctors and pharmacies—the types of plans that have been attractive to price-sensitive consumers.
The state also had some special situations with its individual market. A unique Medicaid waiver gave certain low-income people the ability to purchase private subsidized coverage on the exchange. Wal-Mart Stores, which is headquartered in Arkansas, also decided to cut health benefits for employees who work less than 30 hours per week in 2015, giving the exchange a small but influential crop of eligible marketplace enrollees.
Those strategies and circumstances allowed the Arkansas Blues to post a 6.2% underwriting margin in its individual business last year and overall positive results. The company “weathered the first phase of ACA marketplace transition well and (is) in a sound competitive position,” the firm said in its annual financial filing.
Next door, in Tennessee, a much different story unfolded. Blue Cross and Blue Shield of Tennessee posted an underwriting loss of $195.7 million on $866.4 million of revenue in 2015 just from its individual plans—a negative margin of almost 23% that gets worse when administrative expenses are tacked on. That sizable deficit prompted the insurer to bail on the exchange next year in Knoxville, Memphis and Nashville, the state's three largest cities.
Tennessee did not expand Medicaid eligibility like its western neighbor. Experts also say a unified provider community in Tennessee likely made negotiations tougher. Ultimately, the Tennessee Blues' marketplace members “had more health needs than we anticipated,” the company said in a September letter to its members.
These wildly different experiences with the ACA marketplaces played out across 34 not-for-profit and mutual Blue Cross and Blue Shield brands in 2015, according to a Modern Healthcare analysis of financial filings lodged at the National Association of Insurance Commissioners. Companies in Alabama, Illinois, Minnesota and Texas fared poorly in the second year on and off the individual marketplaces. Blue Cross and Blue Shield of Nebraska has since dropped all on-exchange plans for 2017.
But Blues plans in Florida, Michigan and New Jersey incurred few problems and have thrived. Overall, half of the 34 examined plans, which sold products in 31 states, posted positive underwriting margins last year.
The results parallel the diverging experiences of for-profit and other not-for-profit insurers nationwide. Although some like Aetna, Humana and UnitedHealth Group suffered massive losses and are retreating from the exchanges, others like Kaiser Permanente, Centene Corp., Molina Healthcare and UPMC Health Plan have handled the new markets with relative ease.