Who Will Sell Insurance In the Exchanges? Non-profit Insurers.For Consumers, This is Great News– Part 1

You may have heard that big for-profit health insurers are taking a “wait-and-see” attitude toward the Exchanges –the one-stop marketplaces where small businesses and individuals who don’t receive benefits at work will be able to buy insurance.

Both UnitedHealthGroup, the nation’s largest carrier,  and Aetna the third-largest, have told analysts that their involvement in the health insurance marketplaces across the country will depend on whether they find them “financially viable” for the companies  WellPoint, Humana and Cigna also have indicated that they will participate in a “limited” number of markets. /

Aetna is being particularly coy.  On a conference call with investors and analysts just three weeks ago Aetna officials said that if they don’t like the way the market is shaping up they “might pull their products from the online marketplaces at the last minute.”

Is this meant as a threat? One can only imagine the chaos that would ensue if Aetna began pulling out of state Exchanges at the 11th hour. The remark demonstrates how little concern Aetna has for its customers.

 Doomsters say Too Few Plans Will Mean Higher Premiums

Many have been predicting that the Exchanges will fail because the big names won’t be participating. They point out that in Illinois “only six insurance carriers have told the state of they want to sell health policies on the state’s online s marketplace. “   The  critics warn that if not enough companies offer coverage in the Exchanges, consumers won’t have enough choices, and  their won’t be enough competition to keep a lid on prices.

Former insurance executive turned industry consultant Robert Laszewski  is quick to pounce on “the Illinois numbers” as “an early indicator that insurance companies are backing away from full participation in the online marketplaces. . . I’m hearing that from other carriers in other parts of the country as well” he told Chicago’s Crain’s Business. “They are terribly fearful that if there’s a poor launch (of the marketplaces) they’re going to get blamed for a mess.”   

Laszewski has been predicting “sticker shock” in the Exchanges for some time. What he ignores is that what matters most is not the number of plans available in the Exchanges, but how good they are.  Quality, not quantity is what counts. 

 In the end, “robust competition” does not depend on the free-market chaos of 20 or 25 plans vying for market share. It turns on a few good companies offering transparent information. Then, and only then, can consumers compare them and make rational decisions.

                              California Disproves the Critics

California already has demonstrated that the doomsters are wrong.  Two days ago, the state unveiled the offerings that will be available in its Exchanges—along with the prices.  Nearly three dozen plans had submitted bids, and 13 were selected.  (California exchange officials rejected bids that were too expensive, or failed to include enough choices of doctors and hospitals.)  

Sure enough, the brand name for-profits are not going to peddle their products in the California Exchange.  

But as it turns out, they weren’t needed to create a competitive affordable market that offers Exchange customers a wide range of choices. As I discuss below, Kaiser, which ranks #1 in the state for both quality and consumer satisfaction will be part of that marketplace.

In  every region in the state, individuals who don’t have health benefits at work will be able to purchase comprehensive insurance that offers free preventive care, covers the 10 essential benefits, and caps out-of-pocket spending for less than $4,000 a year. (In North Los Angeles County, for example, Kaiser will offer a Silver Plan for just $294 a month.)  This is significantly lower than expected: the Congressional Budget Office (CBO) had estimated that such comprehensive coverage would cost $5200.

Four thousand dollars might sound pricey for a middle-class family, but keep in mind that individuals reporting modified adjusted gross income (the number at the bottom of the first page of your tax return) of less than $45,960, as well as families earning as much as $94, 200 will be eligible for federal subsidies that will help them cover their premiums.

 Supposedly the big insurers are reluctant to join the Exchanges because they fear that people who have expensive medical conditions will sign up immediately for coverage while younger healthier customers will wait.

But those fears ignore the federal subsidies that will be offered to middle-income as well as low-income Americans. And 75% of young adults under 30 who now buy their own insurance will be eligible for financial assistance. But they can get tax subsidies only if they join the Exchanges. Why wouldn’t  they? /

Keep in mind that the uninsured are relatively young: 55 percent are under 34; and 73 percent are under 44.   We just have to let them know that the subsidies exist, and that you don’t have to be poor to qualify.

By avoiding California’s Exchanges, Aetna et. al. are missing out on an opportunity to sell insurance to millions of young Americans who, thanks to the subsidies, now will be able to afford comprehensive policies. “Opting out of the exchange” may turn out to be  “a major blunder” for these carriers, says Glenn Melnick, health policy professor at USC.  “California is going to be a trendsetter,” he added, noting California’s size and importance in the reform movement nationwide.  

        The Real Reason Why For-Profit Insurers Are Wary of the Exchanges

It’s not so much that they are afraid that only the old and sick will flood cthe Exchanges.. They are afraid that they won’t be able to compete successfully with a non-profit like Kaiser.

As insurance industry whistle-blower Wendell Potter recently pointed out on Healthinsurance.org: “Most if not all . . . nonprofit insurers  . . . will want to offer their policies on the exchanges because a significant percentage of their current customers are small businesses and individuals, who cannot get coverage from an employer.”

By contrast the majority of the well-known for-profits– “Aetna, Cigna, Humana and United HealthCare – are far more interested in administering benefits for large companies than selling directly to individuals and small businesses.”

The national brand names lack “experience and expertise in the individual and small group market Potter observes.

This may well explain why Aetna CEO Mark Bertolini has said that Aetna will operate in only 14 exchanges and is aiming for a “measured approach … we just think that we have to see how these things operate and we’re not going to go in for a land grab.”

Bertolini is thinking about shareholders—and profits. Under reform, the big insurers will no longer be able to sell extremely lucrative “junk insurance”—policies that are filled will holes that you usually don’t discover until you get sick and fall through one of them. In the Exchanges all insurers will have to cover all essential benefits. In addition they won’t be able to cap how much they pay-out in a given year, or over a life time. Meanwhile, the amount that they can ask customers to pay out of pocket is capped. Finally, in the Exchanges, they won’t be able to shun people suffering from pre-existing conditions. And they will no longer be able to over-charge women. As a result, they fear that they won’t be able to reap the profits that they now command in a largely unregulated marketplace.

By contrast, insurers like Group Health Cooperative, a non-profit in South Central Wisconsin are enthusiastic. “We’re going to go all in,” says marketing director Al Wearing.  /

 For consumers, this is excellent news.

             But Will the Non-Profits Be As Good As the Brand Names?

Some Americans are expressing concerns that the plans available in the Exchanges just won’t match up to Aetna and UnitedHealth. What most  people don’t realize is that when  carriers rated for consumer satisfaction and qualify non-profits top the charts

Since 2010, Consumer Reports has been publishing health plan ratings from the National Committee for Quality Assurance (NCQA). The results are eye-opening: When it comes to both quality of care and consumer satisfaction, non-profit insurers beat the for-profit brand names all to a hollow.

The scores are based on:

•        Consumer satisfaction (as measured by two surveys);

•        Prevention (For example, prenatal and postpartum care, cancer screenings, and appropriate use of asthma medication.);

•        Treatment (When assessing diabetes treatment, NCQA looks at blood-pressure control, retinal eye exams, glucose testing and control, LDL cholesterol screening and control, and monitoring of kidney disease.);

•        NCQA accreditation (The accreditation process involves evaluation by physicians and managed care experts who make sure plans provide accurate marketing material, and give clear information to members on coverage and denial decisions Accredited plans also commit to being held accountable for their performance by reporting data.)

In 2012, every one of the top 10 private plans in the report was a nonprofit. For the third straight year, the No. 1 private plan in the nation was Harvard Pilgrim Health Care’s HMO.

Wisconsin’s Group Health Cooperative, mentioned above, was among the top ten. Ninety-five percent of its enrollees are “happy with how doctors communicate.” Can you say that about physicians in your insurers’ network?

What is shocking is how badly the brand-name for-profits do.. Aetna, Humana, and UnitedHealthCare all have more private plans in the bottom 100 than in the top 100. This was true, not just in 2012, but in 2011.

To see how plans in your state fared, check out the ratings. (For access to the rankings, you’ll need to sign up for a one-month subscription to Consumer Reports.)

                     Harvard Pilgrim expands its New England Franchise

Top-rated Harvard Pilgrim now has nearly 1.2 million members in Massachusetts, New Hampshire and Maine, and is making plans to march into Connecticut, a state dominated by for-profit insurance giants.

There, the leading commercial player-Anthem Blue Cross Blue Shield, owned by WellPoint, a for-profit- has been losing market share.

“With the exchanges coming, Connecticut is the perfect place for Harvard Pilgrim to follow up on what they’re doing in New Hampshire and Maine,” says Ric Gross, an analyst at HealthLeaders-InterStudy. .

‘Integrated’ health systems – the future

Five of the NCQA”s top ten are integrated health systems in Florida (Capital Health Plan), Wisconsin (Group Health), Colorado (Kaiser) and California (two Kaiser plans).

In addition to providing insurance, these “integrated systems” employ the doctors who provide care.

“Unlike traditional independent fee for service’ doctors and hospitals that make money by doing as many treatments and procedures as possible, whether needed or not, integrated plans prosper by keeping their customers healthy and avoiding wasteful care,” Consumer Reports explains.

Other highly-rated integrated plans like Geisinger (Pennsylvania), Group Health Cooperative (Seattle, Washington) and HealthPartners (Minnesota) are among our most efficient because the provider and the payer share the same goal.

Kaiser is the largest, and will likely serve as a model for Accountable Care Organizations of the future. Fully 75 percent of the Kaiser plans place in the top 25 percent on NCQA’s charts, and Kaiser plans to join the exchanges in all of the states where it operates: California, Hawaii, Oregon, Colorado, Georgia, Ohio, Maryland, Virginia, and Washington DC.

Last year, Kaiser jacked up its direct-to-consumer outreach and by year-end membership had jumped 131,000, expanding Kaiser’s base to more than 9 million. Now, as it joins the exchanges, Kaiser is positioned to help the government get the word out: Buy insurance in an exchanges and you may well receive a subsidy.


Are non-profits cheaper? Not necessarily.See Kev Coleman’s guest-post below.  But as the ratings suggest, the non-profits plans offer better value for your dollars.

For-profit insurers must worry about meeting Wall Street’s demands for fat profits margins-and rising earnings, quarter after quarter. This makes it difficult to set long-term goals. If a company misses investors’ quarterly expectations, its share prices will plummet.

The best non-profits, on the other hand, can focus on long-term strategies to improve their customers’ health by stressing preventive care, and chronic disease management. Over time this will lower the insurers’ costs (under reform, this will lead to lower premiums) — and cement customer loyalty.

In part 2 of this post (which will be coming soon ) I’ll discuss how many “choices” are needed to create robust competition, why “choices” are over-rated, and how a dominant, popular insurer can keep health care prices down by refusing to over-pay brand-name providers.


4 thoughts on “Who Will Sell Insurance In the Exchanges? Non-profit Insurers.For Consumers, This is Great News– Part 1

  1. California rates were indeed lower than expected, especially with the federal tax subsidies included.

    Re UHC and Aetna, I agree that they will play a waiting game. Here in Ohio, I don’t expect to see either one enter the Exchange fray this year.

  2. Good piece. Only consideration is that the $4,000 deductible is material, eapecially in a world where many arent used to “skin in the game”. Hospital and MDs are seeing defaults and bad debtors. This could impeded MD acceptance of these patients and should be watched closely.

    • Meg–

      I’m sorry I didn’t reply earlier–for some reason, your comment was lost in the shuffle and I just saw it.

      I agree that a $4,000 deductible is far most than most people can afford.

      But under Obamaacare, very, very few people will pay a $4,000 deductible–unless they decide to pick a “high deductible plan” And O-care they will have a great many better choices.,

      Both in the Exchanges(where people buy their own insurance) and when people have employer-sponsored insurance at work, total co-pays and the deductible for a given year will usually be capped at 3,350. After that the insurer will have to pay all bill for “essential benefits” (basically everything you need.

      If you earn less than 400% of the Federal Poverty Level (roughly $44,000 for an individual) and you buy your own insurance in an Exchange (because you don’t have affordable, comprehensive insurance at work), your
      total out of pocket spending will be capped at much less.

      I just wrote about this on Healthinsurance.org See

  3. Pingback: For Insurers, “New State Exchanges Hardly the Bonanza” that Investors Expected,” says Morningstar