First United, Then Aetna, Scott & White, and Now Oscar: Analyzing The 2017 Marketplace After Big-Name Exits

UnitedHealthcare, Aetna, the Scott & White Health Plan, and now Oscar—insurance plans are fleeing the Affordable Care Act’s public exchanges in North Texas and beyond, raising questions about whether it’s possible for a payer to attract a population with enough healthy people to balance out the costs of treating the sick.

The New York-based startup Oscar Health is the most recent to exit, announcing Tuesday that it would be vacating the Dallas-Fort Worth exchanges after just a year. Here, their strategy was thought to be iron-clad: They linked with Baylor Scott & White Health, adding to the network the providers enrolled in its partner’s accountable care organization, the Baylor Scott & White Quality Alliance. The independent physician ACO Catalyst Health also signed on, both of which featured physicians well informed about the sort of value-based initiatives that Oscar was seeking to provide.

“Most insurance companies sell to HR departments, not to the member,” CEO and co-founder Mario Schlosser told me in November of last year, about two months before its inaugural year on the exchanges began. “With the ACA just knocking on the door in those days, we realized there was a big consumer market available where the people went out and voted with their feet. That seemed to us to be a huge deal. There was a window open to where if you create a better user experience you can pitch this to people directly and they will buy it.”

A high-performing narrow network, an ad campaign that planted clever banner ads on buses and rail lines, and a slew of digital millennial-friendly tools like telemedicine couldn’t overcome the challenges of the exchange population. Oscar wasn’t available for an interview on Tuesday and instead linked over to a blog post announcing the decision. Gary Brock, Baylor Scott & White’s Chief Integrated Delivery Network Officer, said the plan attracted about 7,000 patients in its first year on the exchanges. Statewide, about 1.3 million Texans have signed up for coverage.

“You just can’t seem to get ahead actuarially of the spend rate with these individuals that are signing up on the exchanges,” Brock said. “You don’t have a good risk pool profile because you’ve got so much adverse selection of patients in those products without a mix of healthy patients, so your medical spend ratio is far outpacing the premiums of which you’re spending, and that’s why you’re seeing even Blue Cross asking for a 60 percent increase in their rates.”

And with Oscar ducking out about a week after the Scott & White Health Plan, the state’s largest nonprofit health system is not in network on any exchange plans. Scott & White’s broad PPOs (all nine of them), were some of the last remaining on the exchange. And while marketplace plans only accounted for about 2 percent of Baylor Scott & White’s overall operating revenue, Brock anticipated hiring for open positions internally and tapping the brakes on capital improvement projects until the system can recoup. “It’s not insignificant, but it’s not something that we can’t overcome,” he said.

Aetna is also out in Texas ($430 million in losses since 2014), as is UnitedHealthcare ($650 million in losses), which announced its decision to leave in March. That leaves the aforementioned Blue Cross Blue Shield of Texas, which made it a point to offer products in all 254 counties in Texas, and lost about $1 billion over the last two years in doing so. Now, if its 57 percent to 59 percent rate increases are accepted, it will be the only plan left in 80 counties (if Cigna, as has been reported, does in fact drop out). According to a D Healthcare Daily analysis of federal data, Scott & White’s exit left 18 counties with only Blue Cross Blue Shield plans to choose from. And with Aetna’s exit, another seven were plunged into the one-payer marketplace. With both their departures, the one-two punch knocked another four counties into that category.

And, while the Blue Cross Blue Shield of Texas executives are hopeful that CMS will approve its rate increases (announcement should be coming in the next couple of weeks), it’s clear that the decision will play a significant role in the payer deciding whether it remains in the exchanges.

“The reality is that no final decisions have been made because the rate decisions are coming this week,” said Dr. Paul Hain, the company’s North Texas market president. “It wouldn’t be possible for us to participate if we are going to continue to lose the amounts of money that we’ve lost in the past. This is not a financially stable business model.”

Nevertheless, few consumers may feel the true impact of the spikes. According to the Centers for Medicare and Medicaid Services, 87 percent of Americans who purchased insurance on the exchanges received some type of subsidy to offset the cost of their plan.

Oscar, which Bloomberg News reported lost about $105 million in 2015, hinted that these rate increases would make it tough to compete here. (It’s staying in the market in San Antonio, and will offer an off-exchange bronze plan here, but it won’t be eligible for federal subsidies). Research suggests cheaper plans can be more appealing to a sicker population, and if Blue Cross got its increases, Oscar’s may have fallen below it, making it among the lower-cost options available (it requested increases of between 11 percent and 23 percent). Quoting Bloomberg:

In Dallas, Schlosser said Oscar faced an unpredictable insurance market, with several large carriers pulling out and the state’s Blue Cross and Blue Shield insurer asking for big rate increases, along with climbing medical costs.

Which is to say that the health exchanges will hardly be stable in 2017. David Dillon, vice president of Allen-based Lewis & Ellis Actuaries & Consultants, says he’s curious to see how the market responds to the departing plans. Their patients will likely be shifted to other exchange plans, which could mean more difficult predictions for utilization going forward. And especially so with Aetna, Scott & White, and Oscar, which waited so late in the season to exit that the remaining competitors may struggle to strategize how it will affect their populations.

“Aetna made this decision so late that the other carriers didn’t have a chance to react,” says Dillon, who works with states to consult on actuary rate increases on the exchanges. “I really thought most carriers would give it two to three years, but these companies, they’re cutting their losses early.”


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