The Blues are Obamacare's "last man standing"
The recent report from Standard & Poor's detailing why Obamacare is not in a death spiral has made a lot of waves, especially in liberal circles. Don't overlook the linchpin of the S&P analysis — the financial reports of the not-for-profit and mutual Blue Cross Blue Shield insurers.
Why focus on the Blues? Simply put, they hold a lot of market power, and the exchanges would struggle to function without them. "Traditionally the Blues have been the main players in the individual market," Dan Polsky, the executive director at the University of Pennsylvania's Leonard Davis Institute of Health Economics, told me. "They are kind of the default, the last man standing."
Here's the evidence of the Blues' importance:
- Five states (Alabama, Alaska, Oklahoma, South Carolina, Wyoming) had only one insurer for 2017. In each of those instances, the lone insurer is a Blue Cross Blue Shield affiliate.
- Many other states (Arizona, Delaware, New Jersey, North Carolina, Vermont, West Virginia) had only two insurers for 2017. In each of those instances, the Blues are a dominant player.
- Blues are major competitors in California, Florida and other big-state exchanges.
It's not all rosy for the Blues: The Obamacare markets vary widely from state and depend heavily on other factors, such as Medicaid expansion, whether pre-Obamacare plans are still around, and the state's risk pool.
- Many Blue Cross Blue Shield plans still offer broader networks of hospitals and doctors. But the Blues in Illinois, Minnesota and Texas scrapped those plans in favor of narrow networks.
- The Blues affiliates in Mississippi and Nebraska only sell plans off the exchange, and Wellmark just decided to abandon its half-hearted attempt on the Iowa exchange.
What we're watching: Anthem, the largest of all the Blue Cross Blue Shield companies. The for-profit Anthem has a massive Obamacare business that has hovered around break-even and slight profitability, and its decision to stay or exit in 2018 will be a bellwether for the marketplaces.
"They're kind of caught between theses two different psychologies of how one might embrace the marketplace," Polsky said, noting Anthem will either choose its shareholders or its legacy mission of covering those in need. "It's very unpredictable."