The Affordable Care Act’s open enrollment period for January 1 coverage has come and gone, and Texans who purchased health insurance from the ACA marketplace are now set for the upcoming year. While most of this year’s open enrollment went off without a hitch, one story emerged out of Houston that was reminiscent of the days before the Affordable Care Act. 88,000 people who were insured through Blue Cross Blue Shield’s individual PPO (Preferred Provider Organization) plans were dropped from their current plans when Blue Cross Blue Shield announced that it was no longer going to offer individual PPOs. That left these people, many of them patients with serious illnesses, scrambling to find a new insurance plan before the deadline.
What they found left them, as the Houston Chronicle reported, “furious and terrified.” The only plans available on the ACA marketplace were HMOs (Health Maintenance Organizations), whose narrow networks no longer covered the top-tier medical care these patients had been receiving at places like MD Anderson Cancer Center. Seriously ill cancer patients found themselves faced with the prospect of finding new oncologists, because their established doctors were no longer covered by any insurance plan that they could purchase on the marketplace.
Conservative opponents of the Affordable Care Act want to blame Obamacare for “hurting people.” But let’s take a look at what’s really happening.
The ACA exchange provides does not offer government-sponsored plans, but rather gives people a place to shop around for privately-run insurance. Those plans are run by companies like Blue Cross Blue Shield, Cigna, and Aetna — all private entities who sell a good, health insurance, but still have to keep a bottom line in mind. The company takes in money from the consumer to provide them with insurance, and then has to pay out the cost of a patient’s care. As a private company, it’s up to them to do what they can to keep costs low and profits high.
Insurance companies have a variety of tools to accomplish this goal. One of those tools is by raising premiums, or the monthly price that each individual pays to buy insurance. In general, a higher premium means that the insurance plan provides better coverage, because the insurance company takes in more money up front. Another tool is selective contracting with various health care providers to create a network of coverage that. The insurance company pays those doctors less than an out-of-network doctor, which lowers their costs. (In exchange, doctors get an increased volume of patients, which is good for them too.) The narrower the provider network, the lower the costs for the insurance company. PPOs generally have wider networks and often include some out-of-network coverage, while HMOs have a very strictly defined, narrow network.
There are other tools too, such as denying coverage to sick patients with pre-existing conditions, or rescinding someone’s coverage when they get sick. But those are now illegal under the Affordable Care Act, so insurance companies have to find new ways to keep their costs lower.
Sick patients cost more for the insurance company than healthy patients, so the goal is to have a balance of the two in order to keep costs manageable. The problem is that this wasn’t happening in the health insurance marketplace. As Helaine Olen at Slate pointed out:
“Many customers on the exchanges are going for the low monthly premiums, and they’re willing to take a narrowly restricted medical network that doesn’t compensate for out-of-network charges except in an emergency as the price they pay for the lower monthly bill. For those who are healthy and unlikely to go to the doctor that often, that’s a rational, financially prudent decision.”
Meanwhile, sicker patients were choosing the PPO plans with higher premiums and broader networks, because they needed that coverage to live.
This created a problem for insurance companies. Costly, sick patients were using more coverage in PPO plans and costing them more money, without any healthy people using the PPO to balance out the costs. In fact, Blue Cross Blue Shield of Texas said they paid out $400 million more than they received in premiums for their PPO plan in 2014. Facing that loss, the insurance companies decided to take drastic action and eliminate their PPO plans from the individual marketplace, leaving seriously ill patients without access to the doctors they’d been seeing for months, or years.
(Ultimately, one insurer in Houston, Humana, did come through with an individual PPO plan at the last minute. The plan was only offered directly through the insurance company, not through the ACA marketplace, making it ineligible for any premium tax credits that would have made it cheaper. And it is a very pricy plan.)
Insurance companies like Blue Cross Blue Shield framed the decision as one they had no choice but to make. They were operating on “thin margins” and had to act, and it’s really not that bad for seriously ill patients to lose their established doctors anyway. The one problem with that argument? Blue Cross Blue Shield had grown its revenues by billions last year, and was sitting on a nearly $10 billion surplus. Blue Cross Blue Shield’s CEO got a $10 million bonus last year. And other insurance companies aren’t much better. Cigna, which also dropped its PPOs is seeing higher-than-expected projected profits for 2015.
As John Rowe, a health policy professor at Columbia University Mailman School of Public Health told the Houston Chronicle, “That’s why companies have reserves, for a rainy day. Well, guess what? It’s raining.” He added that Blue Cross Blue Shield’s $10 billion surplus was “unusually aggressive for a nonprofit.” Ya think?
As long as health insurance is based in private industry, run by companies who prioritize their bottom line over sick patients, we will continue to see things like this happen. There will always be a hunt to cut costs, to maximize profits so the C-suite executives can get their bonus — cancer patients be damned. Instead of using the billion dollar surplus to continue covering the patients who need it, while the company figures out a more sustainable solution, there will be a knee-jerk move to slash expenditures without regard for what sick people get screwed. The road to single-payer healthcare won’t be easy, but the elimination of profit motive from the health care industry is a goal we should strive for.
The Affordable Care Act is changing the landscape for insurance companies, it’s true. But forcing cancer patients out of care? That’s all on greedy private companies who put their bottom line before people whose lives are at risk.