Affordable Care Act – Insurers leaving the Exchanges

bottom line, PreferredOne’s policies were loss-leaders to sucker people in, they didn’t have the business competence to service their policies plus their actuarial projections sucked… so of course it’s Dayton’s / Obama’s fault… fkers
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Insurers leaving the Exchanges Posted by Richard Mayhew at 10:18 am Sep 182014

Some drop-outs are more important than others.

Weve seen some insurance companies drop out of the Exchanges this year. My take on a New York drop-out was that it was good news as the enrollment was miniscule and the products were not reasonably priced. The insurer was just too small to compete and there was minimial hope for significant membership gains to cover their back end costs:

384 people are too few people for an insurance company to offer a commercial or commercial like product for two significant reasons. Either reason is a good enough reason for a company to get out of this market segment.
From a policy point of view, unpopular and comparatively expensive plans exiting the marketplace is a good thing in states with deep markets and significant participation. It sucks that 384 people will need to find new policies next but they are highly likely to get better and cheaper policies instead.

This is not the case in Minnesota. A major insurer is dropping its participation from the Exchange on both the individual and SHOP side of the equation.

The insurer with the lowest rates and most customers on Minnesotas health care exchange is pulling out
According to a company statement, MNsure policies make up only a small percentage of PreferredOnes entire enrollment but take up a significant amount of resources to support.
PreferredOne had 59 percent of the individual market for MNsure enrollees as of Aug. 6.

This is a significant disruption to the Minnesota market. It is not shocking though.

I am eyeballing the pricing for a 35 year old non-smoker in the Twin Cities on Health Sherpa and platinum plans without subsidy are cheaper from this provider than most baesline Silver plans. I think a few things are happening.

PreferredOne either was amazingly over optimistic on their acturial modeling or had decided to engage in an extremely aggressive loss leader pricing strategy to build membership. If this was a loss leader strategy, than it may have been too effective as the low cost platinum planss would have been very attractive to people with significant pre-exisiting medical conditions or known medical risk. People with high utilization and high complexity of cases are expensive on the medical side as they go to doctors/hospitals a lot AND they are administratively costly as they are calling in for help and care coordination on a frequent basis.

Secondly, the back-end infrastructure to support Exchange is extensive, especially as the risk spreading mechanisms such as risk adjustment require significant technical support. Building that type of infrastructure from scratch is painful and expensive. PreferredOneseems to have been only a commercial group insurer with a small staff before it decided to dip its toes into the water for individual Exchange. It had no pre-exisiting model it could rip off to modify for Exchange.

It had aggressive pricing, a population that is higher need than normal, and not a lot of administrative/technical depth. On a quick glance at these basic facts, dropping Exchange makes sense. It sucks for the people who have to re-enroll in new plans at higher price points but 2014 was always a beta test year, and we know that companies would be entering and leaving different markets which is why the markets were never expected to stabilize until the 2016 open enrollment period. Preferred One is not the only significant exit, as Hawaii lost a large provider for the SHOP exchanges for the same basic reason

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