Health Care

Blue Cross and Blue Shield of KC is pulling out of Obamacare exchange in 2018

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President Donald Trump and House Speaker Paul Ryan spoke at the White House after the House pushed through a health care bill, the first step to repealing the Affordable Care Act.
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President Donald Trump and House Speaker Paul Ryan spoke at the White House after the House pushed through a health care bill, the first step to repealing the Affordable Care Act.

Blue Cross and Blue Shield of Kansas City announced Wednesday it has decided to exit the Affordable Care Act exchange next year, dealing a heavy blow to those insured under the law commonly called Obamacare.

The decision affects about 67,000 Blue KC customers in 30 counties in western Missouri plus Wyandotte and Johnson counties in Kansas. Most get federal subsidies to purchase health insurance on the exchange.

Danette Wilson, Blue KC’s president and CEO, said the company has lost more than $100 million total on its exchange plans since the Affordable Care Act rolled out in 2014.

“This is unsustainable for our company,” Wilson said. “We have a responsibility to our (customers) and the greater community to remain stable and secure, and the uncertain direction of this market is a barrier to our continued participation.”

Blue KC is the area’s top insurer, with more than 1 million customers and almost half the market share.

Despite the Affordable Care Act losses, the company’s overall financial picture was trending up in three years since the law began.

It had about $1.3 billion in assets at the end of 2016, according to unaudited financial statements in its annual report. The organization took in about $2.75 billion in premiums and other fees that year and paid out about $2.38 billion in medical claims. It also spent about $463 million on operating costs. After taxes and investment income, Blue KC’s net income was about $63 million in 2016. Net income was minus-$73.5 million in 2014 and $40.7 million in 2015.

The company’s medical loss ratio — the percent of premium revenue that the company spent paying medical claims — on individual plans improved each of those years and dipped below 100 percent, at 98.7 percent, in 2016 for the first time since the Affordable Care Act exchange began. That meant the company took in more in premiums than it paid out in claims.

But Kelly Cannon, a spokeswoman for Blue KC, said the company’s operating costs added another 18.2 percent to that ratio, putting it well out of profitability.

Clark Shultz, the deputy commissioner of the Kansas Insurance Department, said he knew it was a bad sign when Blue KC missed a deadline to file plan designs for 2018 this month, but the department still hoped it could work with the company to keep it on the exchange.

“It’s a surprise,” Shultz said. “It’s like knowing a grandparent is going to die and then when the day actually comes, it’s still shocking.”

Charlie Shields, the president and CEO of Truman Medical Centers, said he expected that the hospital’s financial counselors would be getting calls from affected Blue KC customers. Jackson County had about 34,000 people who purchased insurance through the Affordable Care Act exchange last year, and Shields estimated that Blue KC had about 65 percent of the market in the county.

“If you’re one of our patients and you’re on the exchange, this is probably unsettling to you,” Shields said. “Our message to our patients and frankly all those who don’t have insurance in Kansas City is we’re still here, and we’re ready to help.”

As the area’s only safety-net hospital, Truman provides care to Jackson County residents regardless of their ability to pay. Shields said the hospital’s uncompensated care dropped from $134 million to about $100 million during the Affordable Care Act years, which he attributed to more county residents being insured either through the exchanges or through Medicaid.

Shields said the Blue KC announcement was predictable. He said the insurer had asked hospitals to take lower reimbursement rates to stay on the exchange last year, and the company really couldn’t make it work until it got its medical loss ratio under 90 percent.

“We knew that from a financial viability perspective, this was pretty tough for Blue Cross,” Shields said.

Customers concerned

Blue KC’s announcement means that unless another insurer jumps in, 25 western Missouri counties could be without a single Affordable Care Act insurer.

Stephanie Fama, a 62-year-old Kansas City resident, has purchased Blue KC coverage through the exchange for the past two years.

“I think that what it probably means is I’ll have fewer choices and worse plans,” said Fama, who works part time as an office manager at a graphic design company and does not qualify for insurance through her employer.

Fama does not qualify for a subsidy and pays more than $700 a month for her coverage. She said she doesn’t suffer from any major health problems other than migraines. Her husband gets his coverage through Medicare.

The Kansas side of the metro area will have one Affordable Care Act insurer. Minnesota-based Medica has filed initial paperwork with the Kansas Insurance Department to sell Affordable Care Act plans throughout the state again in 2018, but it has not decided if it will continue to cap enrollment at 10,000.

That would not be nearly enough to serve Johnson County, which had about 26,000 Affordable Care Act enrollees in 2016. Wyandotte County had about 6,000.

“If another insurer comes in the area, then maybe it won’t be so bad. If Medica is our only insurer, it could mean higher prices, and I think a lot of folks could just choose to go without,” said Molly Moffett, project coordinator for the Community Health Council of Wyandotte County.

Carla Lasley, 53, runs a day care out of her home in Kansas City, Kan., and said the Blue KC plan she bought on the exchange costs her about $45 a month because it’s federally subsidized.

Lasley, who has one kidney and suffers from high blood pressure, said she has had to change insurance providers and doctors three times in the past three years, and she feared she would have no other option but to do it again next year.

“With this pre-existing (condition), I’m just up in the air,” she said. “The problems that I have, I know I would not be able to afford insurance without it (the Affordable Care Act).”

Megan Levens, a 34-year-old freelance cartoonist, said she purchased a subsidized Blue KC plan this year after moving from California to Overland Park.

Levens said her income varies widely from month to month, and she has few insurance options outside of the exchange because of pre-existing conditions: anxiety and chronic depression.

“For some of us, being able to function and work means having insurance which will cover medications, which will cover therapy and psychiatrists visits,” Levens said.

Blue Cross and Blue Shield of Kansas, which serves the state’s other 103 counties, has filed Affordable Care Act plans for 2018, despite worse medical loss ratio numbers on the individual market than Blue KC. Mary Beth Chambers, a spokeswoman for Blue Cross and Blue Shield of Kansas, said that includes a significant number of customers who are in grandfathered plans that don’t have to abide by Affordable Care Act guidelines.

The situation is murkier in Missouri, where initial filing deadlines aren’t until July. But Humana has already announced it’s pulling out of all of its Affordable Care Act markets, including Missouri.

Cigna has sold Affordable Care Act plans in some Missouri counties in the past, but it has made no announcement about 2018.

Political fallout

As with most things Affordable Care Act-related, political reaction to Blue KC’s exit was split along party lines.

Kansas Gov. Sam Brownback, a Republican, called Blue KC’s exit evidence that “Obamacare’s death spiral is growing worse.” U.S. Sen. Chuck Schumer, a New Yorker who is the Senate’s top Democrat released a statement that said it was evidence of the “real world effect of the Republican effort to sabotage our health care system.”

U.S. Sen. Roy Blunt, a Missouri Republican, said the Blue KC announcement amounted to a broken promise by President Barack Obama, who repeatedly said those who liked their plans and doctors would be able to keep them.

“We now have tens of thousands of Missourians in the Kansas City area that have lost their plans and have no insurer option on the Obamacare exchanges next year,” said Blunt. “It is another devastating blow to families that are already struggling with higher costs and less access to quality health care under the law.”

A statement from U.S. Sen. Claire McCaskill, a Missouri Democrat, highlighted a bill she introduced last week that would allow any consumers in “bare” counties that are without Affordable Care Act insurers to buy into the DC Health Link plan that is available to members of Congress and their staffs.

“The challenges in the individual marketplace are exactly why we need options for folks in those counties, to protect Missourians’ access to health insurance,” McCaskill said, “and I think my legislation — letting Missourians who don’t have access to a local insurance provider get the same plans that Congress gets — is the way to do it.”

The political debate over the Affordable Care Act has raged since it passed in 2010, and Blue KC’s announcement comes amid uncertainty over how President Donald Trump and Republicans in Congress will change the law.

A bill with major changes passed the U.S. House of Representatives early this month, but Senate Republicans have said they will move slowly on it.

Meanwhile, Trump has said he might let the exchanges collapse on their own, adding more uncertainty to whether the federal subsidies for insurance consumers will continue to be paid out.

The law as originally passed also included a safety net for insurers, called “risk corridors,” under the assumption that they might struggle in first few years of selling plans to a new market of individuals, some of whom had been without insurance for years and had pent-up medical care. Insurers that lost money were supposed to get federal help from user fees on insurers that made money.

But as it turned out, there weren’t enough successful insurers to fully fund the plan, and Republicans led by Florida Sen. Marco Rubio blocked the federal government from using other sources to make the payments after they took control of Congress in 2012.

Health care costs continue to rise, and despite increased premiums, insurers in many markets nationwide have struggled to make money on Affordable Care Act plans, especially in states like Kansas and Missouri that did not expand Medicaid.

Blue KC was the first area insurer to jump into the Affordable Care Act marketplace in 2013, under the company’s previous president and CEO, David Gentile.

Wilson, his successor, emphasized that the decision to pull out would not affect most of the company’s customers, including those who get their insurance through their employers.

“This decision is necessary at this time, but we’ll continue to work with federal and state legislators to identify solutions that will stabilize the individual market and bring costs down for our members, the community and Blue KC,” Wilson said.

Andy Marso: 816-234-4055, @andymarso

Bryan Lowry: 816-234-4077, @BryanLowry3