In a sign of continuing tumult in the health insurance industry, the state’s largest insurer said Thursday it will no longer offer its traditional suite of flexible and broad-reaching policies for those consumers who don’t get coverage through the workplace.
Instead, Blue Cross and Blue Shield of Minnesota will sell only health plans with a narrow network, which limits patient coverage to specific doctors, hospitals and prescription drug benefits.
The decision comes after the insurer experienced significant financial loses in the individual insurance market in recent years. It will affect about 103,000 Minnesotans, who will have to find a new health plan at the end of the year.
“It’s a very difficult decision for us,” said Michael Guyette, CEO of Blue Cross Blue Shield of Minnesota, who described the move as a “refocusing of our portfolio” rather than an all-out exit from the individual market.
“The way that we were in the market was just not sustainable right now given all the instability, the volatility and all the change that continues to happen in the individual marketplace both on and off the exchange,” he said.
About 6 percent of Minnesotans buy insurance on their own by working with insurance agents, shopping on the MNsure website or going directly to the health plans.
In Minnesota and around the country, the individual market has proved to be tumultuous for insurers. Before the Affordable Care Act, companies were allowed to deny coverage to people if they had been sick with costly medical conditions.
But not enough young healthy people have purchased insurance on the individual market, which would have kept premiums down overall. And after this year, insurers will lose a key financial safety net provided by the federal government to ease the transition.
The move by Blue Cross and Blue Shield to offer only a stripped-down plan, currently marketed under the brand name Blue Plus, shakes up the market for some 300,000 consumers at a time when premiums are expected to continue to rise.
And because Blue Cross is one of the few insurers with a statewide network of doctors and clinics, those who live outside the Twin Cities area may feel the impact even more.
Some fear that consumers may simply opt out, leaving people who need insurance without it and putting more of a burden on the health care system. “By and large these people aren’t going to get employer-based coverage,” said Roger Feldman, a health insurance expert at the University of Minnesota. “If they’re not eligible for Medicaid or other public programs, then the individual market has got to be the way that we insure them. If the individual market doesn’t work, we’re not going to insure them. That’s my concern.”
All of Minnesota’s nonprofit health plans lost money last year covering consumers who bought their own health plans, but Blue Cross and Blue Shield lost the most.
The Eagan-based carrier lost $265 million on the individual market in 2015 as enrollees’ medical costs outpaced premiums. That was enough of a drag on the bottom line that the company took an overall net operating loss of $178.1 million on revenue of $10.6 billion.
In the past three years, Guyette estimated that Blue Cross has lost about $500 million on the individual market, which represents about 8 percent of the company’s overall business.
This year, Blue Cross hiked its rates on individual policies by 49 percent, hoping to get premiums better aligned with projected medical costs. But the move came with a cost, as many of Blue Cross’ enrollees sought lower-priced health plans from its competitors.
On the MNsure online insurance shopping exchange, Blue Cross was the dominant player last year, selling 43 percent of individual plans. Its enrollment for individual plans on MNsure this year has dropped to about 21 percent.
By forming partnerships with single health care systems, insurers and providers can enter into flexible and more competitive payment arrangements, such as negotiating a single price for knee surgery. In the Twin Cities, Blue Cross works with Allina Health. It also has arrangements with the Mayo Clinic in southeastern Minnesota, Sanford Health in the northwest and St. Luke’s Health Care System in Duluth.
Details on the plans won’t be known until closer to next year’s open enrollment season, which begins in November. Letters will go out to members in the coming weeks.
Blue Cross said it will continue to sell plans on the MNsure exchange as well as through its network of brokers, which work with about 70 percent of its enrollees.
Staff writer Rochelle Olson contributed to this report.