Two large payers reported vastly different financial results last week, largely due to performance in Affordable Care Act marketplace plans.

Florida Blue, Florida’s Blue Cross and Blue Shield affiliate, netted a $471 million gross profit on ACA-compliant individual plans in 2015, compared to  $124 million in 2014. The company attributed its success to high deductible plans and its retail centers that provide health screenings, fitness classes and one-on-one counseling for choosing plans. 

Modern Healthcare reported that much of their premium profits came from federal subsidies: 90 percent of the approximately 500,000 people enrolled in Florida Blue ACA plans receive premium tax credits that reduce the cost of monthly coverage, and 70 percent receive cost-sharing reductions that lower copays and deductibles. The insurer also benefitted from the ACA’s risk adjustment program, in which the federal government redirects money from plans that have lower-cost, healthier member to ones that have higher-cost, sicker members. 

Pittsburgh-based Highmark Health struggled for the second consecutive year, reporting a $565 million operating loss, compared to a $178 million loss in 2014. Highmark Health president and CEO David Holmberg said Highmark and other insurers miscalculated the degree to which new members in exchange plans would seek services. Consequently, he said Highmark was paying out $1.20 worth of care for every $1.00 it received in premiums, which led to a $590 million loss in ACA plans.

Our Take: It’s striking that so many experienced payers—UnitedHealthcare and Humana come to mind—have so poorly predicted the exchange populations, while others, like Florida Blue, Centene and Molina have done so well. Narrow networks and high premiums appear to be driving good performance.

Those who predicted the demise of the ACA exchanges have done so prematurely. For one, as Florida Blue so clearly demonstrates, it is indeed possible to make money with these plans.

Second, recent research shows that early enrollees on the exchanges were older and sicker than more recent enrollees. If that trend stabilizes, payers remaining on the exchanges will adjust premiums accordingly and like Florida Blue, do so profitably as the patient mix becomes more evenly distributed. 

Leave a comment