There’s more to Blue KC’s Obamacare exit than just financial losses

June 06--Blue Cross and Blue Shield of Kansas City cited $100 million in cumulative losses in explaining their decision last month to exit the Affordable Care Act exchange after three years.

But in discussions with Kansas Insurance Department regulators leading up to it, Blue KC officials said they wanted Congress to make changes to the current law, commonly called "Obamacare," and wanted assurances that Republican efforts to dismantle the law wouldn't cause them more financial problems.

Blue KC has declined requests to interview executives about the decision, which leaves about 67,000 customers in 30 northwest Missouri counties and Johnson and Wyandotte counties in Kansas looking for new insurance plans for 2018.

The Kansas City Star filed an open records request for correspondence between Blue KC and officials with the Kansas Insurance Department leading up to a May 14 initial filing deadline for 2018 plans in Kansas.

It yielded 97 pages of emails and texts that show Coni Fries, Blue KC's vice president of government relations, gave Kansas Insurance Commissioner Ken Selzer a 14-point wish list prior to meetings that she and Selzer had with Kansas congressional representatives in Washington, D.C.

"We've been working with them for the past year just like we do with all of our companies," said Selzer, a Republican elected in 2014.

The texts and emails give another window into what insurers are looking for as state deadlines to submit 2018 insurance plans come while the Republican effort to revamp Obamacare moves forward in fits and starts.

Many of the concerns Blue KC outlined in the wish list were things other insurers have said publicly: that they wanted tougher rules to keep people from jumping into ACA individual health insurance market only when they know they need medical care, but they also wanted to be sure they would continue receiving subsidies to defray the cost of insuring sick and low-income people.

Christina Lively, Blue KC's vice president of marketing and communications, declined a request to interview Fries for this story, instead sending an email that said the company "will re-evaluate participation in the ACA individual market annually for 2019 and beyond."

Missouri's initial filing deadlines aren't until July, but Blue KC's decision to exit Obamacare also applies to the 30 Missouri counties it's in, including 25 that now have no insurer for 2018. A similar open records request for correspondence with Blue KC was sent to the Missouri Department of Insurance, Financial Institutions and Professional Registration.

A department official said the Missouri records request is in process and released a statement from director Chlora Lindley-Myers.

"While we understand the reasons behind this business decision of Blue Cross Blue Shield of Kansas City, I am deeply concerned about the devastating impact this will have on Kansas City and Northwest Missouri," Lindley-Myers said. "While BCBSKC customers with grandfathered and transitional plans get to keep their policies, other Missourians will lose their coverage. We will continue to work with insurers and other stakeholders here in Missouri and our legislators in Washington to do all we can to assist these impacted Missourians as soon as possible."

Concerns about the ACA

On Feb. 15, Selzer forwarded Fries' a news story about the Trump administration proposing a federal regulation to shorten the Obamacare open enrollment period and enact other measures to discourage consumers from jumping in and out of coverage.

Fries, like other insurance officials, found the proposal insufficient.

"We will be reviewing the regulation next week and I will share our thoughts," she sent in a response the next day. "In general, while it is a step in the right direction, it is a very small step given the challenges we are incurring. Like one of my co-workers said, 'It's like spitting in the ocean.'"

Blue KC wanted more regulations that would nudge people to maintain "continuous coverage," including a waiting period before consumers could use newly purchased policies. The nonprofit insurer also wanted the "grace period" it is forced to give people who purchase insurance but fail to pay premiums to be reduced from 90 days to 30.

Basically, consumers gaming the system was a major concern, Selzer said.

"That is one of the things that makes the ACA very unstable," Selzer said. "The ability of consumers to abuse the process. That hurt (Blue KC) as it does other companies."

Tim Gronniger, a former Obama administration official who helped craft the ACA, said there are some consumers who do that, but it's rare and doesn't hurt insurers much financially on the whole.

"The reality is most of these things are extremely marginal to the overall market dynamics," said Gronniger, who is now a fellow at the Brookings Institution and was in Overland Park last week to speak at an event hosted by the Alliance for a Healthy Kansas and Indivisible KC, two pro-ACA groups.

Gronniger said the uncertainty about whether subsidies would continue to be paid to insurers now that Republicans were in charge was more consequential.

An end to that uncertainty also made Blue KC's wish list.

Concerns about AHCA

The wish list was compiled after an April 17 meeting between Selzer, deputy insurance commissioner Clark Shultz, Blue KC CEO Danette Wilson and Blue KC general counsel Rick Kastner. Fries later emailed a list of 11 "Repeal and Replace Must Haves" that the group had discussed during the meeting.

Republicans in the U.S. House of Representatives were working on their ACA replacement, which they called the American Health Care Act, and Selzer and Fries had upcoming meetings scheduled with House Republicans who represent Kansas.

Fries made some additions and sent an updated 14-point list to Selzer's office about a week before those meetings.

At the top of the list was a request that federal cost-sharing reduction subsidies for insurers to help lower deductibles and co-pays for lower-income customers be locked in through 2019. Insurers feared the Trump administration would stop paying the subsidies, which are currently subject to a legal challenge brought by House Republicans.

Selzer, in the phone interview, said the lack of certainty about the cost-sharing subsidies was "a huge factor" not only for Blue KC but for all insurers weighing whether to sell individual plans on the exchange in 2018.

In a list of "Action Items to Maintain the Individual Market in Kansas in 2018 and Beyond" that Selzer's office shared with Fries, Selzer also said Kansas insurers are owed about $103.5 million in back payments for another ACA subsidy, the Risk Corridor program. That program, intended to help insurers with unexpectedly high medical claims in the opening years of Obamacare, was cut by congressional Republicans led by Florida Sen. Marco Rubio, who called it a "slush fund" for insurance companies.

The Republican health bill, which passed the House and is now in the Senate, did not restore those payments, either retroactively or going forward.

The bill addressed some of the Blue KC wish list items, but left several outstanding, and Blue KC expressed concern that funding for the high-risk pools "could dramatically decrease" in 2020 when states would be required to match what the federal government is paying into them.

Fries also cited a March 2017 white paper published by Wakely Healthcare Actuaries that even if states segregated the most costly medical consumers in "high-risk pools," as allowed by the AHCA, insurers would still need some financial help adjusting for the cost risks of an individual market in which everyone is guaranteed coverage.

Basically, things were not going well financially in the individual market and Blue KC was not convinced it would get better under the AHCA.

"Even if we got all of our wish list, we would still need to factor in how the business is performing and the information in the Wakely report," Fries wrote. "The current AHCA legislation appears to be a two-year plan with the bottom dropping out in 2020. Having more certainty for a longer period of time would also be better but probably not realistic."

Andy Marso: 816-234-4055, @andymarso

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