Health and Science

Big Tennessee health insurer willing to fill huge void in Knoxville Obamacare market, but warns of higher prices due to GOP moves

Key Points
  • Humana, the only current Knoxville Obamacare insurer, will exit that market in 2018.
  • Its replacement, Blue Cross Blue Shield of Tennessee, said the financial performance of its plans has improved in 2017.
  • Blue Cross Blue Shield lost $400 million on Obamacare plans in the preceding three years.
A doctor tends to a patient in Knoxville, Tennessee. (File photo).
Jonathan Torgovnik | Getty Images

A major Tennessee health insurer said Tuesday it is willing to re-enter Knoxville's Obamacare market — which has been at serious risk of having no insurers selling individual health plans in 2018.

The potential move by Blue Cross Blue Shield of Tennessee would fill the hole soon to be left by Humana, the only insurer selling Obamacare plans in that area this year. In February, Humana informed regulators it would exit that market next year.

But the re-entry of Blue Cross Blue Shield would come at a price.

The insurer warned Tennessee insurance regulators "given the potential negative effects of federal legislative and/or regulatory changes" it will have to seek higher premium rates next year in the state to "price-in those downside risks." Those risks could come from Republican moves to change Obamacare rules.

Blue Cross Blue Shield also revealed Tuesday that the financial performance of the company's Obamacare plans has improved in 2017 after suffering three consecutive years of losses totaling $400 million.

Blue Cross Blue Shield CEO J.D. Hickey, in a letter to the state's insurance commissioner, said the company "is willing to serve the Knoxville region in the 2018 individual Marketplace."

But, "I want to stress that our openness to this action is in no way a political decision," Hickey added. "Nor is it a reflection of our perspective on the stability of the individual Marketplace overall."

"In fact," Hickey added, "we can't justify doing so based solely on our current political uncertainty, but instead we believe it is an extension of our mission to serve our fellow Tennesseans, especially those who do not have other options for coverage."

Hickey noted that his company had chosen to remain in five out of Tennessee's eight Obamacare regions this year "to ensure every region had at least one coverage option and no one was left uncovered."

However, the company's decision to withdraw from three regions came relatively late in the year, shortly before open enrollment in 2017 plans began.

Hickey warned that "while we hope this is unnecessary, we reserve the right not to sign our" individual health plan sales agreements "in September in the event of any post-bid changes that destabilize the market and affect our risk exposure."

In his letter, Hickey cited the potential risks that could come from the elimination of the requirement that all Americans have some form of health coverage or pay a fine and elimination of collection of the health insurer tax. Both are features of the GOP's American Health Care Act, the Obamacare replacement bill that passed the House of Representatives last week.

Another big risk for the insurer — and others — that Hickey mentioned would be if the federal government stops reimbursing health plans for subsidies that reduce out-of-pocket health costs of low-income customers.

The insurer's decision to seriously consider re-entering Knoxville's market and its better financial fortunes so far this year are likely to be used as an argument by Obamacare supporters against opponents, including President Donald Trump, who have said the program is in a "death spiral" or "dead" or "failing" nationally.

As recently as three weeks ago, Blue Cross Blue Shield and the state's other big insurer, Cigna, were not ready to take Humana's place in Knoxville because of uncertainty over the Obamacare market stemming from efforts in Washington, D.C., by Republicans to gut the program in several ways.

House Speaker Paul Ryan, R-Wisc., and other Republican leaders have repeatedly pointed to the exit of Humana, Aetna and other insurers from individual health plan markets as evidence that Obamacare is doomed and needs to be replaced with the AHCA.

Julie Mix McPeak, Tennessee's insurance commissioner, said on Tuesday that Blue Cross Blue Shield's decision "is very much a glimmer of hope for consumers on the exchange in the Knoxville rating area."

"Their willingness to take this step and consider providing coverage for 2018 in the Knoxville area is a true commitment of theirs to the state of Tennessee," McPeak said in a YouTube video announcing the move.

"Time is of the essence for Congress to act and provide some level of indication of what the market regulatory perspective will be for 2018," she said. "The more certainty that we can provide around funding levels, reinsurance programs or any flexibility in Obamacare terms and conditions of participation on the exchange will only add to the certainty that Blue Cross Blue Shield will participate in the Knoxville area in 2018."

The tentative decision by Blue Cross Blue Shield was welcome news to Knoxville resident John Nehls, who currently buys individual health coverage from Humana.

"I am ecstatic. Blue Cross Blue Shield was who I had before," said Nehls, a quadriplegic who broke his back in a biking accident three years ago.

In a CNBC story last month, Nehls had expressed concern about Humana's departure from the market.

"The biggest concern we have is what's going to happen in 2018. We do have coverage for this year on the Humana plan, but in 2018 there will be zero options in this county, " Nehls said at the time.

Despite Nehls' relief on Tuesday, a major concern for Blue Cross Blue Shield and all other Obamacare insurers in the coming year is the fate of so-called cost-sharing reductions.

Those CSRs reduce the amount of money that lower-income Obamacare customers must personally pay when they receive health services or prescription medications. Insurers cover the cost of those reductions up front but then are supposed to be reimbursed by the federal government.

Trump, however, has suggested he might cut off those reimbursements to insurers, even while the insurers are still legally obligated under the Affordable Care Act to continue giving them to customers. If the reimbursements are ended, insurers have said they will have to raise their premiums for 2018 to make up their cost, which in turn could discourage some customers from signing up for coverage next year.

Republicans in the House have sued the U.S. Health and Human Services Department for continuing to make the reimbursements without specific funding authorization from Congress.

A federal judge ruled in the House's favor, finding that the federal government should not have spent the money, but her decision is basically in limbo as Trump and the House Republicans try to figure out how to resolve the issue.

In the meantime, the reimbursements continue to be made.

Hickey of Blue Cross Blue Shield, in his letter Tuesday, noted the potential elimination of the CSRs as a risk for the company. He said that and other factors are keeping the insurer from adding to its Obamacare business beyond the Knoxville area.

"With our past losses and the continued uncertainties associated with the individual Marketplace, we are not willing to consider expanding our current footprint in 2018 beyond the addition of the Knoxville region, as the other geographies are currently covered by other carriers," Hickey wrote.

"We believe this fiscally conservative approach to limit our risk profile in this market continues to be in the best interest of all the members Blue Cross serves across all lines of our business."