BREAKING: Florida Blue Cross Blue Shield doing just fine on the ACA exchange

...which also provides a perfect example of the Achilles heel of the ACA exchange.

This morning, I posted the following:

...the assumption is that as long as insurance carriers either a) know they'll make a profit in a given market or b) think they'll make a profit at some point in the near future, they'll participate in that market, right?

However, that's not necessarily the case. As we saw last year in the case of Aetna, profitability itself doesn't necessarily guarantee participation. Aetna pulled out of 11 states, and while they were losing money on the indy market in most of them, there were at least 2 states (Pennsylvania and Florida) where they were making a profit, yet bailed anyway. In fact, in Florida, the only reason they were making a profit in the indy market was because of their exchange business (they were losing money off-exchange).

...Whatever their reasons for doing so, the fact remains that they CAN do so...because the individual market is such a small part of their business anyway. Which is why I'm calling for managed Medicare/Medicaid contracts to be locked at the hip with participation in the individual exchange. If they want those sweet, sweet, high-profit Medicare Advantage contracts, make them also participate in the ACA exchanges. They can raise their rates by an appropriate amount, sure...but they have to participate.

Just a few minutes ago, Bob Herman of Axios posted this story:

Florida Blue increases Obamacare profits

Florida Blue, the dominant health insurance company in the state, is still reaping huge profits from its Obamacare plans — a stark difference from the doom and gloom portrayed by other insurers.

Florida Blue sits in one of the most competitive Obamacare exchanges and made money on those plans in 2015. And last year, Florida Blue more than doubled its bottom line by registering a gross profit (before taxes and other expenses) of almost $1.1 billion just on its Obamacare plans sold on and off the exchanges, according to financial documents analyzed by Axios.

...These numbers are for 2016 and only represent each subsidiary's individual-market products:

  • Florida Blue's PPO subsidiary: 529,452 members, $860.8 million gross profit
  • Florida Blue's HMO subsidiary: 201,331 members, $237.8 million gross profit
  • Combined: 730,783 members, $1.1 billion gross profit

...the gross numbers show how Florida Blue priced the health risk of the people in the Obamacare marketplaces. Florida Blue's gross profit on its Obamacare plans across both subsidiaries in 2015 was $533 million.

OK, so Florida Blue made $533 million in profit last year and $1.1 BILLION in profit this year all specifically on ACA-compliant policies, presumably because they actually have competent management who carefully researched the market and priced accordingly, along with what I presume is a good marketing campaign and so forth. Bully for them.

Now, there's some wiggle room here because the numbers above include both Florida Blue's on and off-exchange indy enrollees. However, as of two years ago, over 77% of Florida's entire ACA-compliant individual market had already shifted onto the ACA exchange, and that trend has almost certainly continued, so it's pretty safe to assume that the profitable off-exchange enrollees aren't "masking" the exchange enrollees. That is, I'm willing to bet that at least, say, $750 million of that $1.1 billion in profit came specifically from their ON-exchange enrollees last year, which is impressive.

OK, so this story proves that all of the "DEATH SPIRAL!!" hand-wringing is likely nonsense (at least in Florida), right?

Again, as of March 2015, Florida's entire individual market was around 1.9 million people (of which 253K were grandfathered/transitional enrollees). As of January 2017, their exchange-based indy market was 1.76 million (more like 1.58 million after non-payments). I'm guessing that many of these are off-exchange/grandfathered/transitional enrollees who shifted over to exchange plans, but the total market is still likely over 2 million people by now...and Florida Blue holds at least 36% of that by itself.

Perhaps...but take another look at my quote from this morning.

Let's suppose, just for the sake of argument, that Florida Blue decided that they don't want to participate in the exchanges in 2018.

This would be an incredibly stupid move on their part, to be sure. The CEO would have to explain to the Board of Directors, the insurance commissioner and so forth why they chose to abandon a highly-profitable market.

Even so...there's nothing legally or contractually preventing them from doing so. And that's the core of the problem: Not whether they happen to decide not to stick around, but the fact that they could do so if they chose.