Does insurer drop out in South Carolina risk health of individual exchange?

Just how sick is South Carolina’s individual healthcare exchange?

Citing unprofitability, UnitedHealthcare announced it would pull out of South Carolina at the end of 2017.  It was followed by Coventry, a subsidiary of Aetna, which served 14 of the state’s 46 counties.

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Blue Cross and its subsidiary, Blue Choice, is now the only statewide insurer selling coverage through the healthcare.gov insurance exchange. Currently about 216,000 people out of a state population of nearly 4.8 million obtain coverage through the federal Healthcare.gov exchange.  South Carolina declined to set up a state-based health insurance exchange.  

The state guarantee fund, also called a reinsurance fund, had to pay $48 million in outstanding claims for the 67,000-member Consumers Choice Health co-op when it went into receivership at the end of 2015.

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“In South Carolina, we never had a rich or competitive health insurance marketplace in general,” says Sue Berkowitz, JD, director, SC Appleseed Legal Justice Center. According to Berkowitz, South Carolina policymakers opposed to the ACA were unwilling to fix or capitalize the co-ops that would have provided additional consumer options. Berkowitz explains that Blue Cross, which is a private, for-profit corporation, dominates much of the state’s health insurance market; hence the state’s insurance market lacks the oversight and regulation that could tamp down insurance rates.

Next: Part of a national trend

In 2016, the state approved an 8.66% rate increase for Blue Cross, an 8.86% rate increase for Blue Choice and a 31.8% average rate increase for Coventry’s 34,000 members. In 2015, over 140,000 people received federal subsidies via the healthcare.gov exchange.

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 Nevertheless, the United Healthcare withdrawal is of minor significance, as the insurer served only five counties and insured 3,000 lives, says Kendall Buchanan, deputy director, division of market and consumer services in the South Carolina Department of Insurance. Buchanan hinted that new companies may enter the market, saying, “Filings for products that will be offered for the effective date of January 1 or later are currently under review,” while also noting that more than one company has filed.

Part of a national trend

Insurers have been abandoning exchanges throughout the nation, claiming high medical costs. Some markets remain lucrative, however; for example, UnitedHealthcare’s second quarter 2016 revenues in the Medicaid market rose 14.7% to $8.3 billion.  

Critics argue that insurance companies should not be able to cherry-pick populations, given the ACA was set up on the premise that expanding the insurance pool overall through giving insurers access to government programs would make up for any revenue shortfalls, and preventing “adverse selection” in individual markets where patients tend to be unhealthier and costlier to insure.  Market volatility could also be due to merger negotiations with the government.  HIPAA federal requirements prevent insurers who completely leave an individual market for

. 

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 “The hope was that the federal exchange would promote competition,” says Robert Oldendick, PhD, executive director of the Institute for Public Service and Policy Research, University of South Carolina. “With more and more carriers dropping out the fact that an exchange exists has not cut much into Blue Cross’s dominance in the state. Is there going to be an expansion of Medicaid? We seriously doubt whether that will happen.”

Next: “We are a state that reeks of adverse selection”

South Carolina hit harder

South Carolina has an unhealthier population compared with the rest of the United States. “We are a state that reeks of adverse selection,” says Lynn Bailey, M.A., a consulting health economist. “We smoke. We have high rates of obesity, coronary artery disease, cancer. We are not mentally healthy.” 

 One in five South Carolinians fell below the federal poverty line in 2014. Twenty percent of adults reported fair or poor health, and 12% were diagnosed with diabetes. Two thirds were overweight or obese.

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“The best health plan in the state of South Carolina is the Medicaid plan,” she says. “It has the richest network. The Medicaid plan reimburses doctors at the Medicare rate.” According to Bailey, state residents have sought SSI disability coverage so they can enroll in Medicaid under the dual eligibility clause, which applies to those who meet eligibility standards for Medicaid-which includes SSI disability coverage-and are old enough to qualify for Medicare. “I think more people may be caught between a rock and a hard place because the Blue Cross plans are amazingly expensive and they have narrow networks,” Bailey says.   

Left out entirely?

South Carolina is among 19 states that have not expanded Medicaid eligibility under the ACA, leaving 123,000 people in a coverage gap without access to health insurance out of 604,000 uninsured in the state. This comprises 20% of the state’s non-elderly uninsured population, compared to 9% of other states. 

Next: "We are really limiting our patients’ coverage choices"

If South Carolina expanded Medicaid, it would erase this coverage gap; 48% of uninsured South Carolinians would be eligible for Medicaid coverage, increasing the total share of uninsured eligible for coverage to 70%.

What options are available to South Carolinians who, at 138% of the federal poverty level, (FPL), make too much money to qualify for Medicaid but are too poor to qualify for the healthcare tax credits at 100% of FPL in the individual market?

“Right now there aren’t many, outside of the most expensive and least effective place for primary care, and that’s our emergency room,” says Rozalynn Goodwin, vice president, engagement for the South Carolina Hospital Association. “They are our working poor, and they are caught in the middle of a very unfortunate unintended consequence of policy decisions with our federal and state governments.”   

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Goodwin cites the model of Arkansas, which has expanded Medicaid through a private option that has attracted more insurers to the state, promoted competition which has maintained stability in rate increases.

“Without us reclaiming our $11 billion from the federal government to expand coverage (what South Carolina forfeited in federal subsidies by not expanding Medicaid), even through a private option, we are really limiting our patients’ coverage choices,” says Goodwin. “We are waiting just like everybody else to hear who, exactly will be in the marketplace.”

For people who fall in the affordability gap, the availability of care depends upon geography, according to Goodwin. South Carolinians can turn to Federally Qualified Health Centers, which take payment on a sliding scale, but access to specialists such as surgeons and nephrologists depends on the particular center.

Next: “We have a comprehensive model for the unfunded in particular"

Hospitals provide some charity care.  Notable is the Greenville Health System, which partners with Blue Cross and serves 800,000 patients.

“We provide the same level of care whether they have insurance coverage or not,” says Angelo Sinipoli, MD, vice president for clinical integration and chief medical officer.  Greenville risk-stratifies its patients, focusing on the socioeconomic factors driving healthcare utilization, such as transportation and health literacy.

“We have a comprehensive model for the unfunded in particular,” says Sinipoli. “We go out to their house.”

[Note]  Blue Cross, the South Carolina Academy of Family Physicians, the SC Alliance of Health Plans and the Medical University of South Carolina declined to comment for this article.

Reference

Kaiser Commission on Medicaid and the Uninsured Fact Sheet, February 2016, Key Data on Health and Health Coverage in South Carolina