Health Insurers' Exit Spells Trouble for Obamacare in Texas

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The roughly 1.3 million Texans who bought health insurance under the Affordable Care Act will likely have fewer, more expensive coverage options in 2017, as health plans continue to announce they will no longer sell their products in Texas.

Insurance start-up Oscar announced on Tuesday it would partially withdraw from the Texas market, joining veteran health plans Aetna, UnitedHealthcare and Scott and White on the list of companies that recently announced they would abandon the marketplace created by President Obama’s signature health law. The companies said their costs of providing coverage to middle-income Texans have been unsustainable, fueling concerns about a lack of competition and consumer choice within the health insurance market next year.

The announcements come at a time of uncertainty for health insurance markets nationwide, with several major health insurers opting to abandon the exchanges in all but a handful of states. And Cigna, another health insurance company, last week told the Houston Chronicle it was “in discussions” with state regulators about exiting the Texas exchange.

“I think what we should be expecting is premiums that are substantially higher, and I think there’s a real risk that other insurers pull out,” said Michael Morrisey, a professor at the Texas A&M University School of Public Health. “We may be beginning to see the death spiral of insurance plans in the exchanges.”

In addition to the shrinking market, major health insurers that have not indicated they will leave the exchange — most notably Blue Cross Blue Shield of Texas — have asked the federal government for permission to raise their monthly costs by up to 60 percent. Blue Cross says its financial losses in the marketplace were unexpectedly large, and last year the company ceased offering one of its plans, which covered 367,000 Texans.

A spokeswoman for Blue Cross Blue Shield of Texas said Tuesday the company had made "no final decisions" about its 2017 offerings.

"We have been in this market for 80 years and, while some carriers have chosen to exit the market, we are working towards continuing to provide health insurance options for Texas consumers," the spokeswoman, Edna Perez-Vega, said in an email.

"However, that must be done in a sustainable way," she added, noting that the insurer lost $770 million in the Texas marketplace in 2015.

In addition to Blue Cross, about a dozen smaller insurers are expected to remain in the Texas marketplace in 2017.

Sherri Greenberg, a professor at the University of Texas’ LBJ School of Public Affairs, said monthly health insurance premiums were likely to rise across the state. But she said many Texans might not feel the effect of those increases because they will continue receiving federal subsidies — a pillar of the law meant to offset the cost of health care for many Americans.

Greenberg said 2017 price hikes in the Texas market could vary widely across the state, with rural markets likely to see the biggest changes.

"If you had very few options to begin with, and now you’re left with [even] fewer carriers and reduced competition, that can mean an increase in insurance premiums," she said.

Competition could still improve if additional insurers choose to enter the Texas marketplace before the Sept. 23 deadline. It is also possible that additional health plans will choose to exit the marketplace before then. 

The Obama administration has said it is confident that the “majority” of people signing up for coverage under the Affordable Care Act will have multiple options for coverage in 2017 and will be able to purchase a plan for less than $75 per month. The federal government has reported that the average Affordable Care Act health plan in 2016 cost about $400 per month, but after tax credits, the average enrollee paid $113 per month.

Lack of insurer participation in the Affordable Care Act exchange is of particular concern for rural areas. Scott and White, which says it will continue to offer some individual market plans outside of the exchange, has had a significant presence in some of the state’s more sparsely populated regions.

An Aug. 19 analysis conducted by the health care consulting firm Avalere Health found that more than a quarter of Texas’ 26 federally designated geographic areas could have just one insurance carrier offering plans on the exchange in 2017.

“Lower-than-expected enrollment, a high cost population, and troubled risk mitigation programs have led to decreased plan participation for 2017,” Dan Mendelson, the company’s president, said in a statement. 

Health economists say newly insured Texans have required more expensive care than companies were prepared to handle. Insurers last year struggled to enroll enough healthy people to offset the costs of patients with expensive medical needs, despite a provision in the law that requires people without health insurance to pay a fine. Health plans have also criticized Congress for cutting funding to programs that were intended to offset their financial losses on the exchange.

The Affordable Care Act offers subsidies to some middle-income Americans who buy insurance on the exchange, and it requires insurers to provide more comprehensive — and, for insurers, more expensive — coverage. The law has also led to a drop in the percentage of Texans without health insurance, from 25 percent of Texans before the law’s passage to roughly 17 percent in 2016, according to the Obama administration.

Many of the health insurance companies leaving the exchange in 2017 have said they will return in later years if the market becomes less volatile.

Mario Schlosser, the chief executive of Oscar, which insured about 7,000 people in the Dallas-Fort Worth area, said in a statement that uncertainties in the market had made it "challenging for us to operate effectively and continue to deliver access to quality healthcare.”

“We hope to return to these markets as we carry on with our mission to change healthcare in the U.S.,” he wrote. The company says it will continue to offer coverage in San Antonio.

The enrollment period for 2017 coverage starts Nov. 1.

Read more:

• Federal officials have specifically targeted Texans in their efforts to boost enrollment in health insurance under the Affordable Care Act.
• U.S. Census data in 2015 showed that, for the first time in more than a decade, Texas’ uninsured rate dipped below 20 percent. Still, Texas continues to have more uninsured people than any other state.

Correction: An earlier version of this article said Oscar Health Insurance was leaving the Texas marketplace. Oscar is leaving the marketplace in North Texas but will continue to offer Affordable Care Act coverage in San Antonio.

Disclosure: Blue Cross Blue Shield of Texas, Texas A&M University and the University of Texas at Austin have been financial supporters of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.