Insurer shut down causes stir

August 22, 2016

Here’s what to expect from Blue Shield of California’s four-day closure over Obamacare losses.

Citing losses from its Covered California exchange plans and other income challenges, Blue Shield of California is shutting down its operations for a week in September.

This move could save Blue Shield an estimated $4 million, by reducing its liabilities for paid-time-off. Staff employees are being required to use paid-time-off from September 6 to 9, according to the Sacramento Business Journal.

Reid

“We are now seeing the results of huge cost increases and many exchanges becoming insolvent after spending hundreds of millions being set up,” according to David A. Reid, founder and CEO, EaseCentral. “For those who listened to industry experts, this should come as no surprise.”

Few carriers could afford to have a closure beyond September because 75% of small employers renew their business in the fourth quarter, says Reid.

“This was exacerbated in 2014 when most small business moved their renewal dates to December 1, 2014,” he says. “By doing so, they were able to avoid the Affordable Care Act [ACA] until the following December. Business and the insurance carriers could see well in advance the toll on premium increases that would come from Obamacare and did everything they could to postpone these massive cost increases as long as possible.”

Based on this action from Blue Shield of California, executives should prepare for a “massive increase in healthcare costs,” Reid says. “Additional pressure will come from employees demanding that employers bear these costs. Employers have already moved their deductibles to levels previously unimaginable."

Next: New emerging groups

 

 

As a result, Reid predicts new emerging groups:

1.   The new “voluntarily uninsured” that will choose to pay tax penalties that are far less costly than spending 9.5% of income on very high-deductible health plans that do no good, he says. “The notion of ‘affordable care’ from the ACA has been just the opposite for most,” Reid says. “The few exceptions are government and public employees that get free health are from taxpayers.”

2.   More frequent emergency room visitors. “This will further increase costs on the system as these people will postpone needed healthcare until it is even more costly or utilize emergency rooms as it will be the only venue where they can receive services,” Reid says. “Emergency room care, of course, is many times higher than seeing a primary care physician but that is only an option for people with insurance.”

3.   Those that need healthcare that may choose to drop to part-time status so they do not qualify for their employer plan. “The result will be an ability to get heavily subsidized insurance though the exchanges-at taxpayer expense-because they earn so little working part time they qualify for ‘free’ or ‘next-to-free’ health insurance with low deductibles,” Reid says. “The ‘net total cost’ will be lower to them because while working full time a massive amount of their income is needed to pay these higher premiums and very high deductibles.”