Blue Cross of California sifts markets

Kaiser Health News
January 30, 2015
Insurance Choices Dwindle In Rural California As Blue Shield Pulls Back
By Pauline Bartolone, Capital Public Radio

Blue Shield of California used to sell policies to individuals in every
county in the state, according to the Department of Managed Health Care,
one of California's two teams of health insurance regulators. But by
2014's open enrollment period, Blue Shield had pulled out of 250 zip
codes throughout the state, including four entire counties: Alpine,
Monterey, Sutter, and Yuba.

The gaps are particularly felt in the top third of the state, where
thousands of residents now have only one choice of insurer if they want
to buy a health plan on the exchange.

Blue Shield of California declined an interview with NPR. But in a
written statement, the company reported that it's not selling in certain
areas of California because it could not find enough health providers
willing to accept a level of payment that would keep premiums low.
According to the statement, the company also is not selling in areas
where there is no contracted hospital within 15 miles.

Because of the broad changes in the individual health insurance market
under the Affordable Care Act, "there is no accurate apples-to-apples
comparison between the individual market in 2013 and the individual
market in 2014 and beyond," Blue Shield said, adding that "coverage
areas were designed to meet regulatory guidance and with patient access
to care in mind."

Blue Shield of California is acting within the law, says Shana Alex
Charles, director of health insurance studies at UCLA's Center for
Health Policy Research. She says Blue Shield could have offered to pay
health care providers more. But, at the same time, she adds, insurance
companies can't be forced to operate at a loss.

"There's no public charge that says they have to be in those zip codes,"
she says. "If they determine that it's not within their company's best
interests to remain there and sell their product there, then they won't
be there."

http://www.capradio.org/articles/2014/12/17/after-blue-shield-pulls-out-of-zip-codes,-consumers-see-limited-insurance-options/

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Comment by Don McCanne

Blue Shield of California has pulled out of 250 California zip codes in
the Covered California program (California's insurance exchange under
the Affordable Care Act), citing inability to negotiate low prices with
the local health care providers.

Nonprofit Blue Shield of California and for-profit Anthem Blue Cross
were the only Covered California insurers in many zip codes in the
state. It is ironic that the for-profit Blues plan - Anthem Blue Cross -
has continued to serve areas where coverage is more difficult, whereas
the nonprofit Blues plan - Blue Shield - has pulled out. So much for the
theory that nonprofit Blues plans are public service models while
for-profit Blues are primarily profit-making business models. They have
become the same animal, with the for-profits leading the way.

Blue Shield blames regulatory guidelines requiring that patients have
access to care. By refusing to contract with the local providers,
patients would have been required to travel long distances for care - a
violation of the Affordable Care Act.

Some might blame Blue Shield for demanding rates that were too low to
adequately cover costs, whereas others might blame the providers for
demanding rates that provided excessive profits, but the primary blame
does not lie with either party. It is the model that uses private
insurers as financial intermediaries that is defective and should be blamed.

Contrast that with Medicare, which is a public insurer that administers
the rates to be paid. Medicare is not setting rates to ensure that the
government is profiting off of the program. Rather it is setting rates
to be sure that the health care delivery system is adequately funded so
that it will be there when patients need it.

It is true that Medicare rates are not always optimal, but that is
because it is only one payer in a dysfunctional, multi-payer system
which makes rate setting much more difficult. If Medicare were the only
payer for the entire nation, it could set rates with much greater
precision, paying legitimate costs and fair margins.

Although the Blues had their day as health insurers serving in the
public interest, those days are long gone. It is time for a single
payer, improved Medicare for all.