By Greg Guggenmos
Texans enjoy many benefits from the booming economy in our state. Low taxes and light regulation has kept the cost of living down while steadily creating jobs. One industry, however, has not benefitted as much from the Texas model in recent years: healthcare.
On July 23, Blue Cross Blue Shield of Texas (BCBS), which insures more than 4.7 million Texans, announced it would be phasing-out its Preferred Provider Organization (PPO) health insurance plans due to unsustainable pricing requirements and regulations created by the ACA.
In 2014, BCBS paid out $400 million dollars more in medical claims than it took in through premiums on its PPO plans, creating a financially unsustainable product. Roughly 367,000 Texans will lose their coverage plan because of the cancellation, caused by an ACA regulation that ties the price of individual plans to the claims’ history of all insured members. This regulation would have dramatically increased prices on all plans offered by BCBS, not just the PPO plans, and would have likely pushed many of their customers to different carriers. While HMO plans are still available to BCBS members, the cancellation will have the effect of limiting access, since HMO plans are far more restrictive than PPO plans.
Several factors contributed to the negative profit margin of the PPO plans last year—all caused, directly or indirectly, by the federal healthcare law. The leading cause was the injection of high-risk customers into the individual insurance market after the Texas Legislature phased out a state-run insurance plan due to the creation of a federal exchange under the ACA. In early 2014, Texas shut down the high-risk insurance pool that provided coverage for 23,000 Texans with pre-existing conditions.
According to the Texas Tribune, “The state has deemed the high-risk pool obsolete, as the Affordable Care Act prohibits insurance companies participating in the federal marketplace, which launched on Oct. 1, from denying coverage to Texans with pre-existing conditions.” Once these new customers with higher claims costs flooded the market, PPO plans became financially untenable. The cancellation of those plans means all Texans, not just those with high medical costs, will be left with less access to care and fewer coverage options.
Even if customers remain with BCBS, the HMO plans have a much smaller network of doctors and hospitals. Barriers to care, and the inconvenience of limited options, often leads to lower health outcomes for patients. Faced with rising prices, many Texans may choose to drop ACA-approved plans altogether and divert their money towards non-compliant plans, opting to pay the penalty instead. Reuters reported that in spite of federal subsidies for ACA plans on the exchanges, “the number of people applying for non-compliant, short-term health insurance policies was up more than 100 percent in 2014.”
Much of this is coming from young people unable to pay the high costs of ACA coverage. The cost discrepancy between ACA-compliant and non-compliant plans is so high, many customers with non-compliant plans are paying less even after paying the ACA penalty.