Last August, Pinal County almost made history. Six and a half years after Congress passed the Affordable Care Act, President Obama’s legislation aimed at providing health insurance for everyone, there were no insurance companies providing individual plans on the federal marketplace in Pinal. A few weeks later, Blue Cross Blue Shield of Arizona agreed to offer coverage, becoming the last lonely tumbleweed blowing across Pinal’s insurance landscape.
A similar story is now playing out across the state. In 2017, 12 of Arizona’s 15 counties will have only one insurance provider – Blue Cross – offering coverage on the exchange. Pima County has two providers; Maricopa has one. The exodus means Arizonans who buy plans there will have precious few options for doctors. Add to that premium increases and the unpredictability of who will sign up for coverage (likely leading to more rate increases) and the marketplace looks almost nothing like ACA architects had hoped.
If the ACA exchange in Arizona has 99 problems, money is most of them. Blue Cross officials said it lost upwards of $185 million in 2014-2015. Aetna, which pulled out of Arizona in August, has lost $430 million on individual ACA plans since 2014.
Healthcare consultant Jim Hammond says insurers are losing money because the market is too volatile. “There’s a phenomenon called adverse selection,” he says: Lower costs and government subsidies incentivize less healthy and less wealthy people to buy insurance on the marketplace. Most others get insurance through their employers or, if they’re healthy enough, eat the penalty – which costs less than most plans – and go without. With not enough healthy people paying in, insurers lose money.
To stop the bleeding, insurers applied to the Arizona Department of Insurance for huge rate increases for fiscal year 2017. Phoenix Health Plans, Inc. requested a 159.9 percent premium increase before dropping out of the market altogether. Stephen Briggs, the insurance department’s public information officer, says that may have been the largest increase request in the country – the average request in Arizona on the individual marketplace was 50 percent.
When rates were published in October, they painted a dismal picture: Blue Cross marketplace plans in Arizona are increasing about 51 percent. Centene Corporation, the only company offering plans in Maricopa County, is increasing rates by 74.5 percent.
For most Arizonans on the individual marketplace, those rate increases are the pea under the proverbial mattress. An estimated 75 percent of the 200,000 residents who bought insurance through the individual exchange in 2016 received a government subsidy toward their premiums. Many got the care they needed and then bailed – only 179,000 paid for coverage four months later.
Across the U.S., 20 million people have gained coverage since the ACA passed – including new enrollees to Medicaid and state-sponsored healthcare (here called Arizona Health Care Cost Containment System, or AHCCCS). As of June 2016, almost 600,000 additional Arizonans had signed up for Medicaid thanks to that expansion.
Where there’s free coverage, there’s bound to be a bill. The Obama administration offered full federal matching grants for the first three years of the program to states that agreed to expand. Fiscal year 2017 is the first year funding recedes. To compensate, Arizona lawmakers turned to hospitals, creating a new assessment – essentially, a bill to hospitals each time they see an AHCCCS patient. It’s going up by about $15 million in 2017. Hospitals are more than willing to pay it, says Matthew Benson, spokesman for the Arizona Hospital and Healthcare Association. “Hospitals are losing money on this care,” he says, “but they’re losing less than they would if these individuals had no care whatsoever.” Before the expansion, hospitals treated many of these same folks in the ERs without any payment at all.
In early October, The New York Times published an article with the headline “Ailing Obama Health Care Act May Have to Change to Survive.” It’s a sobering look at the controversial law, if a bit misleading: Change has already come to Arizona.
