Regence BlueCross BlueShield Pulls out of Oregon’s Insurance Exchange

Its counterpart in Washington state known as Regence BlueShield, also backed away from its exchange
The Lund Report

May 3, 2013 – When the dust settled and the insurers announced their proposed rate requests for Oregon’s insurance exchange, the state’s largest health insurer – Regence BlueCross BlueShield of Oregon – decided to back away. That decision came on the heels of Regence having the highest enrollment last year compared to its rivals -- 472,902 members – just slightly ahead of Kaiser Permanente – which had 464,637 members.

Regence’s decision couldn’t have been based on strictly financial reasons. Ending the year with $522 million in capital and surplus, the health plan spent another $277,639 on lobbying elected officials, while paying its executives handsomely – Jared Short, president, took home $597,281 in 2012, while Mark Ganz, president and CEO of Cambia Health Solutions, ended the year with $1.2 million from Oregon, Washington and Utah. His compensation in Idaho is not publicly available.

Onlookers came away stunned. Regence had been at the table all along, testifying in favor of the exchange during legislative hearings and had staff attending work sessions organized by Cover Oregon. Its top executives, including Mark Ganz, Jim Walton and Don Antonucci had appeared in numerous public speaking forums touting their support, giving all indications they’d be a strong player in the exchange. The Oregon Insurance Division had even scheduled a hearing in early June to review Regence’s plans.

“Regence is just trying to game the system and play politics in the hopes that the exchange goes down; it’s quite obvious that they’re setting themselves up to compete by not participating in the exchange and not gamble on a risky population that they can’t predict,” according to people familiar with the marketplace.

In Oregon, Regence will not be among the insurers offering coverage to small employers under the exchange, and its name will not appear among the plans offered to individuals. Instead, its parent company, Cambia Health Solutions created a new entity, known as BridgeSpan, whose name will appear on the exchange for individuals.

Those familiar with Regence believe that decision was made to avoid adverse selection since Regence has been responsible for nearly 11,000 people on the high risk pool, the majority of whom have major health problems and would prefer that those people seek coverage elsewhere. “Regence wants to do everything in its power to avoid having to pay hefty claims and would prefer other insurers take those people on,” said an onlooker.

Meanwhile, in Washington state, Regence is taking similar action, having withdrawn from the small business exchange, known as SHOP, earlier this week. “They didn’t say why, and we haven’t had a chance to have a conversation with them about this situation yet,” said Rich Roesler, public affairs project manager for the Washington state Office of the Insurance Commissioner. “We certainly would like to see as many plans in the SHOP exchange as possible, since it’s in everyone’s interest to have a robust market in the exchange”.

Regence Responds

Asked why Regence had decided to take such action, Scott Burton, media spokesman for Cambia, gave the following response. “Across all four of the states we serve, individual consumers have made it overwhelmingly clear that they want access to a consumer-friendly marketplace to shop for health insurance, and so we have created a brand new company in BridgeSpan to respond to that demand on the exchange,” he told The Lund Report. “Similar demand is not expected from small businesses in both Oregon and Washington. As a result, we will continue to offer products to small businesses off the exchange. As we serve our small business customers, we’ll gauge their interest in shopping for our products on the exchange. Given these clearly differing levels of market demand, our exchange focus is currently on meeting the needs of the individual consumer. You will see both Regence and BridgeSpan offering individual plans in all of our markets. As you’re aware, the Affordable Care Act has created a level playing field requiring one carrier to pay another if ‘risk’ is unbalanced among carriers. This eliminates any advantage or disadvantage a carrier could have over another as a result of who they insure.”

Burton also said that Cambia has “supported Cover Oregon’s development and growth since day one, and we continue to do so. Rocky King and his team have done incredible work to get the exchange ready for business.”

Despite Regence’s reluctance, Cover Oregon has no shortage of insurers willing to participate in the individual and small group marketplace. 

“I’m very pleased with the carriers that are participating and am especially proud of the small group market,” said Rocky King, executive director. “It reflects the best blend of carriers and co-ops that are involved in both the Medicaid and the commercial market and almost all of them are involved in transforming the delivery system to bring better quality and value to the market. It’s not going to be business as usual.”

Oregon – along with Washington and Maryland – is considered at the top in the country for creating a robust insurance exchange by October 1. This comes at the same time New Mexico announced it can’t make that deadline and is delaying start-up until January 2015.

“It continues to be a very steep climb to get all technology in place prior to October 1,” King said. “We’ve had to build 40 different interfaces with carriers, banks, the federal government and our state partners -- the Oregon Health Authority, Medicaid and the Department of Employment. The website is pretty well done. Now we’re populating it with the appropriate content, and we’re putting the system through rigorous testing procedures; that’s our big challenge now.”

King also said he’s not worried about any significant rate discrepancies among the insurers. “I actually haven’t reviewed all of them but I’m confident the Insurance Division will do a good job reviewing those rates to make certain they’re reasonable and won’t allow any unreasonable rates to be offered.”

Once the rates are approved by the Division, the insurers have an opportunity to back out – before they sign a contract with Cover Oregon. If that occurs, it’s likely to happen by September 1. King doesn’t anticipate calling for another RFP from prospective insurers for two years. And, if the market is robust, that may not actually occur. “We reserve the right to extend enrollment to our current insurers,” he said.

Rate Review Process

On May 10, the Insurance Division plans to announce the rate requests proposed by the insurers and hold public hearings starting in late May.  

 “Oregon’s rate review process is among the strongest and most transparent in the nation,” according to Lou Savage, insurance commissioner. “As the OSPIRG report just noted, Oregon’s strong rate review process is effective at eliminating excessive overhead. Of course, all documents are posted so anyone can see what we’re doing. We have the expertise to conduct a thorough rate review: We have our own experienced actuaries on staff. One of our actuaries, in fact, is a former insurance commissioner. Federal grants through health reform helped make it possible for us to gear up to drill deep. Rate review team includes three experienced, credentialed health actuaries, and senior management, including me, sign off on each decision.”

To determine if the rate requests are reasonable, the Insurance Division intends to review several key points.

  New benefits and cost-sharing structure (less cost sharing for consumers)

  • The cost of formerly uninsured, high-risk pool and people with portability plans entering the individual market

  • The impact of changes in age rating and tobacco, along with other rating factors such as geography

  • State and federal risk-adjustment programs that ensure no one carrier gets a disproportionate amount of super-high claims in the individual market. (This is to help keep premiums down.)

  • Other considerations are how much medical costs will increase based on provider contracts, new technology and other traditional factors, as well as administrative costs.

FOR MORE INFORMATION

To read an earlier story about Regence and Health Net’s participation in the insurance exchange, click here.

To review Regence’s latest filing in Oregon, click here.

Diane Lund-Muzikant can be reached at diane@thelundreport.org.

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Comments

This article/author appears strongly biased against Regence. Nevertheless: According to this article, Cambia Health Solutions owns Regence. And it also indicates that Cambia Health Solutions owns BridgeSpan. Therefore I see no disadvantages for consumers in the exchange, whether or not it is “Regence” or “BridgeSpan”: if a consumer, through the exchange, receives insurance with BridgeSpan, they are, in essence, receiving insurance from the same company which manages Regence. The only difference is the name itself. If I am missing something please list the disadvantages to this for consumers.

Mr. Rowe, The logic, rightness or wrongness of Regence's last minute decision to pull out of the exchange under the Regence logo can be debated forever. I propose a simple, one question test to determine whether there are legitimate disadvantages for consumers, including those at highest risk. So here is a way to figure it out... WHAT WOULD DICK WOOLWORTH DO?

Regence is a licensed affiliate of the national Blue Cross Blue Sheild association, which means they must comply with reporting and disclosure obligations, meet minimum service standards, and operate within the quality and control standards and expectations of all licensees. BridgeSpan is not part of the BlueCross BlueSheild association. They are a non-branded, "green-label" subsidiary that cannot use the Shield, Cross or any other BCBSA mark. This means all the quality control and minimum standard requirement that go along with the Blue Brand are avoided. There are huge differences between a Blue branded product and a non-branded product. Network discounts, provider agreements, minimum service levels, reporting and disclosure thresholds, brand name reputation and recognition - if the only difference was the name itself, as you naively proposed - there would be no value in the Blue Brand. Simplistic reasoning applied to an incredibly complex issue is easier than attempting to understand the fine points; however, if you are representative of the typical average healthcare consumer who would in fact be purchasing off the exchange, then like government, you get what you deserve.

Here are 5 common gaps qualified health plan issuers have to resolve before plans can be sold on an exchange http://www.healthcaretownhall.com/?p=6715

The Lund Report nailed it back in its April 26, 2013 issue with this quote -- "But many industry officials remain skeptical about Regence’s true intentions and are convinced this is an attempt by Regence to discourage people with high medical costs from joining its plan. Why else would the company make such a decision at the same time the high risk pool is drawing to a close?" Although Regence played along with all the other insurance plans in the state as they sat at the table, crafted self-promoting policy, and talked about "servant leadership" and transforming healthcare... Yes, in fact many of us were skeptical and wondered what would happen at the exchange finish line. What happened last week is what I call "insurance interruptus!" Translation: It's just Regence doing what Regence does best... looking out for their bottom line by ridding itself of the high risk pool and creating a new product, BridgeSpan, designed to attract young and healthy low-risk members and keep Regence/Cambia from being sidelined altogether. Gotta hand it to you Regence -- pretty darn clever!

It was common knowledge that their plan was to get out of the Individual market. While the company as a whole may be profitable, this line of business has become more unprofitable as the healthy folks dropped out and the risk pool got worse. Is it fair to expect other lines of business to subsidize the Individual market? Probably not. The problem with this recent development is that it shows Regence is looking to dump their current high risk pool in a pretty slimy way - they will discontinue their products while offering different products (like high deductible plans) under a separate company. It sucks, but they are also charged with maintaining financial stability and not having group lines subsidize the Individual market.

The rules around health insurance exchanges are dynamic and evolving all the time. Some agents fear these exchanges could displace us-in the way Travelocity displaced many travel agents. Others argue that because health insurance is a far more complicated purchase than an airline ticket, and because consumers are likely to be confused by these new channels, our expertise and advice will be even more crucial.