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Health insurer joins stampede to narrow networks

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Blue Cross and Blue Shield of Minnesota is cutting back its participation in the state's Affordable Care Act insurance exchange next year after losing nearly $300 million in the individual market in 2015.

However, the large Blues insurer is not completely exiting the state-based marketplace. Fully withdrawing has its consequences: Federal law bars insurers from re-entering the marketplaces for five years, assuming they discontinue all types of individual policies.

Instead, Blue Cross and Blue Shield of Minnesota is dropping health plans with the broadest networks sold on and off the exchange and will push people toward its narrower HMO option called Blue Plus, according to the Star Tribune.

Plans with more limited networks of doctors and hospitals usually offer cheaper monthly premiums, which has been appealing to the price-sensitive exchange crowd, but they have also created some confusion for members unfamiliar with the products.

“The premiums will be lower, but (consumers) may not get the same choice of doctors and hospitals that they had before,” said Roger Feldman, a health economist at the University of Minnesota. “It's one of the hard choices that's being increasingly faced in health insurance more generally.”

Blue Cross and Blue Shield of Minnesota's decision is not unprecedented and has been embraced by other insurers around the country. The Blues plans in Illinois, New Mexico and Texas — all of which are owned by Health Care Service Corp., a giant Chicago-based company that has lost billions of dollars on ACA plans — abandoned their broad-network exchange plans in favor of the narrow-network HMOs.

“Some of these Blue plans are not able to tolerate these significant losses,” said Cynthia Cox, an associate director and health insurance researcher at the Kaiser Family Foundation.

Ms. Cox also said Blue Cross and Blue Shield of Minnesota's emphasis on its HMO subsidiary is similar to what UnitedHealth Group Inc. has done in some exchange states. Although UnitedHealthcare Inc. is only staying in a handful of ACA marketplaces, its Harken Health subsidiary is ramping up in Florida, Georgia and Illinois. Harken is a clinic-based health plan built on the premise of providing primary care at no charge.

Dropping broad-network plans can also be seen as a controversial risk dump for insurers. The sickest people who cost the most to insure often chose plans with higher monthly premiums to gain access to broader provider networks and fewer out-of-pocket costs. In Minnesota next year, those people may opt to buy those plans with other carriers, immediately benefiting the Blues' bottom line while redirecting the insurance risk elsewhere.

Mr. Feldman said what Blue Cross and Blue Shield of Minnesota and other insurers are doing reminds him of when HMOs became the default health policy a couple decades ago, and when individuals and employees revolted at the restricted choice of providers.

“Almost everything has been tried at least once,” Mr. Feldman said. “This does represent a return to the model we had in the 1990s, and we went away from it because people were not willing to make the trade-off at that point.” He sees the employer market eventually making its way down this path as well, considering the ACA's “Cadillac” tax on high-cost health plans goes into effect in 2020.

Blue Cross and Blue Shield of Minnesota ended 2015 with a $178 million net loss on $3.76 billion of revenue from its fully insured lines of business, according to financial documents. Those totals don't include business from self-insured employers. The company's underwriting losses just on individual-market plans — which don't include administrative expenses or taxes — totaled $280 million.

However, its Blue Choice subsidiary posted a $52 million net surplus on $895 million of revenue in 2015, according to separate financial filings.

Blue Cross and Blue Shield of Minnesota did not respond to interview requests.

Bob Herman writes for Modern Healthcare, a sister publication of Business Insurance.