The ObamaCare Three-Step is a little dance that insurance companies and insurance regulators will partake of more and more in the next few years on the exchanges. This is how it works:
Step 1. Insurer Takes Big Loss On Exchange And Requests Big Premium Hike For Following Year
Step 2. Insurance Regulator Denies Insurer’s Rate Hike Request
Step 3. Insurer Leaves The Exchange.
In the Land of Enchantment, Blue Cross Blue Shield New Mexico (BCBSNM) and the State Department of Insurance appear to be the first to do the ObamaCare Three-Step. Earlier this year BCBSNM requested a rate hike of over 50 percent for policies in the individual market, including the exchange, after it lost about $19.2 million.
In early August, the Dept. of Insurance rejected the rate request, offering a 24 percent one instead. In late August, BCBSNM said it was discontinuing its business on the New Mexico individual market, including the exchange, at the end of 2015.
According to news reports, BCBSNM “covered 35,000 people in [New Mexico] last year. That number amounted to just below one-third of people in New Mexico on individual plans.”
Not only will thousands of people have to find new insurance, those on the exchange will find a much smaller array of plans to choose from. For a 27-year-old single person living in Albuquerque, there were 57 plans on the exchange for 2015. Twenty-five of those are BCBSNM plans, meaning the number will drop to 32 plans for 2016, a decline of 44 percent.
A 57-year-old couple had a choice of 52 plans in Albuquerque in 2015. That will fall to 29 in 2016 thanks to the departure of BCBSNM, also a 44 percent drop.
The head of the New Mexico exchange asserts she has “had conversations with the [four] other carriers to be sure they would be ready to absorb new membership. They’ve assured us that they are.”
But that’s not the real concern. Rather, the concern should be whether the Dept. of Insurance is willing to approve big rate hikes for those other insurers in the future, as the sicker patients who were enrolled in BCBSNM plans now migrate to the other four insurers.
Or, will more New Mexico insurers be doing the ObamaCare Three-Step?