Texas Health exchanges, the next boom in health care, are on the way
Health exchanges, the next boom in health care, are on the way
Mitchell Schnurman
mschnurman@dallasnews.com
Published: 16 March 2013 04:56 PM
The health care industry hasn’t had an opportunity like this in, oh, about half a century. That’s when Medicare started.
This time, millions of new customers are up for grabs and millions more will be in play, because Obamacare is coming to Texas, with or without Rick Perry’s approval.
Last week, Blue Cross Blue Shield of Texas kicked off a statewide campaign to promote open enrollment this fall, when the health exchanges are supposed to launch. The online marketplaces will let shoppers compare insurance and tap into subsidies to help pay for coverage.
A family of four earning up to about $90,000 will be eligible for some help, and if families earn less than $30,000, their contributions will be capped at 2 percent of income. That will mean new options for the uninsured, along with individuals priced out of the market and small businesses frustrated by the costs and complexity.
The subsidies will be so rich that one expert predicts that some small companies will dump low-paid employees into the exchange and use the savings to boost their pay.
Enrollment is expected to start at about 11 million nationwide in year one and build to more than 30 million. If exchanges work well and attract robust competition — proponents have compared them to Travelocity and Amazon — the numbers will swell. With more employers embracing them, enrollment could hit 75 million by 2021, according to the Deloitte Center for Health Solutions.
As the state’s largest insurer, Blue Cross Blue Shield has pledged to offer plans for residents in all 254 Texas counties. Other insurers are certain to follow, albeit much more selectively.
“We’re not just cherry-picking the urban areas,” said Bert Marshall, president of Blue Cross Blue Shield of Texas, which has about 5 million members.
‘Be Covered Texas’
To get an idea of the business opportunity here, up to 4.4 million Texans could be added to insurance rolls if the expansion is a roaring success. That’s the best-case scenario from researchers at Rice University, assuming that the uninsured sign up at the same rate as the elderly in Medicare. Under the most conservative estimate, they project about 1.4 million people would be added.
That wide gap is the reason that BCBS is starting its “Be Covered Texas” campaign now, more than six months before the Oct. 1 enrollment date. It’s also why the federal government extended the initial sign-up period through March 2014 and plans its own awareness campaign. About three-fourths of exchange enrollees will buy insurance for the first time. They’ll need facts and hands-on help for a complex product and application process.
“This is a colossal effort,” Marshall said, adding that local groups will help educate their communities. “This isn’t a one-shot opportunity. We’ll ramp up each and every year.”
While Medicaid expansion faces opposition from lawmakers in Austin, it’s a big part of the market’s growth potential. BCBS, for instance, has a managed care program for Medicaid in eight counties around Austin, and Marshall wants to expand that footprint.
Many insurers haven’t revealed details of their strategy yet, and premium prices in Texas may not be revealed for months. UnitedHealth Group, the nation’s largest insurer, said in January that it was considering entering 10 to 25 exchanges out of a potential 100 nationwide. The top executive said they would hold back until they had greater clarity about the rules and prospects.
“The question is which markets will they play in?” said Bill Copeland, leader of the U.S. insurance practice at Deloitte.
He said Dallas-Fort Worth and Houston will attract all the major national players, because of the potential customers and provider networks. They could have four to six competitors, including smaller offerings with narrow networks.
The big unknowns
For the first time, large insurers are investing heavily in the individual market, even hiring consumer experts to strengthen their efforts. Next year, exchanges are projected to generate at least $50 billion in insurance premiums nationwide and about $200 billion by 2021, according to PwC Health Research Institute.
Whether that’s profitable business remains to be seen. Insurers must take all applicants, regardless of pre-existing conditions. Older customers won’t have to pay more than three times the rate for younger members; today, it’s not uncommon to charge five times more.
If health reform works, insurers will develop tighter, more efficient networks and gain from the expansion. Or young people could ignore the individual mandate and subsidies, and decide not to buy coverage. Then insurers would be stuck with too many sick members.
About half of insurance customers spend less than $1,000 a year, while 5 percent spend more than $45,000 annually, said John McCracken, health care management professor at the University of Texas at Dallas. In the exchanges, they’ll have to cover them all.
“I don’t think this is going to be a golden age for insurers,” he said.
Unless they figure out how to manage it.
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