Blue Cross Association Trumpets $500 Million In 'Savings' But One Blue Still Needs 19% Rate Increase
by Dan Munro Contributor ("I write about the intersection of healthcare innovation and policy")
The headline may sound fictional — but it really isn’t. It’s actually a compilation of two articles that appeared just one week apart earlier this month.
The first was a press release from the Blue Cross Blue Shield Association (BCBSA) — the parent organization of the 37 independent Blue Cross Blue Shield companies around the country.
Initial reports from the survey [of BCBS companies] show savings of $500 million in 2012.
BCBSA Press Release — July 9, 2014
The second article appeared earlier this week based on state filings by BlueCross BlueShield of Tennessee (BCBST).
BlueCross BlueShield of Tennessee — the state’s dominant health insurance provider — is asking to raise rates by an average of 19 percent for its exchange plans in 2015, according to documents filed with the state of Tennessee.
The Tennessean — July 16, 2014
In effect, the move to “value-based” care has resulted in $500 million in “savings” across the 37 independent BCBSA companies, but at least one of the 37 — BlueCross BlueShield of Tennessee — still needs a rate increase of 19% for 2015 to stop hemorrhaging millions per month.
It’s easy to discount the first as representing all 37 Blue Cross Blue Shield companies and the second representing just one, but certainly a portion of the $500 million saved should be attributable to the largest health insurer for the state of Tennessee (population 6.4 million).
The accounting conflict does make it difficult to assess the real market dynamics. The larger story for Tennessee appears to be an overly aggressive pricing strategy for customers that signed up under the new exchange for that state. BCBST was able to capture about 88% of new enrollees through the new exchange ‒ which amounted to about 133,000 new members, but they are also losing millions per month on those new members.
Based on our claims experience through the first half of this year, we’re paying out more than we expected. In fact, we’re in a loss position that will be in the tens of millions of dollars.
Roy Vaughn ‒ BCBST Spokesman as quoted in The Tennessean (here)
The larger question remains — shouldn’t the Tennessee portion of the $500 million that BCBSA trumpeted as “saved” have given that state’s largest health insurance provider an edge? Shouldn’t BCBST have been able to under‒price other carriers and not lose millions per month?
The BCBSA may well have saved $500 million across all 37 member companies in 2012, but where the savings went is another mystery. Clearly it didn’t go to consumers in Tennessee. Are we supposed to applaud the corporate accomplishment for saving $500 million across 37 health organizations or do we criticize the lack of any visible effect on consumer wallets? The Milliman Medical Index highlights the effect of healthcare pricing for a fictional family of four with PPO over the last 13 years.
Pricing transparency in healthcare is much broader than just what providers charge for healthcare services and procedures. We’ve seen those and they are shocking, but pricing transparency logically extends to every constituent in the healthcare ecosystem — including those that are eager to trumpet banner savings while requesting double digit premium rate increases. Savings aren’t really savings if they don’t translate to lower pricing. Those aren’t “savings.” They’re typically called profits.