The Affordable Care Act (ACA) has brought about a lot of changes over the past few years in regards to health insurance. And since the Individual Health Insurance Marketplace went live in late 2013, many individuals are starting to get the hang of how it works. In fact, 9.5 million individuals signed up for it in 2015. But in California, things are starting to get complicated for individuals purchasing individual health insurance.
Blue Shield of California has said goodbye to Northern California customers, making the decision to pull individual health insurance coverage from some 250 zip codes and entire counties. This decision has had negative repercussions on many individuals and their ability to purchase individual healthcare.
Insurance Options Decreased to Anthem Blue Cross for 30,000 Individuals
Entire counties including Alpine, Monterey, Sutter, and Yuba, and over 250 zip codes are now limited to one health insurance provider, Anthem Blue Shield, if they are purchasing through CoveredCA.com, California’s Individual Health Insurance Marketplace.
In years past, both Anthem and Blue Shield of California were providers to the Northern California area, but by 2014’s open enrollment, Blue Shield of California stopped selling individual health insurance. But, was this happening to other areas of California as well? Not exactly. In fact, it was the opposite.
But Other Parts of California Have as Many as Six Options
Areas such as San Francisco have six to seven choices - a striking contrast to their Northern neighbor's single choice.
In fact, as shown in the illustration, it’s easy to see Blue Shield of California has stopped selling policies to individuals in almost the entire Northern part of the state. But, there must be a reason, and there is: Insufficient hospital networks.
What is the Relationship Between Insurance Providers and Hospitals?
Here’s how it works. In order to stay competitive, health insurance plans must have a fairly diverse list of providers and hospitals within their networks. The same is true for doctors and hospitals, which often rely on inclusion in major plans in order to keep their doors open.
To become part of a network, a provider must have a contract with the health insurance company. The agreement gives the doctors and other providers a steady stream of patients and offers the health insurance companies service at reduced rates. This results in more affordable health insurance plans.
Because there is a lack of hospital networks and doctors in the Northern California area, and Blue Shield of California does not want to offer plans at a loss and their plans are no longer available in the area. However, who is really losing in this situation?
With No Competition, Consumers Lose Out
Truth is, with no little-to-no competition, individuals in Northern California are faced with a monopoly of individual health insurance. The remaining company, Anthem Blue Cross, has the ability to charge more for their coverage simply because there is no competition.
But is Anthem Blue Cross the Only Option for Individuals in the Area?
No. In fact, there are two other companies - Assurant Health and Moda Health. However, both of these companies are not on the public Individual Health Insurance Marketplace. Why does this matter? Individual health insurance tax credits (premium tax credits).
Premium tax credits are for qualifying individuals to buy individual health insurance through their state’s Health Insurance Marketplace. They are available to the majority of individuals and families who do not receive insurance through work. The tax credits cap an individual's cost at 2% - 9.5% of their household income.
So, individuals in Northern California are left with two choices: Buy an Anthem Blue Cross policy through the Individual Health Insurance Marketplace and use premium tax credits, or buy a policy through Assurant Health and Moda Health and lose the opportunity to utilize premium tax credits. With such limited options to a large portion of the state, is it legal? Surprisingly, yes.
Blue Shield of California is Acting Within Law
Blue Shield of California's actions are within the law. In fact, there is no public charge saying the company (or any health insurance company) must offer coverage to an entire state. And, as stated previously, Blue Shield of California says they have pulled coverage from the area because of a limited network with which to work and operate at a profit - rather than a loss.
While their actions are legal, thousands of individuals are now left with limited individual health insurance options.
Though Blue Shield of California is no longer available to much of Northern California because of a lack of network, over 30,000 individuals are left with one health insurance option through the Individual Health Insurance Marketplace - Anthem Blue Cross.
And despite the fact that other options such as Assurant Health and Moda Health are available, they are not currently through the Individual Health Insurance Marketplace and individuals would not have the option to utilize their premium tax credits.
What do you think Blue Shield of California should have done in this situation? Do you think Blue Shield of California shouldn't have said goodbye to California customers? Comment below.
An earlier version of this post incorrectly stated the name of a California health insurance provider. This post has been updated to reflect the correct name of the provider, Blue Shield of California.