Blue Shield makes huge Obamacare profit hindering access to care

Photo:  source  .

Photo: source.

Two weeks ago, I wrote about a new government report showing that Blue Shield of California, a nonprofit health plan, made a bigger profit off Obamacare coverage in 2014 than any other U.S. insurer. The windfall subjected Blue Shield to a $107-million-excess-profit tax, which it made enrollees pay by deducting $223 per person from rebate checks it owed them.

The full story, it turns out, is even uglier. Blue Shield generated the big profit by impeding access to care.

Paying for less care 

As detailed in a class action lawsuit and separate enforcement action by health plan regulators, Blue Shield thoroughly botched the rollout and administration of Obamacare plans in 2014. After paying their premiums, customers often waited months before getting their member ID cards. Information Blue Shield provided about which doctors were covered was inaccurate. And when enrollees tried to get problems over care access and other issues resolved, they frequently confronted hours-long hold times or had their calls abandoned.

Other insurers also had difficulty with the launch of Obamacare, but Blue Shield’s mishandling was extreme. I was the insurer's public policy director at the time, and could tell you stories about how royally screwed up things were. But the company already has a lawsuit against me for my whistleblowing, so on the advice of counsel, I won’t.

What I can tell you, based on an analysis of claims data, is that the obstacles to care imposed by Blue Shield’s mismanagement appear to have deprived its nearly 500,000 enrollees of approximately $200 million in healthcare services. Compared to its two biggest competitors, Anthem Blue Cross and Kaiser Permanente, Blue Shield spent about $400 less per member on medical claims, after adjusting for differences between the insurers in the health condition of their enrollees and richness of the coverage they sold.

How do we know that impaired access to care is responsible for the lower claims payments? Because no other potential cause, such as membership demographic differences, appears to have been a significant factor. My analysis, including methods and data sources, is here.

Making enrollees pay

The bottom line: Blue Shield made a huge profit hindering access to care, which triggered a $107-million-excess-profit tax that it forced enrollees to pay. Sticking customers with that bill wasn’t illegal, but it was wrong, especially given Blue Shield’s not-for-profit status and billions of dollars in reserves. Blue Shield needs to return the $223-per-enrollee that it took to pay the tax.