Tennessee Insurance Commissioner Warns Obamacare "Very Near Collapse"

Last week we highlighted how insurers participating in Obamacare exchanges around the country were set to lose $2BN in 2016 prompting many to impose substantial 2017 rate hikes and/or withdraw from the exchanges altogether.  In fact, we also noted the chart below, from independent analyst Charles Gaba, who analyzed the rate hikes proposed for each of the 50 states.  Per the chart, Tennessee was specifically highlighted as a state expecting 2017 rates to rise an astonishing 59% in just 1 year.  


Today we have new reports from the commissioner of the Tennessee Department of Commerce and Insurance, Julie Mix McPeak, who is saying that the Obamacare exchange in her state is "very near collapse" as she struggles provide at least 1 insurance option in each Tennessee county.  Per The Tennessean:

I would characterize the exchange market in Tennessee as very near collapse ... and that all of our efforts are really focused on making sure we have as many writers in the areas as possible, knowing that might be one," McPeak told The Tennessean. "I’m doing everything I can to prevent a situation where that turns to zero.”

Blue Cross Blue Shield (BCBS) is the only insurer that has provided statewide coverage in Tennessee over the past 3 years with other insurers electing to only participate in select counties.  According to BCBS, the insurer has lost a total of nearly $500mm over that time period, in Tennessee alone, which prompted their request for a 62% premium increase in 2017.  The problem for the insurance commissioner is that BCBS hasn't yet committed to providing insurance statewide, a decision they don't have to formally make until mid-September.  Given that BCBS is the only statewide provider, any decision to pull back coverage could result in people in certain Tennessee counties losing access to health insurance all together. 

Chattanooga-based BCBST, the only insurer that's sold statewide in the first three years of the federal exchange, is estimating that, by the end of 2016, it will have lost close to $500 million in three years. Such losses are unsustainable, said Roy Vaughn, chief communications officer of BCBST.


The insurer, which has previously underscored its support for the individual market, is still weighing what its presence in 2017 will look like. At this point in the process, the insurer only has to notify the state if it decides to make changes to where it will sell plans, McPeak said. It’s too late for another insurer to come onto the 2017 market.


“We agree with the assessment of the ACA marketplace in Tennessee. We appreciate the support of our request to close the gap between our rates and medical expenses for ACA marketplace plans. Beyond rates as we’ve discussed with the (TDCI), we continue to have concerns about uncertainty with the ACA at the federal level," Vaughn said to The Tennessean. "Due to these concerns, we are keeping all of our options open at this point about participating in the 2017 marketplace. We anticipate making a final decision in mid-September.”

Governor Bill Haslam said that Tennessee had concerns about the Obamacare exchanges from the start noting that the federal government can't force insurers to cover people at a loss. 

“Ultimately, I think that’s where the federal government needs to come in and address the situation. They created the program and so they’re going to have to address that. They can’t make insurance companies cover people if it doesn’t pay off for insurance companies,” Haslam said. “Those of us who had some structural questions about the Affordable Care Act said OK, we’ve set this up, now you need to come up with an answer for this if we’re not going to have anybody that covers the exchange.”

When questioned about the seemingly failing exchanges in Tennessee, a representative from the Department of Health and Human Services noted that people receiving subsidies in Tennessee will only see their insurance premiums increase $2 in 2017 to $104 per month.  While that may be true, it says absolutely nothing about the overwhelming majority of people who don't receive subsidies and are facing a 59% increase in their costs YoY. 

“Consumers in Tennessee will continue to have affordable coverage options in 2017. Last year, the average monthly premium for people with Marketplace coverage getting tax credits increased just $2, from $102 to $104 per month, despite headlines suggesting double digit increases,” said Marjorie Connolly, HHS spokeswoman, in a statement.

We're unsure whether to take Connolly's comment as just another piece of propaganda intended to defend a failing piece of legislation or an intentional, blatant admission that the Department of Health and Human Services simply doesn't care about the majority of Americans, the so-called 1%'ers, who are facing debilitating increases in healthcare costs.  We'll let you decide on that one. 

Meanwhile, Kevin Walters of the Tennessee Department of Commerce and Insurance echoed our concerns:

"Our team has answered hundreds of phone calls and e-mails from concerned policyholders upset about premium increases and whether they can afford another jump," TDCI spokesman Kevin Walters said. "A 45-year old Nashville resident will face premiums ranging from $500 to over $600 a month, depending on the carrier.  To focus on the 'majority' receiving subsidies speaks nothing to those who receive no such assistance and, instead, face $500-plus premiums. While some consumers may switch plans, rising prices are faced by all."

In the end, the administration can only keep its head in the sand about Obamacare for so long.  The fact is that exchanges across the country are on the verge of collapse.  They're stuck in a negative feedback loop where healthy people are refusing to sign up, which leads to losses for insurers, which leads to higher rates, which, of course, leads to even fewer healthy people signing up.

As we've said before, "if Obamacare enrollments continue their current trend and insurers continue to hike premiums at alarming rates then Republicans may not have to worry about "repealing and replacing Obamacare" as it might just work itself out "naturally"."