Anthem Pulls Out of Covered Calif.'s Small Business Exchange

On Friday, Anthem Blue Cross announced that it will not participate in California's small business health insurance exchange under the Affordable Care Act, the Sacramento Business Journal reports.

The move comes after California Insurance Commissioner Dave Jones last month recommended that Anthem be excluded from the state's health insurance exchange for small businesses because of recent "unreasonable" rate hikes (Robertson, Sacramento Business Journal, 7/19).

Background on Exchange

The exchange -- named Covered California -- primarily will serve individuals and small businesses.

The exchange is expected to open for registration in October, and an estimated five million people will purchase plans through the exchange in 2014.

The state estimates that up to 200,000 small business workers and their dependents will get coverage through the exchange's market for employers with 50 or fewer workers.

About Anthem's Rate Hikes

Anthem has imposed three rate hikes for small businesses over a period of seven months, including a:

  • 10.6% rate hike announced in January;
  • 10.5% rate hike announced in March; and
  • 7.6% rate hike that took place July 1 (California Healthline, 6/14).

Details of Anthem's Announcement

Anthem -- a unit of WellPoint -- is the state's largest insurer for small businesses, with 31% of that market in 2011, according to Citigroup data.

Anthem is the first big insurer to officially pass on participating in the small business exchange under Covered California, the Los Angeles Times reports (Terhune, Los Angeles Times, 7/19).

Anthem spokesperson Darrel Ng said the company decided to back out after the state last month said insurers no longer are required to participate in the small business marketplace in order to offer plans through the individual insurance exchange (UPI, 7/20).

Anthem will continue to offer small business plans through the privately run California Choice exchange. In addition, Anthem still plans to offer individual coverage through Covered California.

Anthem said Jones' criticism did not influence its decision.

Reaction

Micah Weinberg -- a senior policy adviser at the Bay Area Council -- said the move is "really surprising and not a good thing for the exchange."

However, Covered California spokesperson Dana Howard said the exchange does not believe Anthem's decision "will have a huge impact," adding, "There are other companies that are just as big. This will be a competitive market."

Bruce Jugan -- an insurance agent and president of Benefitscafe.com -- said the small business exchange "will get a lot of business, even without Anthem Blue Cross participating," as long as the marketplace can offer lower rates.

Following the announcement, Jones in a release said he believed Anthem withdrew "because they felt they would be excluded or at a minimum they didn't want to face additional debate" over its rates (Los Angeles Times, 7/19).

Mark Miller
The last post of mine a couple of minutes ago is responding to the link in this article that took me to Jones' figures http://www.insurance.ca.gov/0400-news/0100-pres...
Earl Dworkin
I believe in this case Anthem made the right decision for their company. It made no sense to be one of the first kids on the block to take a black eye in expenses without knowing in advance what to expect. There letting Healthnet and Blue Shield take the hit before deciding whether it makes any sense. I would not be surprised if the two I mentioned are thinking the same as I am writing this comment. Earl
Mark Miller
I don't understand why the 25.2% return on equity figure is twice what Morningstar.com quoted. See http://financials.morningstar.com/ratios/r.html... Anybody have any ideas?

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