Why One Insurer Quit Covered California

(Getty Images)

After initial enthusiasm, Ventura County Health Care Plan withdrew its application from the Covered California marketplace. (Getty Images)

By Dan Diamond, California Healthline

Ventura County Health Care Plan administrators won’t soon forget May 23, 2013.

That was the day that Covered California announced that VCHCP — a small, county-run plan — would join Anthem Blue Cross, Kaiser Permanente and 10 other insurers in next year’s marketplace.

VCHCP put out a press release declaring it was “honored” to be part of Covered California’s inaugural crop of insurers. There was a celebratory Facebook post.

“This is a monumental day,” the county’s health care director, Robert Gonzalez, said at the time.

Behind the scenes, the plan’s leaders kept coming back to their concerns about the number of potential enrollees next year, and whether VCHCP could truly handle the influx.
But 10 weeks later, Covered California has signed contracts with a dozen insurers — and Ventura County Health Care Plan isn’t one of them. Instead, the plan announced last week that it had withdrawn from the health benefits exchange for next year; a terse press release alluded to “ongoing analysis of enrollment projections, start-up costs and certain factors whose outcome and impact are difficult to predict.”

There was no Facebook post.Officials in Ventura County, at Covered California and at other organizations have stressed that uninsured county residents will still have a range of choices when seeking health coverage next year. And VCHCP plans to apply to Covered California in hopes of joining the exchange in 2015.

“We didn’t withdraw completely,” Barry Fisher, chief deputy director for the Ventura County Health Care Agency, told California Healthline.

“The opportunity to participate with Covered California — we were … well, still are excited about it.

Putting the plan in context

VCHCP’s flirtation with Covered California will ultimately be a footnote in the exchange’s success or failure; the plan currently covers about 13,000 government workers and affiliates, and was expected to add 10,000 beneficiaries or so in 2014. (Note that’s a small number in the overall uninsured, but a big increase for VCHCP, an increase that ultimately mattered quite a bit.)

“Covered California remains partners with [VCHCP] and will lay the groundwork for negotiations next year,” Peter Lee, executive director of the state exchange, said in a statement last week.

And while Ventura County (region 12 in Covered California) will have about 95,000 exchange-eligible individuals, state officials say they will be amply served by the region’s three remaining plans: Anthem, Blue Shield of California and Kaiser. (Not so coincidentally, the three plans that essentially have a statewide footprint in the individual health coverage market.)

But with California leading the way — no state has moved faster to implement its exchange — VCHCP’s experience may be illustrative of the challenges that are looming for small plans around the nation.

Observers previously told “Road to Reform” that Ventura County’s participation in Covered California was a sign of reform’s promise; an example of a small insurer that was boldly stepping into the gap when plans like Aetna and United didn’t even bother to apply.

But turning the Affordable Care Act’s promise into reality will be a sometimes-bumpy rideAnd that’s to be expected, experts say.

“From the perspective of where California was in 2010 to where it is approaching 2014, change isdramatic,” said Patrick Johnston, CEO of the California Association of Health Plans. “It’s such an enormous undertaking … [like] we’re in a raft going down a fast-moving river.”

There are rocks and shoals and eddies, and plenty of details that can have everybody scratching their heads.”

Why Ventura County geared up to participate …

VCHCP signaled its interest in applying for Covered California at a county board of supervisors meeting back in January — a hearing that played as a microcosm of the tensions facing local legislators and health care leaders around the nation.

Gonzalez laid out the case for participating in the exchange: It would allow currently uninsured county residents who used Ventura County health care facilities to obtain coverage through VCHCP too, and offer financial benefits for the county plan given that so many current patients lacked insurance.

“Why are we doing this?” Gonzalez asked rhetorically. “A lot of this is based on our experience of what we do … [And] we do a good job of it,” Gonzalez added, noting that VCHCP had about one-third the number of emergency visits and roughly 40 percent of the inpatient utilization of comparable low-income plans. “Our system does work,” he stressed.

And if Ventura County decided not to bother applying this year, Gonzalez warned, the plan would essentially be locked out of the next three years of the exchange.

Gonzalez found a mostly sympathetic audience.

But the board’s chair — Peter Foy — confessed that he had doubts about the exchange, mostly about the potential trade-offs over cost and quality. “I still struggle with the whole idea of this issue,” he said, wondering aloud if joining the exchange and expanding VCHCP’s obligations would weaken the county health system and open it up to new financial obligations.

The supervisors ultimately voted 4-1 to allow the plan’s application, with only Foy dissenting.

… and why leaders had second thoughts

In subsequent months, VCHCP staffed up to prepare for the exchange; had its proposed rates checked and approved; and returned to the board of supervisors to ask for additional resources to help with its exchange participation.

But behind the scenes, the plan’s leaders kept coming back to their concerns about the number of potential enrollees next year, and whether VCHCP could truly handle the influx — especially if it turned out to be more than the original predictions.

“When you’re looking at having to invest $3.8 million in various new systems,” Ventura County’s Fisher said ruefully, “the option of delaying entry into [Covered California]” to further prepare for the expansion and exchange became increasingly appealing.

And unlike some of the other participants in Covered California, VCHCP has significantly smaller operations and margins — which translates to less margin for error.

“The big plans don’t have some of the things that we have to worry about,” said Fisher. For example, the larger health care insurers already have agreements in place with brokers and can easily afford the new technology systems they’ll need for next year.

“We feel that we can compete with them,” Fisher added. “Looking at the rates we were right in there with them.”

But when going through the final calculus, “we [had] to look hard at where we stand in the marketplace.”

After the plan’s withdrawal

Fisher said that VCHCP leaders kept “working and working” with Covered California to make the numbers work, but reached the conclusion — several days before last week’s announcement — that it just wouldn’t be feasible for 2014.

“We want to remain a financially viable plan,” Fisher added. And by taking the option to delay a year, “that little bit of extra time is beneficial to us and the current members of the plan.”

But looking back now at January’s county board meeting — when Gonzalez made his pitch, when local leaders eagerly signed on — is like watching a dream deferred.

“If there’s any county that’s most prepared for this, it’s us,” Supervisor Long said back at the January hearing, when Ventura County made the decision to apply to Covered California.

“While other [county's] hospitals are closing, we actually opened up a new hospital,” Supervisor Linda Parks agreed, pointing to Ventura County’s relative strengths in delivering health care.

“If we can’t do it, I don’t think anyone can.”

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