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One Insurer Bets on Health Care Exchanges

At a closed White House meeting in April, President Obama told corporate insurance bosses “we’re all in this together” on implementing his signature health-care law. But some insurance companies seem to be more in than others.

At least five Blue Cross and Blue Shield executives sat at the table of about a dozen chief executives with the president, according to people knowledgeable about the session, which was first reported by the New York Times. Just as significant is who wasn’t there: chiefs of the country’s biggest and third-biggest health insurers, UnitedHealth Group and Aetna.

Those two and most other non-Blue insurers “seem to be proceeding cautiously” in the online marketplaces expected to cover to millions, said David Windley, who follows the industry for the investment firm Jefferies & Co. “They are evaluating markets state by state, and in some cases region by region within the state, to assess the viability of all the different pieces.”

Not the Blues. They’re expected to offer health-exchange plans nearly everywhere, ensuring at least a minimum choice for individuals seeking subsidized coverage when the marketplaces open Oct. 1. It also makes them an undeclared Obama ally in implementing the health-care law.

“The Blues will definitely participate,” said Ana Gupte, an insurance stock analyst for Dowling & Partners. “If there is an exchange, I’m sure there will be the Blues.”

The exchanges are online marketplaces that will operate in all 50 states, offering insurance plans for individuals and small businesses. The individual market has long been a high-risk, unstable business that some insurers never sought. The health-care law — with its subsidies and its mandate that could bring younger, healthier people into the pool — seeks to stabilize the individual market.

The Blues already have the largest share of the individual market in most states, so protecting that business is why they have little choice but to offer plans in the online marketplaces, analysts said. If they abstain, they risk losing those members. Once in the game, they need to recruit as many customers as possible to avoid signing a disproportionate share of the sick.

But it’s not just that Blues will offer coverage in places other carriers may avoid. In states where Republican governors oppose the health-care law, Blues may be the single biggest factor in explaining the system to consumers and recruiting them into Obamacare.

In Louisiana, where Gov. Bobby Jindal, R, has flatly said “we are not implementing the exchange,” the local Blues plan has organized community nonprofit groups, churches, chambers of commerce and food banks to get out the word on what will be a federally run marketplace there.

BlueCross BlueShield of Louisiana “is the driving force” behind the Louisiana Healthcare Education Coalition, launched in March, said Nebeyou Abebe, who works on consumer engagement at the Louisiana Public Health Institute. “I can’t think of any other entity in Louisiana that’s developing a massive campaign to educate people.”

Blues plans are building similar operations on the ground in Florida and Texas, two of the states with the highest number of uninsured. But if few other insurers follow the Blues into those markets, consumers in those states may not see the same kind of competitive pricing of premiums that states such as Oregon have reported.

The Affordable Care Act requires exchange plans to cover anybody, no matter how sick, at regulated prices and often with large government subsidies.

Despite the prospect of millions of new customers and measures to cushion insurers with disproportionately high claims in the early years, carriers worry that the sick will be first to sign up while the healthy stay away. Fears grew after claims came in far higher than expected for temporary “high risk pools” that had been established by the law to cover the chronically ill until the full law took effect in 2014. The shortfall prompted the plans to close enrollment early.

“Insurance companies, very suddenly in my estimation, are getting very conservative and hesitant about being in the exchanges,” said Robert Laszewski, a Virginia-based consultant and former insurance executive. “All along, everybody, including the companies, assumed they would be in a lot of exchanges.”

UnitedHealth Group’s recent disclosure that it would offer plans in only a dozen state exchanges marked new disappointment for those hoping the exchanges will generate vigorous competition. Previously, UnitedHealth had said it would sell on as many as 25 exchanges.

Aetna plans to offer individual exchange policies in 14 states and may reduce that if some states look unprofitable or unprepared, chief executive Mark Bertolini said on a conference call in late April.

For its part, Cigna will focus on making exchange plans work well in five states rather than spreading efforts more thinly, said Ray Smithberger, who’s in charge of the company’s individual business.

“What you see in the general market is just a hesitancy” over whether states will be technologically ready, he said in an interview.

The Blues characterize their approach very differently. “We’ve been in this market for more than 80 years, and we’ve been providing coverage in every Zip code to everybody. We imagine we will continue to do that,” said Alissa Fox, a senior vice president at the Blue Cross and Blue Shield Association.