While we are still in the process of transforming healthcare delivery, I’m proud of the leadership role we are taking and the progress we are making. Although there will continue to be bumps in the road, it’s important to look back over the past few years and reflect on how far we have come.
As this market matures, Blue Shield of California continues to learn more about our members and how they are using healthcare services. We saw that both pharmacy and utilization costs were higher than anticipated. Furthermore, utilization by members who enrolled during the special enrollment period was significantly higher. In fact, this population had up to 30 percent higher utilization than members who joined during the standard open enrollment period. Managing these key cost drivers – including pharmacy expenses (particularly specialty drugs) and high-cost providers – remains a top priority.
Health plans across the country are projecting financial losses on individual market business for 2016. This situation is not sustainable over the long term. For 2017, we are pricing to provide sustainable, long term coverage for our customers. Our 2017 rates also had to account for phase-out of the federal reinsurance program, which provides funds to plans with higher-cost enrollees to offset those medical costs and guarantee coverage regardless of health status. This program ends in 2017, and this change alone added approximately 5 percent to our rates. In alignment with our mission, our rate increase aims for an income margin of just over 1 percent.
We remain committed to our partnership with Covered California and fostering a statewide health exchange market that is stable over the long-term. Covered California has reduced the state’s uninsured rate from 16 percent in 2013 to 8.1 percent in 2016 – a full percentage point below the national average. The Exchange has created a competitive marketplace and provides individuals and families with access to the care they need when and where they need it.
Jeff Smith is vice president of Individual & Family Plans at Blue Shield of California