Subject: Blue Cross Blue Shield Follow-Up
From: "Ann O'Leary" <[email-masked]>
To: John Podesta <[email-masked]>, John Podesta <[email-masked]>
Cc: Jake Sullivan <[email-masked]>, Milia Fisher <[email-masked]>, Sara Latham <[email-masked]>
Date: Wed, 16 Mar 2016 11:55:05 -0700

John -

I've been working closely with BCBS - think we have calmed them down.

Attaching what we sent into HRC and pasting below background on BCBS in
case Daschle is still calling you. Please let me know if you are getting
more concerns.

Thanks,
Ann

*Background on Blue Cross-Blue Shield plans’ for-profit status*

In response to several questions in the past few weeks in public forums,
YOU have expressed concern about the fact that a number of Blue Cross-Blue
Shield (BCBS) plans had converted from non-profit to for-profit status.
While this is true and there are legitimate concerns about BCBS plans
converting to for-profit status or acting like for-profit companies, we
wanted to clarify that not all BCBS plans are for-profit and that in many
ways BCBS has been a good actor in making expansion of coverage possible in
the individual marketplaces. In fact, BCBS plans have broad participation
in the Exchanges – without them, some states like North Carolina would have
counties with one or no plan offerings. Indeed, other for profit and
not-for-profit insurance plans selectively offer coverage only in parts of
the state they believe they can be certain to make money; virtually all
Blues plans offer coverage state-wide -- something we need many more plans
to do.

*Background: *It is a fact that in the early 1990s, BCBS began allowing
non-profit BCBS plans to convert to for-profit status – and raising
concerns about the potential of harm to consumers. Today, according to
BCBS, for-profit, publicly-traded companies serve about 29% of the 105
million BCBS members system wide. While the share of BCBS customers gaining
coverage from for-profit companies is nearly one-third, only two BCBS
companies out of 36 are publicly-traded, for-profit companies – Anthem,
Inc. (which operates BCBS Plans in 14 states) and Triple-S Management
Corporation (which operates in Puerto Rico). And, the last conversion into
a for-profit plan occurred around 15 years ago, which suggests this is not
the model that Blues plans appear to be pursuing anymore, and explains why
many Blues not-for-profit plans have expressed umbrage about your comments
to John, Ann and Chris.

Having said, the issue in the news now is that a number of Blue Cross Blue
Shield affiliates, incorporated as non-profit organizations, have recently
come under fire for engaging in a series of practices that are more
traditionally associated with for-profit companies. California's Blue
Shield has been the main target, as a recent audit revealed that it
stockpiled "extraordinarily high surpluses" - more than $4 billion – and
premium increases that are "higher than a lot of for-profit insurers." As a
result, California Blue Shield has been stripped of its tax-exempt status
by a state regulatory board. Texas and Alabama BCBS affiliates are coming
under similar scrutiny for similar reasons: high reserves, high premiums,
and anti-competitive practices to push other insurers out of the market and
then hiking rates. Modern Healthcare also noted
<http://www.modernhealthcare.com/article/20141219/blog/312199978> BCBS'
clout in Washington – they are handled under different corporate tax rules
than other insurance companies, but they won a fix that allowed them to
count quality-improvement efforts towards their medical loss ratio, the
same as other insurance companies.

The bottom line is that there are legitimate concerns about BCBS plans
converting to for-profit plans, *or acting like for-profit plans* – but
there are even more significant villains in the health insurance markets,
such as the mega-mergers proposed between four of the five largest health
insurance plans (including Anthem, which operates for-profit BCBS plans),
about which YOU have consistently and publicly raised appropriate concerns.
This development is more disconcerting when one considers that the
not-for-profit coops created under ACA to provide additional competition
have proven to be disappointing at best and a disaster at worst.  Many
underbid their competition, but then found they had insufficient revenue to
cover their claims experience and either had to leave the market place or
substantially increase premiums to remain in it.

It is true, of course, that the very design of ACA presumes the
participation of private health insurance plans. We need them to offer
coverage within the exchanges to ensure competition, affordability and
sustainability of the insurance market the law created. And our best
short-term way to do that is to do a far better collective job of
attracting and retaining the millions of eligible but not yet enrolled
populations into the exchanges, (which is what your recent policy is
designed to do).

With this in mind, the balancing act that we must walk is to understand
that, at least for the foreseeable future, we cannot succeed in continuing
to expand coverage in the individual marketplaces without BCBS and other
(not-for-profit and for profit) insurers participating in greater numbers.
For good or bad, BCBS plans are among the widest participants and are
amongst our most important allies (among insurance companies) in
implementing the ACA.

We believe that YOU should continue to make a strong case for greater
competition and more affordable options on the exchanges, and have
suggested language below, without leaning in on BCBS plans as a proof
point. If asked about your BCBS comments, YOU can lean into the concerns
about the individual BCBS plans that are non-profit, but acting like
for-profits and YOU can also focus on other forms of harmful competition in
insurance (e.g., consolidation among 4 of the 5 largest health insurance
companies).  And, finally, YOU can highlight your proposals that would make
premiums more affordable, increase enrollment and provide states with the
choice to provide a separate public option to their citizens purchasing
insurance on the exchange.

-- 
Ann O'Leary
Senior Policy Advisor
Hillary for America
Cell: 510-717-5518