Health Plan Weekly

During Oscar Health, Inc.’s recent Investor Day presentation, CEO Mark Bertolini declared that “ICHRA’s time has come,” referring to Individual Coverage Health Reimbursement Arrangements, which the insurer said it believes is the key to expanding its presence in the individual insurance market. However, some industry experts and two much larger health insurers aren’t convinced that these alternatives to traditional employer-sponsored plans are poised for their big break.  

“They’ve done a really good job getting a lot of attention on something that’s really a non-issue,” Ari Gottlieb, principal of health care consulting firm A2 Strategies, says of Oscar’s ability to generate headlines about the ICHRA’s market potential.  

CalPERS, the California state agency that administers state and local government employees’ benefits and retirement programs, on June 12 selected Blue Shield of California to administer the agency’s statewide PPO plan, which is projected to have about 400,000 members when the contract starts in the 2025 plan year. The size of the contract makes the deal notable, as does the fact that Blue Shield (which already administers a CalPERS HMO with approximately 175,000 members) will take CalPERS’ PPO business away from incumbent Elevance Health, Inc.  

But the structure of the contract itself is what has the health insurance business abuzz. In the new deal, Blue Shield will take on both upside and downside risk based on the plan’s rate of medical cost growth. According to a CalPERS press release, Blue Shield in 2029 stands to gain $31 million in additional fees if it can cut spending growth by 5.5% annually — but Blue Shield would have to pay the agency $61.5 million if it hits “observed trend compared to benchmark” of 5.5%. 

Recent analyses from the Congressional Budget Office (CBO), Centers for Disease Control and Prevention (CDC), and the Urban Institute all demonstrate the impact that’s been made by the supersizing of Affordable Care Act exchange subsidies — as well as the damage to coverage rates and insurance markets that could be wrought if they aren’t extended past 2025.  

The enhanced subsidies have been in place since March 2021 after the passage of the American Rescue Plan Act. They both increased the level of advance premium tax credits available to lower-income individuals (making $0-premium plans widely available to that cohort) and expanded eligibility for APTC to middle-income Americans for the first time.