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November 26, 2013

An Obamacare Bellwether

By

Corporate advertising often reflects the evolving zeitgeist. Three new ads that poke fun at the Obamacare rollout fiasco do just that. But what makes them particularly noteworthy is that they are from a health insurer.

Both the source and the message are significant on several counts.

First off, the insurer, Wellmark, is the parent company of the Iowa and South Dakota Blue Cross plans. It is the largest insurer in both states. Wellmark currently accounts for 78 percent of the individual health-insurance market and 75 percent of the employer group market in Iowa. In South Dakota it has 73 percent of the individual market and 50 percent of the group market. So, this is not some marginal player, or an upstart trying to attract attention. Rather, this is an “establishment” company talking.

Second, of the 62 Blue Cross Blue Shield licensees, only three are not participating in the Obamacare exchanges in 2014, and Wellmark’s Iowa and South Dakota subsidiaries are two of those three. (The third company is Blue Cross Blue Shield of Mississippi.) Seasoned market analysts know that it is always a good idea to pay attention to what the “contrarians” are up to.

Back in mid August, an attendee at a conference of Iowa health-insurance agents told me that Wellmark had opted to stay out of the exchanges because the company did not expect—based on the way things were then going—that the exchanges would be “a positive customer experience.” Translation: Apparently Wellmark did not want to risk tarnishing its brand by associating with what was shaping up to be a disaster.

Today, I bet you would be hard pressed to find anyone in Wellmark’s corporate headquarters who doesn’t think that their company made the right call. I’d also be willing to bet that there are plenty of people in the offices of the 59 Blue Cross plans that did join the exchanges who are wishing they had gone in Wellmark’s direction.

Third, Wellmark still says that it intends to offer coverage on the exchanges starting in 2015. Watch in the coming months to see whether Wellmark revises that projection, as it will be an important “tell” for how Obamacare implementation is progressing. If Wellmark sticks with its current position beyond the next six months or so, it will indicate that the Obama administration is making solid progress in fixing the operational issues that created the rollout debacle. In that case, I expect a number of the other carriers that took a pass on the exchanges in the first year—or, like Aetna, United and Cigna, are only “test driving” the exchanges in a few states—will also go into the exchanges in 2015. Conversely, if Wellmark changes its mind and decides to remain outside, expect to see a number of insurers that signed up this year drop out of the exchanges next year.

At this point, by running ads that humorously contrast the malfunctioning new exchanges with its own reliability, Wellmark nicely positions itself for the possibility that it might need to abandon its plan to join the exchanges next year if Obamacare continues to falter. Furthermore, as a “mutual” insurance company owned by its policyholders (who elect its board), Wellmark is less susceptible than most other insurers to political pressure.

All of this brings me to another, important, point that is almost entirely missed by commentators—across the political spectrum—when assessing Obamacare. Namely, that “the insurers” are not some monolith responding in unison to Obamacare. As I detail in a recent paper, there is considerable variation in how insurers have reacted to Obamacare, and there are some important insights to be gleaned from analyzing insurers’ exchange-participation decisions. 

One of those insights, illustrated by Wellmark’s new ads, is that there continues to be a substantial, and viable, market for private health insurance outside of the exchanges. Indeed, if one clicks through the first three ads on Wellmark’s YouTube channel, the next six, more serious, videos elaborate on some of the themes that we will likely see from other insurers that opted not to participate in the exchanges.

In those 30–90 second videos, company executives explain how Wellmark offers plans outside the exchanges that are competitively priced and easy to purchase, how while their plans aren’t subsidized their enrollment system actually works and they don’t ask intrusive questions about an applicant’s income, and how the company is not canceling coverage but has instead offered to renew the existing policies of its individual and group customers through 2014.

In sum, if you want to know how the market is responding to Obamacare, Wellmark is a key insurer to watch.

- Ed Haislmaier is a senior research fellow in the Heritage Foundation’s Center for Health Policy Studies.

Originally appeared in National Review Online.

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