Blues may rise or fall with exchanges

The Blues have developed ways to operate in multiple states and diversify revenue sources, but now, in part because most of those companies continue to have strong ties to certain states, and to the state and federal government plan markets in those states, they have a larger-than-average exposure to the Patient Protection and Affordable Care Act exchanges, the analysts write.

“The profitability of exchange-sourced business is highly uncertain, especially in light of operational difficulties the exchanges have experienced to date,” the analysts write. “Profitability of exchange-sourced products will be driven by enrollment trends and how well they conform to assumptions used to set premium rates, as well as the effectiveness of risk-sharing programs introduced under [PPACA].”

Because the Blues sprang up at a time when many employers offered traditional defined benefit pension plans, the Blues also tend to depend more heavily than large, publicly traded competitors on the performance of pension plan investments, the analysts write.

In recent years, the analysts say, low rates have hurt pension plan yields on forced the Blues to put cash in the plans.

Rates started to increase last year, and that should help the Blues’ pension plans’ funded status, the analysts write.

See also:

• Where States Stand on Implementing PPACA
• Exchange plan grades may come soon
• Analyst shrugs off exchange bumps