United has a limited presence in the state’s individual market, according to Jones, with about 8,000 people currently insured in its subsidiary PacifiCare. And, he said, Aetna also casts a relatively small shadow in the individual market, with approximately 50,000 people insured in the state.
Dave Jones mentioned a little-known detail about a tax break for other insurers that might have placed United and Aetna at a competitive disadvantage.
According to Jones, a $100 million tax break enjoyed by two other insurers, Anthem and Blue Shield, gives them a competitive break and led to the withdrawal from the individual market by United and Aetna.
Jones is California’s elected insurance commissioner. While not specifically detailed in the story, the “tax break” refers to a difference between what a health plan issuer pays to sell an indemnity health insurance plan regulated by the California Department of Insurance (CDI) and a managed health care service plan regulated by the state’s Department of Managed Health Care (DMHC). California’s Constitution subjects insurance policies to a 2.35 percent premium tax, while managed care plans are assessed a $2,000 base fee plus $0.0048 per enrollee under California Health & Safety Code Section 1356(c).
One year ago, CDI revealed Blue Shield of California would have only three individual insurance plans open for enrollment after it closed nearly two dozen existing plans effective July 2012. At the time, CDI noted Blue Shield had filed applications with DMHC to nearly double its roster of managed care plans to 20.
Given the shift toward managed care plans dominated by California’s market share leaders Kaiser Permanente, Blue Shield and Anthem Blue Cross along with the move by the state’s exchange marketplace, Covered California, to require HMO-like standardized benefit designs for plans it sells, Aetna and United likely concluded they could not economically pick up a sufficient number of new policyholders via the exchange marketplace to justify remaining in the Golden State.
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