Tennessee's biggest health insurer plans to use a portion of its savings from the new federal tax law to enhance its consumer tools for selecting doctors and hospitals this year and will share the rest of its savings in its premium rates next year.
But with medical costs still rising, the tax savings will likely offset only a slight portion of next year's increase, especially in the individual market, where the end of the cost sharing payments under ObamaCare by President Trump has resulted in insurance companies raising rates to offset their higher risks.
BlueCross BlueShield of Tennessee estimates it will save about $50 million this year from the reduced corporate income tax, which was cut from a top rate of 35 percent down to 21 percent this year. Although the Chattanooga-based health insurer is a not-for-profit business, it paid $548 million in federal, state and local taxes last year since it is treated the same as its investor-owned competitors for most taxes.
"We pay all the same taxes as our competitors," said John Giblin, BlueCross's executive vice president and chief financial officer. "And over the past five years, we have consistently paid more in taxes than we've retained in net income each year."
The drop in the federal tax rate is less than 10 percent of Blue Cross's total tax bill, but it will help BlueCross enhance some of its health management capabilities this year, Giblin said.
To improve its consumer tools, BlueCross is taking 25 percent of its tax savings, or about $12.5 million "to make it easier for our members to manage their health - and their health care" with easier access and control apps and services, Giblin said.
"We all know health care can be complicated - from selecting a physician or facility to understanding how much a treatment might cost before committing to it," he said. "That's why we offer tools to help, from an interactive provider directory and treatment cost estimator to a member portal and mobile app. We also offer one-on-one support from care coordinators - who are usually registered nurses - when members have special needs, like after a hospital visit or when managing a chronic condition."
The other $37.5 million of projected tax savings comprises a tiny fraction of the more than $14 billion of premiums, fees and other revenues generated each year by the Tennessee BlueCross plan to provide health care for more than 3 million Tennesseans.
Earlier this week, U.S. Sen. Lamar Alexander, R-Tenn., the chairman of the Senate health subcommittee that oversees the Affordable Care Act, or ObamaCare, called the defeat last month of a plan to restore cost sharing payments to insurers like BlueCross that participate in the individual Obamacare market "the biggest disappointment of my Senate career."
Alexander blamed Democrats in Congress for blocking approval of a compromise bill he had reached that would have paid insurers money to help offset the risk of having to insure all persons without a mandate for all individuals to buy insurance. President Trump said such payments were illegal and stopped them last year, pushing insurers to raise their premiums to cover the adverse selection risk of the new individual insurance pools.
Alexander said as a result of Trump's move to cut off the cost sharing payments and Congress's refusal to adopt a reform plan, health insurance premiums for the 6 percent or so of consumers who buy health insurance as individuals will continue to skyrocket.
"Unfortunately what the failure of this bill means is that the self-employed plumber or farmer making $50,000 or $60,000 a year is probably going to pay nearly $20,000 a year for individual health insurance and his or her premiums will probably go up another 10 or 20 percent when we could have reduced those premiums by around 40 percent if this measure would have passed," Alexander said.
Contact Dave Flessner at email@example.com or at 757-6340.