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Reform Spurs
QualChoice’s
New Products
QualChoice of Little Rock will begin
offering dental, vision and short-term
gap health insurance this spring, which
is one of several changes it’s making in
response to national health care reform.
President and CEO Michael Stock said
QualChoice is adding the lines because
profits are limited under its large group
and small and individual health insurance
lines.
Under the Affordable Care Act, also
known as Obamacare, health insurance
companies must spend at least 85
percent of the premium they collect on
health care for customers in large group
policies and 80 percent on small group
and individual policies. (A small group
policy is up to 100 employees.) If the
health insurance company spends less
on health care costs under those plans,
the difference could be refunded to policyholders.
Stock said it’s difficult to operate
under the medical loss ratios because of
the limit placed on how much money can
be kept to cover administrative expenses.
Before the law took effect in 2011, if
the large group line suffered a loss, then
the profits from the small group line
could subsidize those. But not anymore.
“Every product has to be profitable
and hit the loss ratios,” Stock said.
To add more revenue, QualChoice
started selling Medicare supplemental
insurance coverage and life insurance
products in 2011.
To trim administrative expenses, in
the summer of 2011 QualChoice reduced
the amount of commission it paid on
first-year sales for individual lines from
15 percent to 8 percent.
Company revenue for the first three
quarters of 2012 was $110.5 million, a
slight decline from $110.9 million
for the same period in 2011, according
to its filing with the Arkansas Insurance
Department.
However, it reported a loss of $3.3
million, compared to a $22,589 profit
Michael Stock, president and CEO of
QualChoice.
Arkansas Business January 28, 2013 25
Health Care
Mark Friedman
MFriedman@APBG.com
for the same period in 2011. And by
the end of 2011, QualChoice had a loss
of $4.6 million. The company had a 2010
profit of $2 million.
Stock said “a lot of the loss” in 2011
was tied to the implementation costs
associated with health care reform. The
company also had high-cost claims that
year.
The 2012 loss through Sept. 30
stemmed from “high claimants,” Stock
said, with one claim over $2 million.
In the coming months, QualChoice is
expected to officially announce its participation
in the state health insurance
exchange.
In October, the exchange is expected
to start enrolling individuals and
employees of small businesses for policies
that go into place Jan. 1.
It’s estimated that more than 200,000
Arkansans will be buying insurance
through the exchange, and some of those
will certainly buy from QualChoice.
“Any business likes new customers,”
Stock said.
But, he said, there are still a lot of
unknowns about the exchange, including
what it will cost policyholders and
the insurance companies.
“The question is, what’s the price have
to be to offer coverage to those people?
And what’s the cost of providing care
to them going to be? And can you do it
profitably?”
Stock said he also is unsure what the
demand for health care services will be
for those who currently don’t have insurance.
“Are there diabetics that haven’t been
managed?” he said. “Those could be
high-cost patients.”
The health care reform law prohibits
insurance companies from turning
people down for coverage based on preexisting
conditions.
Stock said he thinks the price of a
health insurance policy in the exchange
will be higher than traditional coverage
today.
Still, the federal government will provide
a subsidy to the policyholders to
buy the insurance in the exchange. The
amount of the subsidy will be based on
the policyholder’s income.
One of the goals of health care reform
is to lower health care costs, but Stock
said he hasn’t seen prices fall since the
health reform law was passed in 2010. n