In a signpost pointing to health insurance changes under the nation’s new health care law, North Carolina’s largest insurer has warned of steep rate increases for customers who have typically paid below-average premiums.
A third of Blue Cross and Blue Shield’s customers who buy individual policies – or about 125,000 residents – should prepare for unusually large rate increases, according to the Chapel Hill company. The remaining quarter-million customers who buy individual policies will see increases in line with previous years.
The rate plans are anticipated as a barometer of North Carolina’s emerging health care landscape that will take shape under the Affordable Care Act, the 2010 federal law that takes effect in less than seven months. The law is expected to extend coverage to 1.6 million North Carolinians who are uninsured, many of whom are presumed to be in worse health than those with access to regular medical care.
Blue Cross policies and costs are expected to set an industry standard, influencing how insurers adjust to the law and what that law will mean for those who have had insurance and those who have not been able to afford coverage previously and will now be buying it for the first time.
“What everyone is interested in right now is: What are the rates under the new law?” said Adam Linker, health policy analyst with the N.C. Justice Center’s Health Access Coalition. “All the myths and hype and propaganda will be swept aside and we’ll have real numbers.”
But not just yet.
Blue Cross filed its rate request with the N.C. Department of Insurance under seal, requesting confidentiality under the state’s trade secrets exemption. Blue Cross is offering a plethora of new policies designed to comply with the federal law. The company wants to prevent competitors from taking advantage of its actuarial data to undercut its business.
However, Blue Cross did disclose that insurance costs for employees who work for businesses with 1 to 50 employees will rise by about 18 percent in 2014 because of increased coverage and benefits, as well as eight new taxes and fees in the Affordable Care Act. But the effects on small businesses are so wide-ranging that they will result in reductions as deep as 41 percent and increases as high as 284 percent.
“More sick people in the insurance pool, more benefits, and new taxes and fees will drive rates up,” Blue Cross said in a statement.
Advocates of the new health law say it will drive down overall system costs by reducing costly emergency room visits that result from lack of basic access to health care.
The federal law prohibits traditional insurance practices, such as charging extra for pre-existing conditions and charging more to insure women.
It also limits the spread between insuring the young and old to a 3-to-1 difference, ending a longstanding practice of selling dirt-cheap coverage to people in their 20s and dramatically marking up policies to older people.
Numbers to become public
Blue Cross rates will become public as soon as they are approved by the N.C. Department of Insurance. The company has requested a ruling by July 31 so it can begin enrolling customers in October and switch them to new plans in January.
“I expect it’s going to make the idea of the individual mandate real for the first time,” said Adam Zolotor, assistant professor of Family Medicine at the UNC School of Medicine and vice president of the N.C. Institute of Medicine. “We’ll get the idea whether people will actually perceive these rates as affordable.”
But for the first time, reading a table of rates will not necessarily indicate how much one pays for insurance. The Affordable Care Act includes federal subsidies available for people at specific income levels – up to $45,960 a year for an individual and $94,200 a year for a family of four – to offset insurance costs and make health care more affordable.
The subsidies range from $630 to $4,480 for an individual, and between $3,550 and $11,430 for a family of four, depending on income, according to an April study issued by Families USA, a Washington nonprofit advocacy group.
Nearly 900,000 North Carolinians are eligible for these subsidies, just over half of the total number of the state’s uninsured, according to a recent report issued by the N.C. Institute of Medicine, a nonpartisan research organization created 30 years ago by the state legislature.
Not all individuals and small businesses will buy the new policies developed as a result of the federal law. Some will prefer to remain on their current policy under a grandfather clause. Some will opt out of insurance altogether and pay an annual penalty that rises over time.
The Blue Cross rate filings will affect the 373,668 people who currently buy individual policies and 234,633 “small group” policies offered through small businesses. In all, however, Blue Cross insures 3.7 million North Carolinians, many of them through the state government and through larger companies.
So far, Blue Cross is the first insurer to file new plans and rates with the N.C. Insurance Department, said agency spokeswoman Kerry Hall.
“We expect all insurers to either amend or terminate and replace existing non-grandfathered major medical health plans to be ACA compliant for 2014,” Hall said by email, “unless the insurer is withdrawing from the market altogether.”