With less than three weeks to go before nationwide enrollment begins for subsidized insurance, FirstCarolinaCare Insurance abruptly pulled out of the North Carolina market, saying there are too many unknowns about how the Affordable Care Act will play out here.
Several health care experts said FirstCarolinaCares case of cold feet is an indicator of the insurance industrys anxiety that the market will be inundated with disproportionately ill people, a consequence of the Affordable Care Act making it illegal for insurers to refuse to sell coverage to anyone.
The chronically ill, who can require expensive medical care, had often remained uninsured and resorted to hospital emergency rooms because they either couldnt afford coverage or they were turned down by insurers.
FirstCarolinaCare, which insures about 20,000 people in the state, had planned to sell subsidized policies in just six counties, and the companys withdrawal will be immaterial to most insurance users.
Still, the Pinehurst-based nonprofits vote of no-confidence in the nations health care law leaves just two insurance companies to offer subsidized policies here: Blue Cross and Blue Shield, which operates in every county in the state, and Coventry Health Care of the Carolinas, which will announce its areas of operation next week.
It does underscore the reality that North Carolinians obtaining coverage from the exchange will have a limited number of insurers to choose from, said Jonathan Oberlander, UNC-Chapel Hill professor of social medicine and health policy.
Enrollment under the Affordable Care Act begins Oct. 1 and coverage begins Jan. 1. The federal program will provide subsidies on a sliding scale depending on income that will average more than $5,500 per family.
To qualify for subsidies, annual wages must range from $11,490 to $45,960 a year for an individual, and from $23,550 to $94,200 a year for a family of four. The law also includes a fine of $95, or 1 percent of annual pay, whichever is greater, in the first year, for those who fail to get coverage. The fine will increase in subsequent years and will be taken out of tax refunds.
Tough to compete
FirstCarolinaCare president Kenneth Lewis was unavailable for comment Thursday. But in a statement he said the company could reconsider in the future after sitting out this year from the subsidized insurance market, formally called the Federal Health Insurance Exchange.
This was not a step taken lightly, Lewis said. After months of review, there continue to be uncertainties in the Exchange implementation and processes for insurers.
FirstCarolinaCare also cited business considerations as a reason for pulling out of the subsidized market at the last minute. A month ago, when the company announced its new insurance rates, it acknowledged doubt as to whether it could compete against larger, established insurers.
FirstCarolinaCare submitted 16 different plans, compared to 26 from Blue Cross and 25 from Coventry.
FirstCarolinaCares rates not only came in higher than Blue Cross rates, at least $20 a month more in many cases, but the company lacks name recognition, said Adam Linker, policy analyst at the N.C. Justice Center.
When you add it all up, they thought they werent going to be competitive, Linker said. Is it worth it to try to advertise, to try to build out your system, for the amount of people youre going to get?
Blue Cross monthly premiums for a 25-year-old will range from $184.99 to $350.40, before federal subsidies are applied. FirstCarolinaCares rates for a 25-year-old will range from $221.96 to $372.40.
Uncertainty over costs
The rate disparity for other age groups is more pronounced, so that Blue Crosss cheapest plan for a 60-year-old is $500.05 a month, while FirstCarolinas cheapest is $600. For many people, these costs will be offset by monthly subsidies.
Many of FirstCarolinas customers work in small businesses where the insurer operates: Lee, Moore, Richmond, Hoke, Montgomery and Scotland counties. FirstCarolinaCare decided to take a risk on subsidized policies on the assumption that some of those small businesses would skimp on health coverage because their employees would be able to shop for subsidized policies.
But that move exposed FirstCarolinaCare to the risk of being required to sell insurance to the kinds of people the industry has traditionally shunned.
In other states, several insurers have also pulled out, while others decided not to participate in the first year.
Theres uncertainty about what the real costs are going to be, said Mark Hall, a health law scholar at Wake Forest University. We dont know how people are going to behave signing up whether its going to be sick people desperate for coverage or a balanced cross-section of the population.