Blue Cross and Blue Shield, the state’s largest health insurer, is proposing a 22.9 percent rate increase on Affordable Care Act plans in 2018, in what will be the fifth year of the federal health insurance mandate.
Steep rate increases have been a consistent feature of Blue Cross’s ACA coverage in North Carolina, and Thursday’s announcement follows a 24.3 percent rate increase this year and a 32.5 percent increase in 2016. The company’s ACA rates have more than doubled since the law made health insurance mandatory for most Americans in 2014.
Cigna, which offers ACA plans in five counties in the Triangle, requested a 31.9 percent average rate increase Thursday.
The insurers filed their requests with the N.C. Department of Insurance on Thursday. The agency will review the applications and issue decisions in late summer or early fall. Blue Cross, the only health insurer offering ACA plans in all 100 North Carolina counties, insures around 502,000 people in the state through the federal exchange.
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Because 94 percent of Blue Cross’s customers in the state qualify for a federal subsidy to offset the cost of their monthly premiums, most customers will not feel the full brunt of the rate increase. The subsidies are available on a sliding scale based on household income, with the lowest incomes qualifying for the most generous subsidies.
However, Blue Cross said its rate increase proposal would be 8.8 percent if Congress continued fully funding the ACA in 2018. So far, Republicans in Congress have debated how to dismantle the law and replace it with a less costly alternative.
On Wednesday the Congressional Budget Office said the Republican proposal would eliminate coverage for 23 million Americans in 2026. The Center for American Progress estimated Thursday that 1.3 million North Carolinians would lose coverage by 2026.
“Many ACA customers will pay more for coverage that is already a large portion of their household income,” said Brian Tajlili, Blue Cross’s director of actuarial and pricing services. “We must ensure the smoothest transition possible without jeopardizing access to health insurance and care in 2018.”
Speaking in a conference call with reporters, Tajlili said that ACA rates continue climbing in part because customers who sign up for federally subsidized health insurance are older and sicker than the general population. Around the country, some insurers have filed for even larger rate increases, including 52 percent in Maryland by CareFirst and 38 percent in Virginia by Anthem, according to The Washington Post.
Insurers are concerned that if the federal penalty to buy health insurance is not enforced next year, the result will be a concentration of sicker customers as healthy customers bow out.
“Some are expecting the market to deteriorate next year,” said Gary Claxton, a vice president at the independent Kaiser Family Foundation. “The insurers are building in a lot of room for uncertainty.”
By contrast, eight insurers who sell policies directly to individuals in North Carolina – but do not sell federally subsidized ACA policies – requested much smaller rate increases, mostly in the single digits, and ranging from 2 percent to 20.1 percent, according to the N.C. Department of Insurance. These policies are out of reach for people who can’t pay the full price of health insurance and depend on federal subsidies.
Blue Cross intends to sell individual health insurance plans on and off the federal exchange in all 100 North Carolina counties. But the company said that the uncertain future of the ACA could determine whether Blue Cross will offer plans in North Carolina next year.
The 22.9 percent request Blue Cross filed is a statewide average for 18 plans in 16 rating areas, with specific increases ranging from 7.6 percent to 31.6 percent.
Blue Cross cited several reasons for its request. One is an increase in medical costs, including for doctors fees, hospital services and medicines, which the insurer cites every year it seeks rate increases. The company also blamed the increase on a higher tax on insurers next year.
But the biggest cause is the looming elimination of “cost sharing reductions” in the Republican alternative to the ACA. These reductions offer additional subsidies on deductibles and other out-of-pocket costs to lower-income people whose household incomes are between 100 percent and 250 percent of the federal poverty level.
The reductions are available for a single customer with a household income ranging from $11,800 to $29,700, and for a family of four with a household income ranging from $24,000 to $60,750, Tajlili said.
Under the ACA, insurers are required to offer coverage to lower-income people at steeply reduced prices, even if the federal government doesn’t compensate the insurers as it has done in past years.
Tajlili noted that about 67 percent of the people Blue Cross insures under the ACA in North Carolina qualify for the cost sharing reductions. Blue Cross was refunded $200 million by the U.S. Department of Health and Human Services for cost sharing reductions in 2016. The company expects to incur a larger amount this year because it insures more people and added that estimate to its proposed rates on the assumption that there may be no federal reimbursement.
“The lack of funding requires us to provide coverage without receiving payment,” he said. “The [federal] payments are designed to make the insurer whole.”