As Blue Cross and Blue Shield’s 35 percent rate hike request awaits a decision in North Carolina, the state’s largest health insurer has issued more data in a bid to garner public support for raising rates.
Blue Cross said that in 2014 it spent $365 million more on medical claims for its customers than was required under the Affordable Care Act. Blue Cross’s claim refers to the health care law’s 80/20 rule, which requires insurers to spend at least 80 cents of every premium dollar received on medical claims and related expenses.
In 2014, Blue Cross exceeded the minimum requirement, spending an average of 87.3 cents of every premium dollar and resulting in a $50.6 million net loss, the company’s first net loss since 1999.
All health insurers had to submit their 2014 medical claims data to ACA authorities by July 31, and the data will be made public later this year. But Blue Cross last week jumped ahead of the pack and publicized its $365 million spending figure, emphasizing that this number shows that the company’s health care expenses are unsustainable.
“It is absolutely an indicator of the loss,” said Blue Cross spokeswoman Ryan Vulcan. “It is directly tied to claims for medical services.”
Company officials have blamed last year’s net loss on older, sicker patients who signed up for federally subsidized health insurance and ran up bills for heart and cancer treatment, specialty drugs and emergency room visits. For example, ACA members incurred $435 a month in medical costs, compared to $256 a month in medical costs for Blue Cross individual customers not on ACA marketplace plans.
Chapel Hill-based Blue Cross is experiencing more of the same this year with high-cost customers, necessitating higher rates, company officials have said. The ACA was designed to attract such difficult-to-insure patients with provisions that prohibit turning down customers with pre-existing conditions and prohibiting charging exorbitant rates based on age and health.
Also contributing to Blue Cross’s 2014 net loss was a loss in the company’s Medicare Advantage line of business.
Blue Cross’s rate increase request would pertain only to individual plans under the Affordable Care Act, currently affecting about 380,000 people in the state. In 2014, Blue Cross lost $123 million on its ACA policies, even after a $343 million infusion from reinsurance and other financial aid programs created by the ACA.
The N.C. Department of Insurance is reviewing Blue Cross’s rate request and will issue a decision in time for open enrollment, which begins Nov. 1.
Blue Cross also issued a blog post from managing actuary Brian Tajlili saying its 87.3 percent medical expense ratio proves that its rates are not too high, as some customers have complained. “If an insurer meets or exceeds the standard,” Tajlili wrote of the 80/20 rule, “it essentially means their rate action the prior year was justifiable.”
Not everyone is impressed with Blue Cross’s medical expenses under the ACA requirement, known in the industry as the medical loss ratio, or MLR. Analysts point out that Blue Cross’s MLR was not a corporate goal but the result of unanticipated medical expenses that exceeded the company’s expectations. And they point out the score is not a proxy for a quality measure.
“It doesn’t necessarily mean they’re providing great value,” said Timothy Jost, health care law professor at Washington & Lee University in Lexington, Va. “It doesn’t make them some kind of MRL champion.”
“It doesn’t make them stand out,” said Cynthia Cox, Associate Director for the Program for the Study of Health Reform and Private Insurance at the Kaiser Family Foundation. “There are some insurers that likely will exceed 100 percent.”