Chaney Stokes, who juggles two part-time jobs, can tell you about the hassles of being uninsured.
Rather than getting regular checkups and seeing a doctor, the 27-year-old visits the hospital several times a year. She has a chronic skin condition – causing inflammation and debilitating pain – that can keep her from going to work or doing much else for two or three days at a time.
“It’s beyond painful,” said Stokes, who lives in Raleigh. “There’s no cure for it.”
She requires medical treatment and owes hospitals more than $10,000 in overdue bills.
Neither of Chaney’s jobs comes with health insurance, and she can’t afford to buy her own policy.
“I definitely don’t have my regular checkups like I’m supposed to,” Stokes said. “I was not able to keep up the proper care, so my condition keeps coming back.”
Life is about to change for Stokes and legions like her, under the new federal health care law, which will begin signing people up in October.
A massive population shift to subsidized insurance coverage – likely to exceed 1 million people in North Carolina – is underway as part of the Patient Protection and Affordable Care Act. The transformation is expected to be the biggest shakeup in the nation’s medical landscape since Medicare was introduced in 1965.
As the federal government and some states work to get the program up and running, it is becoming evident that North Carolinians will have limited options – at least in the first year of the program.
Out of more than a dozen insurers that now sell individual policies in the state, only three have applied to offer subsidized policies through the new federally run health insurance exchange. Only one of them, Blue Cross and Blue Shield of North Carolina, the state’s biggest insurance company, operates in all 100 counties.
Meanwhile, three of the nation’s biggest insurers – Aetna, UnitedHealthcare and Cigna – are sitting out of the program in North Carolina, at least for the first year.
That contrasts sharply with the situation in some states where a dozen or more insurers are expected to sell individual policies – coverage purchased directly by people who don’t get insurance through their employers – under the new law.
Still, the three companies that have applied here are submitting proposals to offer more than two dozen insurance plans, giving the public a range of options for deductibles, premiums and co-pays.
“Three applicants is low, but there are other states where that’s true,” said Tim Jost, a health law professor at Washington & Lee University in Virginia. “In North Carolina at this point, you don’t really have a competitive market. But it sounds like North Carolina consumers will at least have a level of choice.”
Most won’t change
Chaney Stokes is among an estimated 800,000 uninsured North Carolinians who are expected to buy subsidized coverage on the new health insurance exchange. In addition, more than half of the roughly 435,000 North Carolina residents who already have individual policies are expected to switch to the cheaper, subsidized coverage.
The majority of state residents who have other types of insurance – a combined 7.6 million covered through employers, Medicare or Medicaid – are not likely to see dramatic changes in their insurance.
Enrollment in the new insurance plans begins in October and coverage starts Jan. 1. As a practical matter, many North Carolinians will have two options: Blue Cross and Blue Shield or Coventry Health Care of the Carolinas. Both have proposed multiple plans that await approval from the N.C. Department of Insurance and the U.S. Department of Health and Human Services.
Under the law, North Carolinians who qualify for subsidies are expected to receive more than $5,000 a year per household on average to offset their insurance costs, according to the U.S. Treasury Department. Subsidy levels will vary depending on income and other factors under the Affordable Care Act, which is often referred to as Obamacare.
Those who don’t get insurance will pay a fine, starting next year at $95 or 1 percent of income, whichever is greater. For Stokes, the 1 percent rule would likely apply, bumping up her potential fine to around $320. By 2016, the penalty will be $695 or 2.5 percent of income.
It is unclear what the limited competition here will mean for health insurance rates. The plans filed by the three insurers here are not public, and the details won’t be available until state insurance officials approve the premiums, deductibles, co-pays and other proposed terms.
The paltry showing among insurers here is due to several reasons. One explanation is that Blue Cross and Blue Shield dominates the state’s individual insurance market, covering more than 85 percent of individual customers today, a barrier to entry for competitors.
Another is the general anxiety among insurers about how the law’s requirements could disrupt their business model.
Droves of sick, ailing people – who previously could not afford coverage or were turned away because of pre-existing conditions – could sign up. Indeed, that is the intent. In the past, insurance companies could reject people with poor health, but that practice will be illegal under the Affordable Care Act.
Without the option of rejecting the sick, some insurers are simply opting not to sell insurance in certain markets. Those who are offering subsidized plans will attempt to offset the cost burden of insuring sick people by attracting “invincibles,” the industry term for young, healthy people who rarely use the health care system.
“There’s nothing insurers are more scared of than getting a pool of disproportionately sick and expensive enrollees,” said Jonathan Oberlander, a professor of social medicine and health policy at the UNC-Chapel Hill School of Medicine.
No funds for outreach
Experts also say that another major factor is the state’s decision this year not to administer its own program, leaving that responsibility to the federal government. As a result, North Carolina passed up a $27.2 million federal grant to run the program. Instead, the federal government has allocated $6.65 million to do the job.
Without a federal grant, the N.C. Department of Insurance will not conduct any marketing, promotion or outreach to help residents sign up for insurance through the new health insurance exchange.
The lack of state commitment is a turnoff to insurers, said Mark Hall, a Wake Forest University professor of law and public health. Insurance companies will have to take up the marketing slack.
Blue Cross and Blue Shield plans to hold more than 20 events statewide this year to educate its customers on their options. The first event, by invitation only, was held in Brier Creek on June 27 with more than 300 people in attendance. A public event is planned at the downtown Raleigh farmers market July 17.
Blue Cross has begun to mail out information to its individual policyholders about the imminent changes.
“We’re warming them up to that exact process,” said Bruce Allen, marketing director for Blue Cross.
Blue Cross has submitted 26 plans for state and federal approval in North Carolina. The company’s strategy is straightforward: Retain as many customers as possible. Blue Cross covers about 375,000 people with individual policies. More than half are expected to migrate to the new health insurance exchange to buy subsidized coverage, Allen said.
The insurer wants these customers to switch from their existing individual policy to a new, subsidized Blue Cross policy, rather than buy coverage from a competitor.
The competition, such as it is, will come from Coventry Health Care of the Carolinas and from FirstCarolinaCare Insurance.
Coventry, the state’s second-largest provider of individual insurance policies, covered 20,277 individual policyholders in the state in 2012. It is not saying which counties it will offer individual policies in but said the plans will be widely available. It has submitted about 25 plans to the Department of Insurance.
FirstCarolina doesn’t have any individual policyholders here, having focused on the business market. It will sell individual policies in just six counties. It has submitted 16 proposed plans.
North Carolina residents could also have options from a federally administered multi-state health plan, but those details are not yet known. The plan will be phased in over three years, starting with 31 states that have not yet been identified.
“It’s just not clear whether it will show up in the first year, in the second year or in the third year,” Jost said.
Blue Cross and Blue Shield plans to compete in most markets in the country. But Aetna, Cigna and United are taking a cautious approach.
Aetna acquired Coventry in May, but the two will operate independently for the time being.
In some states, before their merger was finalized, Aetna and Coventry applied separately to offer subsidized health plans and will compete against each other.
Aetna will offer subsidized plans in 14 states next year; United is focusing on a dozen markets in the first year. Cigna is limiting its participation in health care exchanges to just five states in year one.
How many other insurers will enter North Carolina’s subsidized health care market in the coming years is anyone’s guess.
Cigna spokesman Joe Mondy said the company will evaluate its future options to determine whether “to broaden our participation in future years, if our experience warrants that expansion.”
Despite the limited options, the threat of a fine and the uncertainty about subsidy amounts and out-of-pocket costs, Chaney Stokes thinks subsidized insurance will be a good deal for her.
“I still think it’s better than nothing,” Stokes said. “My initial impression is that it will be a good thing for people like me who make too much to be on Medicaid but can’t afford insurance, either.”