Here’s how Trump’s ACA subsidy cuts will affect NC consumers

Several hundred thousand North Carolinians insured under the Affordable Care Act will have subsidized health insurance in 2018, despite President Donald Trump’s decision to stop funding one of the key provisions of the federal health care law.

But Blue Cross and Blue Shield, the state’s largest health insurer, warned Friday that it might pull out of the state’s ACA market in 2019 if the subsidy is permanently defunded.

The Trump White House said late Thursday that it plans to stop paying “cost sharing reductions” to health insurers to subsidize discounts offered to the poorest people who qualify for ACA health insurance. These subsidies cover deductibles, co-payments and other out-of-pocket costs for people whose household incomes are between 100 percent and 250 percent of the federal poverty level. In North Carolina, that’s more than 300,000 people.

North Carolina’s Department of Insurance had assumed the elimination of the subsidy earlier this year, and allowed Blue Cross to increase its 2018 rates to offset the loss of the federal subsidy.

“This is not a panic,” Michelle Osborne, the state’s deputy insurance commissioner, said Friday. “This is not something that’s going to greatly impact us.”

Still, on Friday, N.C. Attorney General Josh Stein, a Democrat, joined legal action with 14 other state attorneys general in a bid to block Trump’s decision. Their federal suits say Trump has a legal obligation to reimburse the health insurers and has a constitutional duty to execute, not sabotage, federal law.

Momentary relief for health insurance advocates

Blue Cross is seeking a 14.1 percent statewide average ACA rate increase in 2018. The N.C. Department of Insurance is expected to issue its decision on the request on Oct. 27. The public can enroll for individual health insurance under the ACA between Nov. 1 and Dec. 15.

“We filed in anticipation of the CSR payment ceasing,” said Blue Cross spokesman Austin Vevurka. “Our 2018 premiums are not going to be impacted beyond what was already requested.”

However, Blue Cross warned that it might be forced to pull out of North Carolina’s ACA market altogether the following year, dropping a half-million customers from its ACA rolls in 2019, if the subsidy is not funded. Blue Cross said in a brief statement that “stopping payments will make it harder for insurers to plan to participate in 2019.”

Blue Cross’s news that it’s not pulling out of the ACA in North Carolina came as a relief to health insurance advocates, who were alarmed by the Trump administration’s announcement.

“We all panicked when we heard the news,” said Jennifer Simmons, Legal Aid of North Carolina’s navigator project director, which trains volunteers and employees to educate the public on ACA plans.

“Consumers are guaranteed the CSRs – the insurers are obligated by law to pay it for them,” she said. “Really, this is the administration saying they’re not going to reimburse the insurance companies.”

The federal government has been reimbursing health insurers since 2014 for offering discounted health plans. Even without the federal reimbursement, however, insurers must provide the discounts to qualifying customers. The only way for insurers to avoid taking a financial hit would be to stop selling all ACA plans in a given market.

This subsidy has enabled low-income families to get their health insurance at heavily discounted rates, in some cases paying pennies on the dollar. As of February, two-thirds of the 450,822 North Carolinians insured under the ACA qualified for this cost-sharing reduction subsidy. (Today Blue Cross insures a total of 502,000 North Carolinians under the ACA.)

Blue Cross is the only health insurer offering ACA policies in all 100 North Carolina counties. Cigna, which has 21,000 ACA customers in five Triangle counties, also said it would continue selling ACA policies but hinted that it might reconsider its commitment in the future.

“Recent developments regarding these cost-sharing reduction payments bring further uncertainty to the long-term sustainability of the individual insurance market, creating likely increases in future premiums,” the insurer said in a statement. “In the meantime, Cigna will continue to honor the commitments that we have made to our customers who qualify for cost-sharing reduction payments.”

An individual can qualify for the cost-sharing reduction if the household income is between $12,600 and $30,150. A family of four can qualify on a household income between $24,600 and $61,500.

Trump’s executive order

Trump’s decision on Thursday evening came on the heels of an executive order that would pave the way for cheaper, less comprehensive insurance policies that could compete with the ACA.

Critics denounced that decision as well and on Friday, N.C. Gov. Roy Cooper criticized it, saying in a statement: “yesterday’s executive order will promote junk plans with high deductibles, no limits on catastrophic costs, and no protections for people with pre-existing conditions.”

Cooper also said he was disappointed to see the Trump Administration “withholding tens of millions of dollars a month from North Carolina’s economy,” referring to the money that insurance companies receive for the cost-sharing reductions.

Trump’s decisions will not affect another subsidy – the premium tax credit – available to those whose household income falls between 100 percent and 400 percent of the federal poverty level. As of February, 93 percent of North Carolinians who have individual policies through the ACA received this subsidy. An individual can qualify on a household income up to $48,240, and a family of four can make as much as $94,400, to qualify for this subsidy.

The lower-income households qualify for both subsidies, dramatically reducing their health insurance costs.

Blue Cross said in May that the single biggest factor in its rate request for 2018 was a Republican proposal then pending in Congress to defund cost-sharing reductions for low-income families. Blue Cross said its rate request would have been 8.8 percent if Congress kept the ACA fully funded in 2018. At the time, the company had requested a rate increase of 22.9 percent, a statewide average.

In August, Blue Cross reduced its rate request to 14.1 percent, saying it had overestimated its medical costs for ACA customers.

John Murawski: 919-829-8932, @johnmurawski