Linda Hammock of Chapel Hill is about to part with her health insurance, among a growing contingent of North Carolina residents facing soaring costs and seeking alternatives to the Affordable Care Act.
Hammock is currently on a Blue Cross and Blue Shield policy that’s costing her $650 a month, yet she has been to the doctor just once this year and to the chiropractor twice. Now, she is about to make the kind of personal choice the federal insurance law was designed to render obsolete: abandoning health insurance.
An addictions counselor, Hammock, 57, embraced the concept of universal health care and had wanted to see the ACA succeed. But she would have to spend more than $10,000 this year on premiums and the deductible before her health insurance kicked in and paid for treatment.
“It’s offensive beyond words for me to pay a quarter of my income for something I don’t use,” Hammock said. “It’s been brewing in the back of my mind, and the minute they said they’re raising premiums, I said, ‘I’m not participating.’ ”
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North Carolina’s health insurance rates under the ACA are going up as much as 50 percent on some policies next year, and most of the nearly half-million residents insured through the federal program will see double-digit increases. Experts are still debating the reasons for the spike in ACA expenses here, but some residents are taking dramatic steps to contain those costs.
Some, like Hammock, will forgo coverage altogether. Some are opting for religious cooperatives like Medi-Share, which require professions of faith and stress that what they offer is not health insurance. Still others are opting for catastrophic coverage that does not accept applicants with pre-existing conditions. These policies, called short-term medical, do not meet the minimum requirements of the ACA, and customers will have to pay a federal fine as if they were uninsured.
Insurers are also moving quickly to manage their costs. Blue Cross, the state’s largest health insurer, which lost $50.6 million last year on its ACA line of business, is moving specialty medications for HIV and cancer into the highest cost category. This move, affecting about 650 Blue Cross customers statewide, will raise patients’ medication bills from several hundred dollars this year to potentially thousands of dollars next year for the same treatments.
UnitedHealthcare, the nation’s largest health insurer, just last week slashed sales commissions from 10 percent to 2 percent for agents who sell ACA policies in North Carolina and other states. But UnitedHealth is paying agent commissions as high as 25 percent for selling its short-term medical policies – which can turn away people with obesity, heart disease and cancer, and not renew coverage for people who become sick.
UnitedHealthcare also announced last week that it may stop selling subsidized health insurance on state and federal marketplaces in 2017. United, which sells ACA plans in two dozen states, said it is seeing a “deterioration” in the ACA marketplace, and has lowered its earnings forecast for the year.
Humana, which had planned to offer ACA plans in four North Carolina counties in 2016, withdrew from the market in September.
Such developments have reignited debate about the ACA’s prospects as the federal insurance law enters its third year. North Carolina, a state that achieved the fourth-highest ACA enrollment in the nation, has been held up as an example of the ACA’s success. The state has seen its ranks of the uninsured drop from 18.2 percent in 2013 to 14.6 percent this year, with the lowest rate in Wake County falling to 10 percent, according to Enroll America.
But the popularity of the ACA here is coming at a cost. Blue Cross’ first financial loss in 15 years, driven by the ACA’s appeal to sicker customers who can buy subsidized coverage, prompted the Chapel Hill insurer to hike rates by an average 32.5 percent starting in January. Those most affected by the steep cost increases are the 38,000 North Carolina residents – 8.4 percent of those enrolled in ACA – like Hammock whose household income is too high to qualify for federal subsidies.
“I don’t believe it’s sustainable,” said Leslie McMillan, a health insurance broker in Rolesville. “I’m afraid the ACA is going to implode. People are not going to be able to afford it, or people are going to buy short-term medical and go catastrophic.”
Timothy Jost, a health law professor at Washington & Lee University, said it will take several more years for the ACA to stabilize.
“There is very good reason to believe we are hitting turbulence and not falling out of the sky,” Jost said. “The training wheels are coming off and health plans are still trying to figure out who’s signing up for the coverage and what their risk profiles look like.”
According to an analysis by online Chapel Hill brokerage HealthDecisions.us, monthly premiums for the second-lowest cost Silver plan are rising 16 percent statewide. North Carolina’s second-lowest cost plan next year will be in Bladen County, where a 40-year-old male nonsmoker can buy a UnitedHealthcare policy for $335.36 a month.
But most North Carolina residents will have to pay more. The HealthDecisions.us analysis, conducted for The News & Observer, shows that the same 40-year-old would have to pay $456.87 a month in Bertie County and $461.59 a month in Beaufort County for the second-lowest cost policy there, issued by Blue Cross.
In Wake County, the second-lowest cost policy for the same individual is a Coventry plan for $357.96. North Carolina has 16 rating areas, based on regional health care costs and local hospital contracts with insurance companies.
Appeal of ‘junk’ policies
Adam Linker, a policy analyst for the North Carolina Justice Center, a Raleigh organization that advocates for the poor, immigrants and workers, said the steep rise in North Carolina’s ACA rates has come as a surprise to health care advocates. But he said rates are rising here for a combination of reasons: the state’s decision not to expand the federal Medicaid program; the fact that many counties have a single option, Blue Cross; and the fact that health insurance rate filings in this state aren’t public and not subject to public hearings.
If North Carolina expanded Medicaid, Linker said, the federal program would take in people whose incomes are between 100 percent and 138 percent of the federal poverty level, changing the mix of people left in the ACA. North Carolina is one of 19 states that didn’t expand Medicaid as part of the Affordable Care Act.
According to the Kaiser Family Foundation, 44 percent of North Carolina’s ACA enrollments are low income, with household incomes between 100 percent and 150 percent of the federal poverty level, which translates to household incomes between $11,770 and $17,655 a year for an individual, and between $24,250 and $36,375 a year for a family of four.
Federal data show that nearly two-thirds of North Carolina’s ACA policies are sold to people who make below 250 percent of the federal poverty level, the cutoff for low-income people to qualify for subsidized co-pays, co-insurance and deductibles in addition to discounted premiums.
Thanks to the federal subsidies, 85 percent of North Carolina residents who enroll through the federal marketplace in 2016 can expect to pay $100 a month or less, according to the U.S. Department of Health and Human Services.
Meanwhile, some people are joining religious cooperatives that promise medical assistance to people who share their beliefs but do not guarantee coverage. The coverage is based on whether they can raise money from fellow members. These voluntary societies – including The Health Co-Op, Christian Healthcare Ministries, Liberty HealthShare and Samaritan Ministries – precede the Affordable Care Act and are exempt from the law’s penalties for being uninsured.
These organizations are experiencing renewed interest, as testified by Medi-Share’s membership in North Carolina, which has grown in one year from 3,740 to 5,442 members as of Oct. 31. Nationwide Medi-Share said it has grown from 35,000 members in 2010 to 158,000 members today.
As costs soar, insurance agents around the state said they are also seeing renewed interest in short-term medical policies, which are typically cheaper, even with the ACA penalty tacked on. Many agents said they try to discourage customers from buying these “junk” policies because the policies are not comprehensive and pull healthy people out of the ACA market.
McMillan, the Rolesville broker, warned that short-term medical policies are a lot riskier. They typically have separate deductibles and separate out of pocket maximums for each member of the family. And the medical coverage is capped, at $1 million for most policies.
Still, she said a family of three could save more than $7,000 a year on monthly premiums with a short-term medical policy, even with the ACA fine factored in – if no one gets sick or injured. The same family could end up paying a lot more if they need medical treatment, because the maximum financial cost for a family of three would be capped at $13,700 for an ACA policy, while it could be as high as $30,000 under a short-term medical policy.
These policies – which are similar to the way individual health insurance worked before the Affordable Care Act – appeal to people who are generally healthy and need a low-cost catastrophic backstop. If they get sick and their health insurance is not renewed the following year, their options will include purchasing an individual policy on or off the exchange.
Raleigh insurance agent Michael Osborne Jr. said he has discussed this option with more than 10 customers in the past two weeks. Raleigh agent Liz Gallops said she has explained short-term policies to four customers last week.
“I’d rather have you take a short-term plan than to run naked,” Gallops said. “It’s going to keep you from going bankrupt and have unlimited exposure.”
Among those contemplating this route is Joel Landau, a part-time musician and part-time retail clerk in Greensboro. Landau, 64, is currently on a Blue Cross policy under the ACA and paying $596 a month.
The same policy would cost $863 a month next year, he said. His cheapest ACA option in 2016 is a UnitedHealthcare policy for $708 a month. Landau does not qualify for subsidies.
The short-term medical policies Landau has reviewed cost between $255 and $314 a month, he said.
Even with an ACA penalty – which will increase next year to 2.5 percent of household income above the tax filing limit – Landau estimates he would save about between $4,000 and $5,000 a year on a short-term medical policy. And he doesn’t need the policy indefinitely, because he will be eligible for Medicare in August.
“There’s a lot more like me being squeezed out of the insurance market,” Landau said. “If I was a lot younger I’d be tempted not to have insurance at all.”
Average N.C. rate increase
A number of health insurers sell individual coverage in North Carolina. But most are not listed on the federal health exchange, healthcare.gov, because they do not sell subsidized policies. To compare these policies, customers must call the insurer directly, check online or work through an agent or broker.
Under the Affordable Care Act insurers cannot reject applicants based on pre-existing conditions and are subject to other restrictions. They can set rates using only three factors: age, location and tobacco use.
The list below shows individual insurers in N.C. and their average rate increases for 2016.
Aetna (a.k.a. Coventry) 23.6%
Blue Cross and Blue Shield of North Carolina 32.5%
Celtic Insurance 9.8%
Cigna Health and Life Insurance 7.6%
National Foundation Life Insurance 9.9%
UnitedHealthcare Life Insurance 29.7%
UnitedHealthcare of North Carolina 20.4%
Source: N.C. Department of Insurance