As the Affordable Care Act lurches toward its fourth year in 2017, health insurers in North Carolina are proposing another round of big rate increases to pay for insuring people who for years couldn’t get health coverage.
In filings made public Tuesday, Blue Cross and Blue Shield of North Carolina said it wants to raise rates by an average of 18.8 percent, and Aetna is looking to increase premiums by 24.5 percent on average. Both health insurers blame rising drug costs, increasing medical expenses and customers insured under the ACA who cost more to treat than other people.
Blue Cross also wants to be compensated for having to beef up its customer service operations in response to a flood of customer pleas for help in the past five months. Most of those pleas came after a Blue Cross technology system malfunctioned, leaving thousands of ACA customers double-billed, enrolled in the wrong health plans or unable to confirm that they have insurance.
Meanwhile, a third major insurer, Cigna, said it plans to start selling federally subsidized health insurance in North Carolina under the ACA. Cigna intends to start cautiously, offering ACA plans in just six Triangle counties. It now insures about 200,000 people in seven states under the ACA, fewer than Blue Cross insures in North Carolina alone under the federal health care law.
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The proposed rates require approval from the N.C. Department of Insurance and would take effect Jan. 1.
We need to attract more younger people to balance out the typically higher costs of customers aged 35 and over.
Brian Tajlili, Blue Cross’ director of actuarial and pricing services
Brian Tajlili, Blue Cross’ director of actuarial and pricing services, said Tuesday that the Chapel Hill insurer is still undercharging for individual health insurance and will decide in August whether to cut back its ACA offerings in North Carolina.
“We need to attract more younger people to balance out the typically higher costs of customers aged 35 and over,” Tajlili said. “The most important factor for us to continue to offer coverage in all 100 counties is getting the rate approved that we need to cover medical costs for this block of business to be sustainable for us.”
Tajlili said that ACA customers are prone to use expensive hospital emergency room services when they could visit a cheaper urgent care clinic instead. And they log high volumes of knee replacements and hip surgeries, as well as prescriptions for expensive drugs.
Blue Cross has lost $405 million on ACA plans the past two years.
The Blue Cross enrollment fiasco prompted the N.C. Department of Insurance to launch an investigation this year; the department submitted the results to Blue Cross on Tuesday. The insurer now has 30 days to respond before the agency announces fines. State Insurance Commissioner Wayne Goodwin recently said he expects to fine Blue Cross in the millions of dollars for its misdeeds.
Nonetheless, in its rate filing, Blue Cross said it wants customers to pay the costs of dealing with the technology crash: “BCBSNC will increase resources to better address call volume and demand in response to our higher-than-anticipated call volumes in 2016. This important investment is needed to provide the quality customer service experience our customers expect.”
Blue Cross spokeswoman Ryan Vulcan said the customer service component is a small portion of the requested rate increase.
“Rates are primarily determined by the cost of medical services and how much our customers use them,” Vulcan said by email. “A relatively small portion is impacted by administrative expenses, so any impact will be relatively minor.”
They haven’t done anything right this year as far as I can tell, and they still want a double-digit rate increase.
Karen Carlton, Durham resident and administrative coordinator at a private family foundation
That stand may not placate angry customers.
“I can’t believe the arrogance of this company,” said Karen Carlton. “They wouldn’t have had the call volume they had if they hadn’t messed everything up.”
Carlton, an administrative coordinator at a private family foundation, said it took more than 20 hours over four months to get her Durham address correct on her insurance records.
“They haven’t done anything right this year as far as I can tell, and they still want a double-digit rate increase,” she said. “I knew we were going to end up paying their fines. Sigh.”
Insurers also are requesting rate increases in other states in a broad industry strategy that was largely anticipated. According to the independent Kaiser Family Foundation, the proposed increases reflect several factors, including the phasing out of the ACA’s reinsurance program to compensate insurers for financial losses; rising health care costs; and the reality that some insurers underpriced their products.
“This still is a new market, with insurers still finding their way,” the foundation said in a recent study.
It’s plausible that last year and this year are catch-up years because the rates were too low. This is the first year that they really have good data, and this could well be the final catch-up year.
Mark Hall, health law professor at Wake Forest University in Winston-Salem
Mark Hall, a health law professor at Wake Forest University in Winston-Salem, said the ACA will require more time to create a stable insurance market.
“We’re seeing a mixed bag but no immediate reason for despair,” Hall said. “It’s plausible that last year and this year are catch-up years because the rates were too low. This is the first year that they really have good data, and this could well be the final catch-up year.”
Cigna will offer a third option for Triangle residents shopping for individual insurance who can’t obtain coverage through their employer or through a federal program such as Medicare or Medicaid. Most people in North Carolina will have just one or two options on the ACA insurance exchange.
The nation’s largest health insurer, UnitedHealthcare, had sold more than 155,000 individual policies here as of January, but it announced in April that it was withdrawing from most ACA markets because it’s losing too much money. Its ACA customers will have to switch to another insurer.
Blue Cross, which has lost $405 million on ACA plans the past two years, has warned that it might exit some counties in the state or withdraw from the market altogether. The company will decide in August but in the meantime has proposed ACA rates for all 100 counties in North Carolina.
Blue Cross, the state’s largest health insurer, covers nearly 330,000 people under the ACA, while Aetna covers more than 130,000 on its Coventry and Aetna plans.
In all, more than 610,000 people in North Carolina are enrolled in ACA plans, the nation’s fourth-highest ACA enrollment after California, Florida and Texas.
Since most people enrolled under the ACA get federal subsidies, the effect of the rate increases will be offset by financial assistance.
This year, for example, the average monthly premium for North Carolinians with subsidized ACA coverage went up by just $3, from $95 a month to $98 per month, even though the average monthly premium in the state is $497 before subsidies are factored in.
Blue Cross increased rates by 32.5 percent on average this year, a factor that the company says may have reduced its ACA enrollment from 397,000 in 2015 to about 330,000. Last year, Blue Cross paid nearly $1.3 billion in claims for the sickest 5 percent of customers it insured under the ACA, spending 70 percent of its ACA revenue on about 20,000 patients.
The company’s proposed rate increase ranges from 9.4 percent to 28 percent, depending on the type of plan, the age of the customer and the county where it is offered. Blue Cross is submitting proposals to increase deductibles on 19 plans, and in some cases eliminating plans that have no deductibles. The deductible is the amount the customer must pay for medical treatment before health coverage takes over.
Blue Cross is also eliminating “platinum” plans that typically had the highest premiums and lowest out-of-pocket costs.
Deductibles have been rising every year as insurers try to shift customer costs from monthly premiums. From 2015 to 2016, deductibles went up about 20 percent on average nationwide for ACA “silver” plans, the most popular in the system.
Aetna’s proposed rate increase ranges from a high of 61.2 percent on some plans to a reduction of 9.9 percent on others.