Across the nation, some insurers are scaling back their offering of Affordable Care Act policies in the face of losses on this business. While some critics of the law are saying “I told you so,” I believe we need to take a more constructive tone toward making sure the ACA is in fact sustainable for the long haul.
The ACA does some good things – it gives more than half a million North Carolinians access to health care. But we cannot continue on the current path of ignoring the word “affordable” in the Affordable Care Act. Simply put, the ACA is not financially sustainable without changes in the way the law is administered.
Over the past two years, Blue Cross and Blue Shield of North Carolina has lost more than $400 million on our ACA business. This is largely because our ACA customers continue to be older and less healthy and use more expensive health care services than the federal government anticipated.
Last year, the sickest 5 percent of our ACA population paid $108 million in premiums, including their government subsidies. We paid out a staggering $1.29 billion in claims for the same customers.
Despite these losses, BCBSNC is financially stable. We reported a small net income on our business as a whole in 2015. But no insurer can continue losing substantial sums of money on any large line of business.
There are some things that can be done quickly to make the ACA sustainable. Here is where the president, Congress and U.S. Department of Health and Human Services should start:
▪ More strongly enforce the individual mandate that requires coverage. Everyone needs to pay in. To work correctly, any health insurance market needs a large pool of customers, including those who use relatively few medical services. The ACA allows too many healthy people to avoid coverage.
▪ Tighten control of the special enrollment period. The ACA allows far too many exceptions outside of its open enrollment periods. Allowing sign-ups outside the periods leads to people enrolling when they’re sick and dropping coverage when they’re better. Recent steps by the government to limit and verify eligibility for special enrollment periods are a step in the right direction – but they don’t go far enough.
▪ Shorten the 90-day grace period for those who receive government subsidies to help pay their premiums. The lengthy grace period creates an incentive to drop coverage and pay less than owed. In this timeframe, if customers do not obtain any services in the first three months of their policy, they can skip payment, let their coverage lapse and enroll at another time. However, if they do need services, they pay their premium and get their claims paid. Those exploiting this window have the assurance that their health care needs will be covered, without committing to the system until they are sure they will use it for more costly services.
▪ Make the legally required payments intended to help stabilize the insurance market. In particular, the federal government has not fulfilled its statutory and contractual obligations relating to the “risk corridor” program. Insurers pay into programs to help even out gains and losses, but the federal government changed the rules for the program after insurers made decisions based on the old rules – paying just 12 percent of what was owed to insurers for their losses in 2014 under the program. Payouts for 2015 have not yet been announced, but the required payments from the federal government are again expected to be a fraction of what is owed. The federal government’s failure to meet its legal obligations exacerbated our ACA losses in 2014 and 2015, and makes it significantly harder for us to continue selling ACA products.
BCBSNC also needs to play a role in making our ACA business more sustainable. We are doing this by ensuring our rates for 2017 account for the high medical costs of ACA customers. In certain regions, we offer plans with a lower premium cost for more basic coverage. We are also providing tools to help ACA customers manage their health care costs.
For the past three years, we have been the only health insurer to offer ACA plans in all 100 counties. Our commitment to doing what’s best for North Carolina is unwavering. But the best thing for North Carolinians is for BCBSNC to remain a strong, viable company that can continue providing coverage to our customers.
Last week, we announced our intent to continue to offer ACA plans to all North Carolinians. We are working hard to make these products sustainable. However, over the next few months we will evaluate our involvement in the ACA for 2017 to ensure that we are making the right decisions for the 3.9 million North Carolinians who rely on us every day. We are doing everything we can to participate in the ACA, but the law needs to change to make it work better for our customers and our company.
Brad Wilson is president and chief executive officer of Blue Cross and Blue Shield of North Carolina.