Implications of NC Health Insurers’ Proposed Rates for 2016

The 2016 health insurance rates for policies purchased through the Affordable Care Act — sometimes referred to as Obamacare — have been made public.

North Carolina, like 30 states, has one dominant health insurance provider. In our case, its Blue Cross Blue Shield. I couldn’t easily obtain exact numbers for 2014, but in 2013 the company was the only option for people in 40 of the state’s 100 counties. For 2016, it has submitted a proposed rate increase of 25.7 percent on top of last year’s 13.5 percent increase.

Coventry’s proposed increase ranges from 17.2 percent to 25.8 percent, depending on the type of policy. United Healthcare submitted an average 12.5 percent increase. In some counties, all three companies offer policies.

Although these numbers are startlingly high and a far cry from what Affordable Care Act advocates promised us, perhaps we can be glad that we don’t live in New Mexico, Minnesota or many other states.

The dominant carrier in Minnesota covers 179,000 people and is asking for a 54 percent increase. Minnesota’s dominant carrier in 2014, PreferredOne Health Insurance, left the state exchange after experiencing such high administrative costs that it didn’t think it could ever break even.

New Mexico is looking at a proposed 51 percent jump; Tennessee, 36 percent; Maryland, 30 percent; Pennsylvania, 30 percent; and Oregon, 25 percent. The only states that have reported single-digit increases as of this writing, with the exception of Florida, are sparsely populated states.

At this point, these are only proposed rate increases. Since health insurance is not sold in a free market, state regulators will determine the final cost and in my judgment, they are likely to reduce that proposal — but possibly not by much.

First, believe it or not, the price increases still may not cover actual costs. Insurance companies have a strong incentive to be seen favorably by regulators and other government officials. Consequently, several are willing to continue to lose money in this part of their business so they can continue the more profitable part of their business: Group plans.

Perhaps surprisingly, those of us in group plans are providing an indirect subsidy to those who buy policies through the exchanges.

Another reason regulators are likely to support most of the increase is because Blue Cross Blue Shield and other carriers are not just blowing smoke. They now have actual data to base their future projections.

Until this point, experts such as Jonathan Gruber came up with speculative estimates of, for example, the number of young people who would buy insurance rather than pay the penalty. North Carolina’s Blue Cross Blue Shield reported that 80 percent of its requested rate increase is the result of higher-than-expected medical costs.

For example, 15 percent of the projected exchange enrollees were supposed to be age 55 or older. In fact, 29 percent are in that age category, which on average spends far more than younger people on health care.

Oregon’s top carrier reported a 61 percent loss on exchange policies and Illinois’s carrier reported claims $300 million higher than premiums. A substantial percentage of young voters who put President Obama in office are opting out of his signature piece of legislation.

There is one part of the Affordable Care Act that is particularly disturbing and contributed significantly to Blue Cross Blue Shield’s costs across North Carolina.

It is never good to allow and encourage irresponsibility in a policy. The Affordable Care Act mandates that patients receive coverage for three months after they have stopped paying premiums. The insurance company has to reimburse physicians and hospitals for the first month, but the providers simply provide free care for the last two months.

Blue Cross Blue Shield reported that about 20 percent of the individual policy holders who enrolled paid only one premium. They then spent the next four months obtaining treatment, often thousands of dollars worth, and never paid another premium.

The media is quick to report the story of someone who didn’t have insurance before and now does. That’s great, but they don’t report about the cost. Remember, the Congressional Budget Office projects that average cost for each American family of four is $23,000 over 10 years to pay for people obtaining insurance through the exchanges.


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