Because Obamacare requires that insurers pay the government a 3.5 percent fee to sell their plans on the exchange, all Blue Cross policy holders would pay higher premiums if the giant insurer is selected to provide insurance plans on the federal health exchange that will operate in North Carolina, according to Blue Cross Blue Shield of North Carolina officials.
The number of North Carolina residents who purchase individual insurance plans could triple to “a million plus” once Obamacare takes effect, the officials say.
“We’re just like any other business. We’re going to have to build that into our cost structure,” said Bruce Allen, director of marketing for Blue Cross.
The Patient Protection and Affordable Care Act, as Obamacare is formally known, requires insurance pricing to be the same both on and off the exchange, he said.
“We’re still working through exactly what that will be. I think most insurers will tell you they’re going to spread that price to both on-exchange and off-exchange customers,” Allen said.
Republicans in the North Carolina General Assembly passed legislation, signed by Gov. Pat McCrory, to opt out of creating a state-run health insurance exchange. That entity would be an online marketplace from which income-eligible consumers would use federal subsidies to buy federally approved insurance plans.
By rejecting a state-run exchange, North Carolina will now be one of 33 states in which there will be a federally operated exchange. Because the feds did not expect states to turn down the state exchanges, they did not have regulations prepared or money earmarked to operate the exchanges, and are scurrying to patch a federal system together.
Also contributing to higher insurance costs starting in 2014 will be Obamacare’s forced elimination of longstanding tiered rates used in the insurance industry.
“Healthier people get a lower rate and that helps get more people in the insurance pool” to cover costs for all, Allen said of the current system.
Once Obamacare kicks in, “the only factor that we’re allowed to rate for is smoking,” he said.
“All the other reasons go away. As a result of that, rates are going to go up when you issue everybody at the same rate. But a lot of people who are unhealthy today [will get better],” he said.
“Today, about 400,000 North Carolinians buy their own health insurance. We are anticipating that to go over 1 million” after insurance becomes effective on the federal exchange as of Jan. 1, 2014, Allen said. The enrollment period begins Oct. 1.
“We’re expecting a lot of competition. We’re ready for that competition,” he said.
Most, but not all, of the 700,000 to 800,000 new individual purchasers will buy their plans on the federal exchange, Allen said. Some will not qualify for subsidies because of their income and buy insurance plans privately.
The “two big drivers” for expansion will be federal subsidies that make insurance more affordable for consumers and Obamacare’s individual mandate that requires people to buy insurance or be assessed a tax penalty , Allen said.
New buyers will come from all income categories, Allen said. Most heavily subsidized will be the income range of 100 to 138 percent of the federal poverty level, with subsidies decreasing as eligibility rises to a cap of 400 percent of the federal poverty level.
Allen would not speculate how much of the new market would be created because some companies might drop employer-provided insurance once the heavily subsidized federal exchange opens.
Devon Herrick, senior fellow and health economist at the Dallas, Texas-based National Center for Policy Analysis, said his organization expects major restructuring of the health insurance market over the next decade, and lots of employers to start dropping coverage nationally due to Medicaid expansion and subsidized health exchanges.
“We predict a lot of firms will find a way to get out of providing coverage,” Herrick said.
“I suspect that we will see employers taking a wait-and-see approach,” Allen countered, with none wanting to be the first to drop its insurance coverage benefit even though it would be cheaper to pay the Obamacare tax penalty for not providing insurance than to pay the employer share of insurance premiums.
“I think a lot of people are carefully watching what employers do, and especially what the larger employers do,” Allen said.
“All the products on the exchanges have to be qualified health plans,” and insurance carriers are required to provide the same “scope of coverage,” he said.
“We’ll be offering a full choice,” he said, “to make sure consumers get the products they want. They’ll look a lot like our products look today.”
Blue Cross would slot buyers into different medal levels descending from platinum and gold to silver and bronze. The higher levels would have richer coverage and higher costs, Allen said. “Bronze covers less of the total cost than, say, a platinum does.”
As a general rule of thumb, Blue Cross would offer “the same set of products to folks regardless of their income level,” Allen said. “So a bronze plan will be the same for someone at 20 percent of the federal poverty level as someone at 400 percent of the federal poverty level.”
The difference would be in awarding higher subsidies to lower-income individuals to offset premium costs.
“Obviously lower-income gets a bigger subsidy. Folks making less than 250 percent of the federal poverty level get a richer option if they choose a silver plan,” Allen said. “The plan has less out-of-pocket costs for the customer.”
Dan E. Way (@danway_carolina) is an associate editor of Carolina Journal.