Individual health insurance premiums in North Carolina would spike as much as 80 percent on average due to the effects of Obamacare mandates if plans submitted by Blue Cross Blue Shield North Carolina receive federal approval as expected.
Younger, healthy consumers representing one-third of individual policy holders would bear disproportionately “substantial increases” to offset the costs of insuring older, less healthy populations and the requirements of the Affordable Care Act, BCBSNC officials acknowledged.
The 80-percent average increase comes from comparing the 2014 rates for the lowest-cost “bronze” Obamacare plans announced Thursday by BCBSNC to a statewide average of current individual-policy premiums compiled by the Manhattan Institute for Public Policy Research, a New York-based nonprofit research organization. Manhattan researchers used data from the federal government to compile their low-cost 2013 premium averages for each state. They calculated the lowest-available rates for different age groups and for policies offering different levels of coverage. (Methodology explained here.)
When the federal health law takes effect Jan. 1, individuals will be required to purchase an insurance policy approved by the federal government or pay a fine to the IRS. The maximum penalty per adult will be $95 in 2014 and will rise to $695 in 2016.
BCBSNC, which controls 85 percent of the state’s individual health insurance market, announced a sampling of its 26 new plans crafted for sale in all 100 counties on the federal health exchange marketplace.
“We know that the premiums that Blue Cross and Blue Shield released [Thursday] are definitely increasing across the spectrum of all ages,” said Katherine Restrepo, health and human services policy analyst at the John Locke Foundation. “It’s not looking too good.”
Restrepo noted that the comparisons are not perfect because the Obamacare-based plans all have different components and richer layers of required coverage. However, she said, the data are sufficiently reliable to draw credible conclusions about costs associated with the 25-, 40-, and 60-year-old age groups.
It’s also the case that under Obamacare, insurance-exchange participants whose income is between 100 and 400 percent of the federal poverty level may receive varying degrees of tax credits depending on actual income and other factors. These subsidies may at least partially offset premium costs for many recipients. Subsidy amounts would vary not only from state to state, but even county to county, said Barbara Morales Burke, vice president of health policy and chief compliance officer at BCBSNC.
“On one hand, premium subsidies do nothing to impact the cost of insurance, but for the buying public, depending on how much you’re eligible for, they can make a tremendous difference,” Morales Burke said.
Restrepo said that estimating the percentage change in insurance premiums for 2014 was necessary to evaluate the total cost of the Affordable Care Act, regardless of whether the cost is borne directly by policyholders or indirectly by taxpayers. To provide a basis for such comparisons, the Manhattan Institute computed premium averages for the five cheapest individual health plans in each state, looking at the three different age groups.
BCBSNC’s Blue Cross bronze plan is a modest policy covering 60 percent of actuarial costs; the policyholder picks up the remaining costs of care and must take care of co-pays and a deductible out-of-pocket. Silver, gold, and platinum plans are more expensive and offer more comprehensive coverage.
“Just looking at the bronze plans that Blue Cross put out, at age 25 the lowest premiums will be at $185, and the Manhattan Institute numbers, the pre-Affordable Care Act rates, were at $102, so this is an 81 percent increase,” Restrepo said.
“If you look at the age group of 40-year-olds, Blue Cross and Blue Shield for the bronze plan starts out at $235. The Manhattan Institute for 40-year-olds put out $132 premiums prior to the Affordable Care Act, and this results in a 79 percent increase,” she said.
Costs for the 60-year-old group would be even higher, she said.
The new Blue Cross catastrophic plan was designed as the lowest-cost, bare-bones policy. Even it would cost considerably more than the previous $102 monthly premium average of five lowest-cost plans now being offered — even though each of those pre-Affordable Care Act plans provide more coverage than the Blue Cross catastrophic plan. The catastrophic premium under the new Blue Cross menu would be $145 for a 25-year-old, or 42 percent higher. (Manhattan did not include the rates for catastrophic plans available now, which would have lowered current premiums in North Carolina below the $102 average of the lowest-cost plans.)
Morales Burke said the insurance company did not compile a comparative table to show side-by-side costs of current premiums and those that will take effect in 2014.
“These are new products. The benefits are different, the permitted rating factors and rating methodology is different compared to what we do today. There are these taxes and fees that have to be included, so it’s really an apples to oranges comparison,” Morales Burke said.
Other plans and associated premiums will be released Oct. 1, when the federal exchange opens, and the open enrollment period commences. Morales Burke said the insurer wanted to give consumers some basis for comparison even though individuals will not be able to determine their actual out-of-pocket costs until they know whether they qualify for subsidies.
“We do expect that a good number of our existing individual customers will qualify for some premium subsidy,” Morales Burke said. “I’m not trying to call it crowding out because they are our current customers and hopefully they’ll stay with us, so it’s really a matter of whether they’re accessing subsidies.”
Critics of Obamacare contend its subsidies give it an unfair advantage over existing private-sector insurance, and will push people who have self-paid or employer-paid plans to buy coverage from the government exchanges, where policies are subsidized.
“The ACA will make coverage available to many who have never had it and will enhance benefits for most consumers. These are good things, but they come at a cost,” Patrick Getzen, Blue Cross vice president and chief actuary, said in a news release announcing the new plans.
“After the impact of subsidies, we expect about two-thirds of our individual customers will see the amount they pay for coverage increase similar to previous years — or they may pay less. The remaining one-third of our customers will see fairly substantial increases due to the requirements of the ACA,” Getzen said.
Morales said the one-third who will see those “fairly substantial increases” primarily will “be people who are younger, who are healthier, and who probably don’t qualify for much if any premium subsidy.”
Under Obamacare, insurers no longer will be able to set initial premiums for individuals based on a patient’s medical history, so the sizeable discounts healthier people (who typically are younger) have enjoyed will be eliminated in 2014.
While Blue Cross awaits approval of its 26 plans from Washington, FirstCarolinaCare, a subsidiary of FirstHealth of the Carolinas, already has received final certification of the 16 plans it will offer on the federal exchange.
FirstCarolinaCare spokeswoman Emily Sloan said the plans will be offered only in the company’s primary service area of Moore, Hoke, Lee, Montgomery, Richmond, and Scotland counties.
It will be FirstCarolina’s initial entry into the individual health insurance market. Historically, it has served only the group insurance market.
“FirstCarolinaCare’s decision to enter the new individual market was not based on a competitive standpoint, but rather to ensure accessibility and choice to our local community,” Sloan said.
Coventry Health Care of the Carolinas is the third carrier seeking permission to sell its products on the federal exchange. It has not received federal approval or disclosed its 2014 plans and premiums.
Dan Way (@danway_carolina) is an associate editor of Carolina Journal.