News: CJ Exclusives

Officials: Obamacare To Have Modest Effects on State Health Plan

Costs expected to rise 2 percent a year rather than current 5 percent rate

The General Fund cost of operating the State Health Plan is expected to rise about $90 million from fiscal years 2013-14 to 2015-16, but that is a slower growth trend than in past years, and Obamacare will have little effect on it, officials say.

General Fund costs will ratchet up from about $1.9 billion in fiscal year 2013-14 to $1.95 billion in 2014-15, and $1.99 billion by 2015-16, David Vanderweide in the General Assembly’s Fiscal Research Division told Carolina Journal.

And even though members of the State Health Plan have expressed frustrations as they’ve tried to sign up for coverage in 2014 that are not unlike those from people who’ve tried to enroll in Obamacare, a spokesman for state Treasurer Janet Cowell says the two circumstances are unrelated.

Premiums from employees and retirees are not included in those cost increases. Nor is revenue from other sources that fund some government positions, including money from the Highway Fund, receipts, federal funds, or local funds. Including those, total state health plan expenses are expected to be $2.7 billion in 2013-14, $2.9 billion in 2014-15, and about $3 billion in 2015-16.

The pending General Fund increases reflect roughly 2 percent higher costs per year. “That is below the typical increase” of about 5 percent annually, Vanderweide said.

“In total the amount of the Affordable Care Act [adjustments] has a minimal impact on the state health plan” in terms of costs, he said. “You would expect to have a minimal impact on a group that already had [health insurance] coverage.”

Two State Health Plan policies will include expanded services that are Obamacare-compliant, even though the state did not have to broaden its offerings; the State Health Plan was grandfathered in under the national health reform law and allowed to offer the same coverage it provided in 2013.

Determining the scope and cost effects of some Obamacare-related changes, such as dependent care coverage, are difficult to gauge precisely and will be monitored by state officials.

Despite that mostly good news for taxpayers, the state has been besieged with calls the past several weeks from frustrated State Health Plan members, complaining they could not process their health plan selections for the coming year.

“Online enrollment is available, up, and running, as it has been since Oct. 1,” treasurer’s office spokesman Schorr Johnson said in response to the outcry.

Even though the open enrollment period was supposed to end Oct. 31, about half of the State Health Plan members had not made a selection as of Oct. 25. “The plan’s eligibility and enrollment vendor is experiencing a high volume of calls, which is leading to longer wait times than desired. The vendor is working to address this issue,” and extended open enrollment through Nov. 15, Johnson said.

Some members probably are satisfied with the basic 70/30 plan and will take no action, Johnson said.

The treasurer’s office has been administering the State Health Plan for some 650,000 state workers, retirees, and dependents since the General Assembly gave it that responsibility in 2011.

“Folks are running the gamut with their frustrations,” said Toni Davis, communications director for the State Employees Association of North Carolina, which represents state workers and state retirees.

Complaints range from not being able to enroll online, difficulty getting a representative on the phone to provide enrollment services, vendor representatives hanging up on callers, and lack of either a confirmation number when members enroll or an email confirmation of the enrollment, Davis said.

Some dissatisfied retirees have drawn comparisons between the problems in the state system and the meltdown of the enrollment process in the federal health care exchanges under Obamacare, Davis said.

“No, they are very different situations,” Johnson said. “Every member of the state health plan already has health insurance — and taking no action will still result in members being enrolled in comprehensive health coverage,” Johnson said.

The State Health Plan has been beset with problems for years. It has more than $30 billion in unfunded liabilities — benefits promised to state retirees with no money set aside to pay for them. The legislature imposed premium costs on state health plan members two years ago at the same time it shifted administration of the plan to the treasurer.

Obamacare first began impacting the state health plan with an $87 million cash subsidy from the federal government for early retiree reinsurance from 2010-12, according to a November 2012 actuarial report presented to the State Health Plan’s board of trustees by The Segal Company, a benefits and human-resources consulting firm.

The Early Retiree Reinsurance Program let government retirees who were not covered by an employer’s health policy and too young to qualify for Medicare get cut-rate coverage from the State Health Plan. The program has since ended.

State officials will be challenged to determine ongoing dependent care costs due to Obamacare. The management-consulting firm Aon Hewitt reported in May 2012 to the State Health Plan that dependents paid premiums totaling $419 million but incurred costs of $526 million. It is expected the shortfall will remain about $100 million a year.

Obamacare mandates that individual insurers no longer can differentiate among health status and gender when setting insurance premiums. Moreover, a 64-year-old can be charged no more than three times the premium of a 21-year-old for the same coverage — even though current actuarial estimates suggest that health coverage costs between five times and 10 times more for the 64-year-old.

Since private insurers could charge much higher rates or deny coverage altogether to less-healthy dependents, dependents with health issues have been more likely to enroll in State Health Plan, because its premiums tended to be lower than those in the private market.

Conversely, healthy dependents typically have found lower-cost coverage from private insurers.

Under Obamacare, the State Health Plan may become a better deal for healthy people (thus reducing the short-term costs to state taxpayers) and private insurance may offer lower premiums for those with health problems.

Increasing the age of dependent coverage to 26 is projected to cost the state $16.9 million in fiscal year 2013-14, $18.5 million in 2014-15, and $20.2 million in 2015-16, according to an April 2011 Aon Hewitt actuarial report.

The state also anticipates savings by offering new Medicare Advantage plans that require employees to pick up co-pays and deductibles. At present, Medicare is the primary payer of benefits for doctor and hospital visits by Medicare-eligible retirees. The State Health Plan then pays its share, and the individual pays any remaining balance.

The impact of the Affordable Care Act on those benefits is complicated and it is difficult to determine how much the expected savings might be and how much of the savings could be attributed to Obamacare, a legislative aide said.

Dan Way (@danway_carolina) is an associate editor of Carolina Journal.