The official deadline recently passed for Blue Cross and Blue Shield of North Carolina’s exchange policyholders to pay their January health insurance premiums. The deadline was extended at the behest of President Obama due to serious problems with the federal HealthCare.gov website. The days of “enroll now and pay later” are over — or so one would think.
For many North Carolinians, the struggle continues. A News and Observer article detailed some of the many problems North Carolinians encounter when attempting to select and purchase an individual plan on the exchanges. Some applicants may have received confirmation that they successfully enrolled in a health plan, but their applications seem to be vanishing into thin air, as they are not transferring to insurance companies.
Speaking of messed up, taxpayers will again be on the hook for the federal health care law.
If the Obamacare exchanges become suffocated with high-risk policyholders, this will cause adverse selection, triggering an insurance company bailout. The bailout kicks in if the cost of providing care for those insured on the exchanges is higher than original estimates. If this scenario occurs, the law’s risk-corridor provision will compensate insurers for up to 80 percent of company losses.
The bailout will most likely happen in the next few years, especially since insurers can no longer ask questions concerning an individual’s health status on policy applications. They simply will not know the risk they are dealing with until policyholders start submitting claims.
Reinsurance also acts as another safety net and applies to big businesses that self-insure and insurance carriers. It is a $63 fee assessed on not just every worker or individual, but dependents as well. Because of this, The Wall Street Journal dubs this tax the “belly-button tax.” The tax will tally up to $20 billion through 2017, and an insurance company can access this fund if it spends over $45,000 on an individual’s health care costs.
Originally, the law set the limit at $60,000. It has been lowered since Obama’s decree that insurers allow customers to keep their plans if they really like them for one more year — meaning that more low-risk individuals will probably take up this offer to avoid experiencing the dreaded “rate shock.”
And speaking of insurance market destabilization, another loophole in the law could contribute to an even more destabilized market: Short-term health plans. These plans could very well appeal to more low-risk individuals and especially the “young invincibles” population — the very population needed to sign up for plans on the exchanges to maintain a balanced insurance risk-pool.
The Weekly Standard explains it this way:
“Obamacare remakes the individual insurance market by amending the Public Health Services Act, a federal law from 1944 that defines different forms of health insurance coverage. Individual insurance coverage, that act states, is ‘health insurance coverage offered to individuals in the individual market, but does not include short-term limited duration insurance.’”
Short-term plans usually last from six to 11 months and do not have to incorporate all 10 essential health benefits that the law mandates. Yes, these plans are more or less catastrophic, as they offer limited benefits and come with lower monthly rates and high deductibles. But an important distinction between these plans and the exchange plans is consumer choice, for add-on benefits are available. So if you’re an individual who does not utilize a lot of health care services but doesn’t want to remain uninsured, these plans may play to your financial benefit.
In North Carolina, four companies offer short-term health plans via ehealthinsurance.com: Assurant Health, HCC Life Insurance, IHC Group, and United.
Because short-term health insurance plans do not fall under the law’s minimum essential coverage requirement, consumers will still be hit with the law’s individual tax — $95 or 1 percent of income, whichever is greater. But savings will still be significant for many.
Katherine Restrepo is Health and Human Services Policy Analyst for the John Locke Foundation.