Fall always is a busy season for Norma Jean Rector, a SouthPark insurance benefits adviser. But this year, the third for open enrollment under the Affordable Care Act, more customers than ever are begging for help to find affordable health insurance.
“In the two years past, there was interest,” she said, “but not like this year.”
North Carolina’s health insurance rates under the ACA are going up as much as 50 percent on some policies next year. While experts debate the reasons for the spike and critics continue to question the value of “Obamacare,” some consumers and insurers are taking dramatic steps to contain their costs.
Because of higher premiums and deductibles, insurance agents across North Carolina say they’re seeing renewed interest in old-style catastrophic coverage, called short-term medical plans.
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Those who might benefit earn too much to qualify for federal premium subsidies. They’re looking to save money by choosing benefits they want and leaving out others, such as maternity care. These short-term plans, popular before the ACA, are economical because they limit benefits and are not sold to people who have pre-existing medical conditions.
But that isn’t allowed under the ACA, which requires insurers to cover everyone, no matter their medical status, and requires all Americans to buy health insurance that covers 10 “essential health benefits” – or pay fines for not having insurance.
People who buy short-term plans – which some critics call “junk” plans – still would be subject to the federal penalties, as if they are uninsured. But many conclude it’s worth it to pay the fines if they can save thousands of dollars.
Rector understands this thinking. She recently got a notice from Blue Cross and Blue Shield of North Carolina that her premium in 2016 will increase from about $700 to $1,000 a month. “I don’t want to have to pay $12,000 a year for my insurance,” she said. “And I’ve got clients in the exact same boat.”
The difference in premiums is stark. Short-term plans can be purchased for about $300 a month, or $3,600 a year for an individual, Rector said. “That’s a far cry from the $12,000 that I would have to pay for an ACA-compliant plan,” Rector said. “I could just take and pay the penalty and still be coming out ahead.”
Despite the cost savings, some agents and ACA advocates discourage customers from going for the cheap option.
“This is not minimum essential coverage. This is junk,” said Karen Pollitz, a senior fellow at the Kaiser Family Foundation, a nonpartisan health policy research group. “It really is night and day different from the protection that you get under a qualified plan.”
For example, short-term policies might not cover prescription drugs or mental health care, also required under the ACA. And they’re “non-renewable,” meaning that if a policyholder develops cancer or another medical condition, the policy will not be renewed. “If you get pregnant or get hit by a car, you’re out,” Pollitz said.
Penalties are not insignificant, she added. The 2016 fine for Americans who don’t buy insurance – or whose insurance doesn’t meet the ACA minimum – is $696 or 2.5 percent of household income.
For those who don’t have employer-sponsored insurance, “it’s particularly important to buy real coverage. You have a lot to lose (in case of an illness or accident),” Pollitz said.
“If you’re a higher-income person, those bills have to be paid. They can come after your house. You’re not just buying your access to health care. You’re buying financial protection.”
Since 2014, the Affordable Care Act has required that all Americans purchase health insurance – except for those who qualify for exemptions. To make it more affordable, the federal law provides premium subsidies for people in low- and middle-income brackets.
At the healthcare.gov marketplace, a family of four making up to $97,000 can qualify for a tax credit that will “pay a big chunk of the premium,” Pollitz said.
Those who qualify for subsidies are generally pleased with their premiums.
Thanks to the federal subsidies, 85 percent of North Carolina residents who enroll through the federal marketplace in 2016 can expect to pay $100 a month or less, according to the U.S. Department of Health and Human Services.
But people whose incomes are too high to qualify for financial help have complained about the rate increases they’re facing. Many ACA plans also have high deductibles and high out-of-pocket minimums, meaning consumers might have to pay thousands of dollars before reimbursement kicks in.
That’s why some healthy people are looking for low-cost catastrophic coverage.
“Obamacare has created a vacuum,” said Sam Gibbs, the Asheville-based executive director of AgileHealthInsurance. “They’ve priced a lot of people out of the market, and these products are filling in the gap.”
Gibbs said AgileHealthInsurance (www.agilehealthinsurance.com) was created in May, specifically to sell low-cost, short-term health insurance online. From the second to third quarter this year, the company saw a nearly 50 percent increase in policies sold, Gibbs said.
It’s not illegal to sell or buy the short-term policies. But Gibbs said consumers need to understand the plans don’t meet ACA standards, and they still could face fines, Gibbs said. “In a lot of cases, people are just willing to pay the penalty.”
Consumers also should know the drawbacks, Gibbs said. For example, 15 percent of people don’t qualify because of pre-existing medical conditions. If they get sick, the plans won’t be renewed. In that case, Gibbs said, people can switch to an ACA policy, which must be available to anyone.
“For a buyer that understands what they’re buying, this is a great option,” Gibbs said. “… You pick a plan, put in a credit card and the coverage starts tomorrow. You can buy from one month to 12 months and cancel at any time. We’ve made it easy and convenient.”
Is ACA sustainable?
Recent rate increases have reignited debate about the prospects of the federal insurance law.
North Carolina, a state with the fourth-highest ACA enrollment in the nation, has been held up as an example of ACA success. The state has seen its ranks of the uninsured drop from 18.2 percent in 2013 to 14.6 percent this year, according to Enroll America.
But the state’s premium increases are among the highest in the nation. In the Charlotte market, three insurers – Blue Cross, UnitedHealthcare and Aetna – offer a total of 27 plans, with premiums ranging from $305 to $692 per month (without subsidy).
“I don’t believe it’s sustainable,” said Leslie McMillan, a health insurance broker in Rolesville, in Wake County. “I’m afraid the ACA is going to implode. People are not going to be able to afford it, or people are going to buy short-term medical and go catastrophic.”
Timothy Jost, a health law professor at Washington & Lee University, said it will take several more years for the ACA to stabilize.
“There is very good reason to believe we are hitting turbulence and not falling out of the sky,” Jost said. “The training wheels are coming off, and health plans are still trying to figure out who’s signing up for the coverage and what their risk profiles look like.”
Adam Linker, a policy analyst for the N.C. Justice Center in Raleigh, said the steep rise in North Carolina’s ACA rates came as a surprise to health care advocates. He speculated that one of the reasons is that North Carolina has attracted a disproportionate number of poor and sick residents into the ACA plans.
According to the Kaiser Family Foundation, 44 percent of North Carolina’s ACA enrollments have low incomes, between 100 percent and 150 percent of the federal poverty level, which translates to household incomes between $11,770 and $17,655 a year for an individual or $24,250 and $36,375 a year for a family of four.
Filling the gap
Short-term policies are filling the gap.
Rector, the SouthPark insurance adviser, said she has sold three times as many short-term policies this year compared with the same time period last year. “Everyone is asking about alternatives or options available to them instead of traditional health insurance or marketplace coverage,” she said.
Raleigh insurance agent Michael Osborne Jr. said he has discussed short-term plans with more than 10 customers in the past two weeks. Raleigh agent Liz Gallops said she has explained the policies to four customers in a week.
“I’d rather have you take a short-term plan than to run naked,” Gallops said. “It’s going to keep you from going bankrupt and have unlimited exposure.”
Among those choosing the short-term medical option is Joel Landau, a part-time musician and part-time retail clerk in Greensboro. Landau, 64, currently is on a Blue Cross policy under the ACA and paying $596 a month.
The same policy would cost $863 a month next year, he said. His cheapest option in 2016 is a UnitedHealthcare policy for $708 a month. Landau does not qualify for a subsidy, and his wife is insured through her employer.
The short-term medical policies Landau has reviewed cost between $255 and $314 a month. Even with a penalty, he estimates he can save $4,000 to $5,000 a year. And he doesn’t need the policy for long. He’ll be eligible for Medicare in August.