Blue Cross and Blue Shield of North Carolina has announced it will increase premiums for Affordable Care Act plans on the individual market by an average 24.3 percent for 2017. Some consumers will pay more and some will pay less.
That is higher than the company’s original rate request filed in May for an 18.8 percent increase. The rate was approved by the state Department of Insurance, and Blue Cross announced it in a blog post.
Blue Cross received an average 32.5 percent rate increase for 2016 – one of the highest in the country. Critics of the ACA have contended the health reform law has been failing partly because premium increases for the individual market plans have been rising beyond expectations.
According to the Blue Cross blog, the bigger rate increase was necessary because UnitedHealthcare and Aetna both are withdrawing from the state’s ACA marketplace for 2017.
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Like its competitors, Blue Cross also has reported losses on its ACA business – $405 million in 2014 and 2015. Until recently, Blue Cross was also waffling about the future. But the company announced last month that it would continue offering ACA plans in 2017.
Currently, Blue Cross insures more than 300,000 in North Carolina through the federal exchange, and it expects to enroll about 260,000 additional ACA customers who have been insured by UnitedHealthcare and Aetna – nearly doubling Blue Cross’s ACA business.
Blue Cross will offer plans in all 100 North Carolina counties. The only other ACA insurer in North Carolina in 2017 will be Cigna, which plans to offer coverage in five counties in the Raleigh area.
The new Blue Cross rates do not apply to the majority of the 3.9 million Blue Cross covers in the state under employer plans, state plans and other policies.
Double-digit increases common
Cynthia Cox, associate director for the study of health reform and private insurance at the Kaiser Family Foundation, said “it’s not uncommon this year to see double-digit increases.…This is the first year we’ve seen such significant premium increases across the board.”
Overall, premium increases were “flat” in the second year of ACA enrollment and mostly “modest” during the third year. Such high increases for this fourth year suggest that insurers had under-priced their plans initially, Cox said.
Even with increases, current marketplace premiums are below Congressional Budget Office projections from 2009. The CBO projected that the average for an unsubsidized silver plan would be $5,200 per year in 2016, but the actual average is $4,583 per year, about 12 percent lower than projected, Cox said.
More worrisome than the rate increases, Cox said, is the withdrawal of insurance companies from the online marketplace. “Premiums could be a one-time market correction,” she said, “but the exits raise concerns about the sustainability of the marketplace in the long term.”
The architects of the ACA anticipated an influx of older, sicker customers, but expected that the cost of treating them would be offset by attracting younger and healthier customers. That hasn’t worked out for Blue Cross so far, despite the company’s marketing campaign to attract “young invincibles” and federal penalties for those who fail to obtain health insurance. A quarter of 2016 customers are 18 to 34, while 60 percent are 35 to 65.
Blue Cross continues to see a large number of chronically ill people who require expensive medical care. The ACA made it illegal for health insurers to turn down people with pre-existing conditions and charge older customers exorbitant rates, common practices in the past that helped insurers control their expenses.
The 2017 Blue Cross rates do not account for federal tax credits, which more than 90 percent of North Carolinians buying on the exchange will qualify for. As premiums rise, so do the subsidies.
“About 72 percent of our ACA customers who enroll through Healthcare.gov will pay less than or the same next year as they’re paying in 2016,” the Blue Cross blog said.
For example, the blog described a hypothetical family of four in Halifax County that bought a 2016 silver plan for $1,454 per month for the whole family. After the subsidy, the family would have paid $276 per month. Based on approved rates for 2017, the family could get a similar plan for $1,876 a month. But with the subsidy, they would pay only 26 cents more per month than they paid in 2016.
Premiums without the subsidy will be a “significant challenge for many people” who buy plans through the ACA marketplace, Blue Cross said. “The 24.3 percent average rate increase for 2017, on top of a 32 percent rate that took effect this year, is evidence that rising costs are not sustainable for the long term.”