Call it the law of unintended consequences, or the law of misunderstood form letters.
Some Blue Cross and Blue Shield customers are seeing their health insurance rates spike this year despite the company’s first rate cut since it entered North Carolina’s individual insurance market more than 25 years ago.
The Blue Cross reduction for 2019 averaged 4.1 percent statewide for individual health insurance, which are mostly plans sold through the Affordable Care Act marketplace. The rate cut was much more significant in some parts of the state: down 21 percent in the Triangle, and down 16.5 percent in the Charlotte market.
But it didn’t necessarily work out that way for all the insurer’s customers. That’s because the rate cut triggered a corresponding reduction in federal ACA subsidies for low-income and middle-income customers. And some customers didn’t understand the implication until it was too late.
“It is complicated — for most people, it’s incomprehensible,” said Timothy Jost, a Washington & Lee University law professor specializing in health care, in a phone interview. “You have variables that are constantly changing and it’s easy to catch people by surprise.”
One of those caught unawares was Troy Austin Jr. of Charlotte, who saw his net monthly payment go up by 51 percent, from $268.64 a month in 2018 to $406.64 a month this year, when his federal subsidy was slashed. Particularly galling for Austin is that the rate notice letter he got from Blue Cross in September estimated his cost in 2019 would be $202.64, once the federal subsidy was factored in.
“It just blew me out of he water when I saw that,” Austin said by phone. “I’d have come out better if they had gone up on these, not lowered the price.”
The cost increase stings, because Austin, 57, is financially limited. He stays at home to care for his severely disabled adult sister, for which he’s paid an annual stipend through Medicaid. On top of the monthly premiums he has to pay, the annual deductible on his health insurance is $4,000.
Blue Cross won’t know exactly how many customers have been similarly affected until next month, when it finalizes its enrollment data, said Blue Cross spokesman Austin Vevurka.
The form letter Troy Austin received from Blue Cross stated it was an estimate and advised customers to verify costs during enrollment. He said that warning seemed like boilerplate language.
“I can’t be the only one this happened to,” he said. “I definitely won’t believe that letter again.”
Austin’s predicament stems from the formula used to calculate ACA subsidies. Each customer’s subsidy is calculated off a single health plan offered in every ACA market: the second-lowest cost “silver” plan, no matter what plan the customer buys, said Karen Pollitz, a senior fellow at the Kaiser Family Foundation, which researches health care issues.
What’s more, the plan used to calculate the subsidy changes from year to year, as prices change. Austin let his Blue Cross health insurance roll over automatically, so that his plan qualified for a much lower subsidy than it did last year, even though his income didn’t change.
The only way to know for sure what your costs are going to be is to reapply for health insurance every year, and not to rely on an insurer’s estimates. The estimates are unreliable because they are sent out in the fall, before ACA subsidy amounts are known.
“Never auto-renew,” Pollitz said. “Just don’t.”
Vevurka, the Blue Cross spokesman, said the subsidy conundrum is an issue in the nine-county Charlotte market, where Blue Cross has more health plans and more price variations than in other areas of the state. He said that customers who confirmed costs online or by phone with a customer service representative, instead of automatically rolling over, would have compared actual costs for 2019. And the early indications are that “that people received the message from our member communications about the subsidy being impacted,” Vevurka said.
Deputy Insurance Commissioner Ted Hamby said the N.C. Department of Insurance has not received complaints about the issue. Hamby wrote in an email that the rate notice sent to Austin clearly states the 2019 cost cited is an estimate, “and encourages the consumer to update their information on the ‘marketplace’ enrollment website.”
As for Austin, he’s stuck in his plan. His only way out is an unusual event — such as moving, getting married or divorced, having a baby or losing a member of his household — that would qualify him to change his health plan in a “special enrollment.”
“I’ve come to terms with it,” Austin said. “It’s not meaning I like it.”