Earlier today, Blue Cross Blue Shield of North Carolina announced that it was seeking an average rate hike of 22.9 percent for individual plans
on the Affordable Care Act’s marketplace, a staggering increase for the half-million people insured by BCBS in North Carolina through the Obamacare exchange.
On the surface, this hike—along with news that Blue Cross Blue Shield of Kansas City is abandoning the ACA marketplace altogether
, leaving twenty-five Missouri counties without an Obamacare insurer—lends credence to Republican claims that the health care law is “collapsing” and in a “death spiral.” Dig a little deeper, however, and the truth is more complicated. Indeed, much of the blame isn’t inherent to Obamacare at all, but rather owes to the uncertainty sown by the Trump administration and the Republicans hellbent on repealing the law.
Let’s begin in the Midwest. Blue KC is exiting the Obamacare market citing $100 million in losses over the last three years, but its position has actually improved over that period, according to the Kansas City Star.
In 2016, for the first time under the ACA, its Obamacare plans took in more in premiums than they paid out in medical expenses. But it didn’t achieve profitability.
“This is unsustainable for our company,” said Danette Wilson, Blue KC’s president and CEO. “We have a responsibility to our [customers] and the greater community to remain stable and secure, and the uncertain direction of this market is a barrier to our continued participation.”
The uncertain direction of this market ….
Put a pin in that. We’ll come back to it.
In North Carolina, BCBS’s request comes on the heels of a similarly large request from Cigna, which asked for a 31.9 percent hike. Blue Cross will offer coverage in all one hundred counties, and the rate hike won’t be evenly applied; some counties will be higher, others lower. For nearly everyone who purchases insurance on the exchanges, these premium hikes will go unnoticed: 94 percent of BCBS customers receive federal subsidies.
But still, the headline raises an unavoidable question: Are Cigna and BCBS jacking up rates because Obamacare is crashing and burning?
Here’s The News & Observer
However, Blue Cross said its rate hike proposal would be 8.8 percent if the company had assurance from Congress that the Affordable Care Act will continue reimbursing insurers for hefty ACA discounts available to low-income customers. […]
Blue Cross cited several reasons for requesting an average rate increase of 22.9 percent. One is an increase in medical costs, including doctors, hospitals and and medicines, which the insurer cites every year it seeks rate increases.
Another is the looming elimination of “cost sharing reductions” in the Republican [Obamacare replacement] plan. These reductions offer extra subsidies on deductibles and other out-of-pocket costs to lower-income people whose household incomes are between 100 percent and 250 percent of the federal poverty level.
The reductions are available for a single customer with a household income ranging from $12,000 to $25,000, and for a family of four with a household income ranging from $25,000 to $62,000, said Brian Tajlili, the company’s director of actuarial and pricing services.
Tajliji noted that about 67 percent of the people Blue Cross insures under the ACA in North Carolina qualify for the cost sharing reductions.
Long story short: the Republican plan calls for the elimination of CSR subsidies, which help poor people afford deductibles and other health care costs. The problem, as Tajlili explained to ABC11, is that the law would still require BCBS to offer
"We're seeing the market begin to stabilize after three years of coverage. Unfortunately, the lack of CSR funding significantly increases the rates for all ACA customers. We are still required to offer the additional CSR benefits to participate in the Exchange, so covering these costs without CSR funding will drive up our average rate for next year."
Indeed, President Trump has repeatedly threatened to cut off CSR payments
, which amount to about $7 billion a year, as part of an effort to force Democrats
to support the Republicans’ American Health Care Act, which would send the Obamacare markets into a tailspin.
In an interview with The Economist, Trump said he would cut off the cost-sharing reductions (CSRs) — payments that reimburse insurers for providing discounted out-of-pocket costs to help those with low incomes afford insurance.
"[T]here is no Obamacare, it’s dead. Plus we’re subsidizing it and we don’t have to subsidize it. You know if I ever stop wanting to pay the subsidies, which I will," Trump said. "Anytime I want."
If there’s one thing insurance markets hate, it’s uncertainty. And this is uncertainty—and it’s destabilizing the exchanges. Then again, perhaps that’s a feature, not a bug.