BCBSNC Health Care Challenges
Blue Cross Blue Shield of North Carolina is In
Blue Cross and Blue Shield, North Carolina’s largest health insurer, has announced that it will continue offering individual coverage under the Affordable Care Act in all 100 counties of the state in 2017. Until recently, Blue Cross Blue Shield had questioned their participation in the ACA Exchange. Having lost $405 million in the previous two years, BCBS was unsure about continuing its involvement with the ACA Exchange.
Their announcement ensures that all North Carolina residents will have ACA access for at least one more year as the federal exchange enters its fourth year of public enrollment. Previously, two major insurers – Aetna and United Healthcare – announced that they would not offer ACA plans in North Carolina and many other states in 2017. Cigna is the only other carrier offering coverage under the ACA Exchange, but it will only offer plans in five counties in the Raleigh Durham region.
The pricing and other details of Blue Cross insurance plans will not be released until October. The company is seeking an 18.8 percent average rate increase for 2017 plans from the N.C. Department of Insurance, after being granted a 32.5 percent average rate increase for this year’s plans.
Open enrollment for 2017 will begin on Nov. 1, and will end Jan. 31. Customers who want health insurance by Jan. 1 will need to be enrolled by Dec. 15
Blue Cross Will Continue Its Participation in ACA Exchange
Brad Wilson, President and CEO of BCBSNC, outlined the insurer’s options in a presentation before the Hood Hargett Breakfast Club on September 9, 2016. He also offered his recommendations for changes to the ACA so that it might continue more successfully.
Here are some of his comments, edited for brevity and clarity as necessary:
Brad Wilson, President and CEO of Blue Cross Blue Shield North Carolina on Health Care Challenges:
It’s already been said that this is an important and timely topic, health care. It has been for a long time and is going to continue to be very much a part of our state and national conversation holding into the future, and I’m not talking about characterizing it in political terms.
Let me ask you to do this first—set aside whatever particular political energy that you may have around health care for just a few minutes. I’m going to share some information with you that’s data, reality about the ACA and also about the transformation that’s taking place in health care, so that as you listen to the conversation through the political whims and in particular at this time of year as we move through the campaign season, hopefully you will be centered and grounded in reality, as we all enjoy lots and lots of acrimony and spend from every corner.
This is the second time that I’ve had the opportunity to be with you and so thanks for inviting me again. The first was 5 years ago, back in 2011. I had been in this role about a year at that time and we talked about how quickly health care was changing, how we were transforming our system into one that pays for quality rather than for procedures—items, the more you do, the more you get paid.
We talked about what was driving health care costs even higher back in 2011 and we also talked about why consumers, patients, customers, consumers, all of us individually need to be at the center of health care. That is a multi-dimensional responsibility—education of ourselves about reality, full engagement in taking better care of ourselves, and of course being informed and engaged with our wonderful partners. We need help and to be compliant patients when we in fact become a patient. It’s not a question of whether or not we are going to be a patient, it is just a question of when we will be a patient.
Now let me set the term right here at the beginning. As I talk about health care costs I am not talking about your health insurance premium. That is one component part of health care costs, but those terms are not synonymous. When I talk about health care costs, I’m talking about what is being paid for the goods and services that are being delivered when we need them that when you add them up then becomes translates into a health insurance premium. We have to begin to think about it and understand that and so one is related to the other.
There is a cause and effect relationship there that we cannot separate, so as you think about the health insurance part think about health insurance this way. Really your health insurance premium is the average cost of what is being paid for goods and services when you need to access them, plus taxes that we pay, plus administrative costs of running our company. You take those 3 ingredients and then you spread that cost across a group of people, a pool of people, a well-defined group of people, and you come up with a premium.
Now my actuarial friends would say, “Oh, it’s a lot more complicated than that,” and it is, but it works. If you don’t like your health insurance premium, that’s okay, but you have to understand that it does reflect those 3 ingredients.
Let’s explore just a little bit more about 2011 and how far we have come. We talked about something that in 2011 was not yet implemented. It was the law, but it was just sitting there, and that was the Affordable Care Act. The ACA has now been implemented. In 2014, it went wide and the consequences of the ACA, now in 2016, are beginning to be well understood—both the good and the bad—and there’s both ingredients in the story.
You can see that the topics that we talked about with each other back in 2011 are still the same topics that we’re discussing today and that’s why we are going to talk about them again—and we all need to understand that we all have skin in this game. Doctors, hospitals, insurers, employers, government—all working together—that’s what it’s going to take. That is the formula to improve upon and make things better whatever the things are that you care the most about. It is going to require more different and better collaboration.
Let’s start with the ACA, the law to expand coverage. The law did expand coverage to nearly everyone who chooses to or chose to purchase it and it has helped accelerate the reshaping of our system, but the consequences of that have not worked out exactly like we had planned. Indeed, more people are covered. More people have insurance today than they did before the ACA was enacted and that’s a good thing. But conversely costs are much higher.
Costs (remember the definition of costs?) are much higher, and they continue to climb even more, and quite frankly there is no end in sight according to the Congressional Budget Office. If the trend continues, by 2020, 20 percent of the GDP will be spent on health care. That’s $1 of every $5 in your pocket that will be dedicated to health care somehow, someway.
Why should you care about the ACA? I’m confident that in a crowd this size that many of you have your insurance through your employer or through some other mechanism that’s not the ACA and I’m pretty confident that many of you may have your coverage through the ACA or you know someone or you have a family member who now has coverage through the ACA purchasing it through the exchange. Well the reason that we should all care about it is that the employer group market and the ACA market, two different market places, are in inextricably linked. You cannot separate the two.
We are not going to make the progress that we need to make in health care in improving all of health care, every aspect of health care, until we improve the ACA. Getting ACA right and that means making it affordable for consumers and sustainable for insurers and providers is on our minds every day at our company and I know that it is on the minds of all our provider partners around the state and it needs to be on your radar too.
If you don’t know much about what it is we are talking about this morning, here’s a homework assignment. You really need to pay more attention to every aspect of health and health care. Now as I’ve already said, the ACA has had profound impact both positively and negatively on the health care eco-system. First let’s remind ourselves of some of the positives and I’ve already mentioned that more people are insured today than before, but what does that mean for North Carolina? What that means is there is about half a million—500,000 to 600,000 North Carolinians who got coverage today under the ACA that didn’t have it previously. Those folks are not eligible for Medicaid so that’s a separate conversation that we can have at some other point in time, but that’s a good result. Think about all of the money that brings into the medical economy of our state now that those folks are insured and more importantly think about the care that these folks need, want and deserve so they are getting their needs tended to.
Now one of the aspects we lean into at Blue Cross is trying to educate all consumers, but particularly this consumer group about how the ACA works, the options that they have. Many, many, many of these customers for the first time in their lives have insurance and they really don’t understand how it works or how to use it. Our competitors have done and are doing the same and there was much optimism about 100s of 1,000s of people having health care coverage. Unfortunately, the headlines today are different. Let me give you 3 real headlines from around the country. “Enrollment in Affordable Care Act insurance exchanges are half the initial forecast so while we should celebrate 5 to 600,000 the end there is at least another 5 to 600,000 who for whatever particular reason have not signed up.” Another headline, “Obama Care exchanges are in trouble. What can be done?” And the last one, “Aetna to pull out of most of Obama Care exchanges.” A recent event here in North Carolina that I’ll mention in just a second.
It’s clear that something is wrong. Something is not working right or we would have these headlines. The ACA is drawing customers who need a lot of expensive medical services, but it’s not drawing enough younger, healthier, customers to pay into the insurance pool to balance that book out. That’s a simple fact. That is what the data shows. The math is pretty simple. Insurers like us are paying out more than they are taking in. All of you are business people. You don’t have to get an MBA to understand that if you are not taking in enough to pay for what’s going out that that is an unsustainable business model. What happens when that is the reality? Premiums go up. When premiums go up that forces more of the younger, more of the healthier customer to drop coverage. They don’t need it. Not going to use it. Going to live forever. Can’t afford it. All of the things that we’ve heard so they drop out and then guess what happens? Premiums go up even more. The premiums must move higher to make up for the customers dropping because it’s too expensive. That’s what’s called the death spiral and that’s what we staring, we are staring that in the face right now in North Carolina and across the country in terms of the ACA.
Now let me bring it back home here, here in North Carolina. Here’s some details about our experience with the ACA. Over the last 2 years we have lost $405 million on this piece of business. We have 3.9 million customers. I’m going to round up for simplicity. Out of those 3.9 million customers, we have 450,000 ACA customers and those 450,000 have generated $405 million loss. Compare that with Aetna who reported losses of $430 million in 2 years. Aetna is a national company. We only do business in North Carolina. Aetna is 7-1/2 times the size of Blue Cross Blue Shield in North Carolina and they are pulling out. Even though their losses are simply comparable to ours across the country and United has already announced that they will live. That was back in the spring. 2 big names of competitors have already announced they are out here. Now to me that says a lot about how serious this issue is for North Carolina.
With our for-profit competitors leaving the ACA market it leaves just us. Blue Cross Blue Shield of North Carolina and perhaps 1 other carrier (Cigna) who has filed rates to be in 5 counties. Those 5 counties are essentially Wade County and the counties continuous to Wade. Not here. That is my point to this group. If they stay in there will be 2 there and if we stay in, there will be 2 options in the marketplace, Blue Cross in all 100 counties and a competitor in 5. That is not a formula to make this work as good as it could to the people of our state and I’ve already told you the need is great. 600,000 people have coverage here in our state under the ACA. That places us 4th in the country for ACA enrollment and we are not the 4th largest state in the country. We are behind California, Florida and Texas and then there is North Carolina.
These customers for the most part are working North Carolinians who rely on Federal subsidy to get coverage. In fact, across the whole population about 70% of all those folks rely on Federal subsidy in order to be able to purchase the insurance fees and many of them have chronic conditions and acute need for medical services so as we think about it at Blue Cross and I hope you will too. Behind all the numbers, 600,000, 700,000 more than [inaudible 00:15:01] these are real people, individuals, your neighbors. I was telling a group the other day, I was driving to work, first day of school and you are seeing everybody standing out at the curb taking pictures, first day of school and I wondered all the way to work, I wonder if they are covered by the ACA and what are they going to do if we can’t stay in? This is serious business folks. I also remember that a gentleman in Asheville who spoke to the Citizen-Times up there and said this about his situation, his wife’s ACA plan jumped from $511 a month to $853 in just 2 years. What am I going to do because even with the government subsidy that it is making it unaffordable?
Think about this comment. He also closed by saying, “What options are we going to have if Blue Cross pulls out?” The answer is none. The ACA effectively will not exist in our state. Now I’m not saying this to bring how important Blue Cross Blue Shield North Carolina is. I am telling you this because if there is not an ACA program in this state, there will be 600 to 700,000 people who have insurance today who will not have it tomorrow. I think that’s a big deal if you just stop right there, but think about it 1 more step. They’re going to continue to need and demand services that all of our wonderful provider partners across this state and they are not going to be able to pay for it and that means our provider partners will move that from 1 side of their ledger to the other and it will again show up as uncompensated care.
Uncompensated care is paid for somehow, someway. Nothing is free so it will show up in insurance premiums ultimately because they are then forces when they negotiate and have conversations with us about what we are going to pay them. They want us to pay more so that they can pay for that man’s uncompensated care. That’s the way it works. That’s why you should be concerned about whether or not there is an ACA program here in North Carolina.
Now, we have 2 or 3 more weeks before we will make a decision on whether we are going to be in or out. That decision has not been made and we are hard at work trying to figure out how to answer that questions yes, but let me be clear, we have not yet made that decision so stay tuned. We have a strong commitment to North Carolina. We are going to do everything we can to stay in all 100 counties, but we have a responsibility to the 3.85 million people who are not on the ACA to remain a viable, healthy, financially stable and solid company that we are today.
Let me give you a quick word about health care transformation and then I’m going to open it up to you for questions if we have time. I hope somebody’s got their eye on the clock. The ACA has everybody’s attention right now. We’ve spent a good while here talking about it this morning, but let me be clear. There’s lots of transformation because of and outside of the ACA taking place across our nation and in North Carolina. In fact, North Carolina is looked to as one of the leaders in health care transformation. Even if there was no ACA, we need to be shifting away from our outdated system where doctors and hospitals are rewarded for doing more tests and more procedures. In fact, some experts believe that our traditional method for paying or paid by procedure is the single biggest driver of medical costs and so the fundamental model had to change. The fact is skyrocketing health care costs are forcing us to act even if we didn’t have the ACA and we are all working very, very hard to try to search for better ways to provide value in health care and 1 thing that we have to do is put the consumer more at the center of health care.
Let’s ask this question. We won’t completely answer it this morning, but let me give you some examples. Why does health care cost so much? Why does it keep going up? It’s not just 1 or 2 factors. It is complex and it’s multi-dimensional, but here are a couple of suggestions that I want to have you considering when answering that question. Pay by procedure instead of paying for outcomes is inefficient and rewards the wrong thing. A lack of price and quality transparency and information would allow consumer to make better choices. We were talking about yesterday with 2 or 3 conversations on this subject. You can find out more about how to buy your large screen TV than you can about how to get your knee replaced. A little something wrong with that and availability of data, transparency and price and quality is a part of that.
We’re working on this. We’ve developed tools and sources to help consumer help understand the value of the proposition. This is not about looking for the cheapest. It’s about looking for where the most value is on the goods and services that they pay. Unhealthy lifestyles, everybody groans. We’ve heard that before, but it is true. If you look at chronic conditions across the board: heart disease, diabetes, obesity, those 3 things account for about 3 quarters of medical spending. If we all took better care of ourselves, health care would come down and a lot of this is certainly preventable through better lifestyle habits.
The skyrocketing costs of prescription drugs. Now that’s been in the news a lot lately and it’s going to stay in the news. Particularly specialty drugs. These are the drugs that are for rare and chronic conditions or have to be administered in a specific way and frankly they are breaking the bank in health care costs. Let me give you an example that was in the Raleigh News Observer this morning. Humira and Embrel, those 2 drugs alone, you see a lot of television advertisements for them so even if you’re not taking it you probably know a lot about it. That represents 1% of the scrips in America, but those 2 drugs represent 10% of the entire pharmacy cost in America. The price of those 2 drugs have doubled in recent years.
Now, it is a valid question to ask one. I am not criticizing the efficacy of those drugs. I’m simply giving you data points that while we celebrate the wonderful and positive impacts of pharmaceuticals and I like my drugs as much as you like yours. The ones that I have to take, but we have to have a serious conversation about the cost. Why? Because our specialty drug spending at Blue Cross last year alone jumped 34%. Remember your health insurance premium? When the pharmacy costs jump 34% in 1 year, yes it will put pressure on the health insurance premium and the pharmacy cost is more than any other single category of spending in our company and in companies like ours across the country and unfortunately there is no end in sight. You probably heard about the EpiPen which is the most recent poster child for price escalation when consumption has not increased commensurate with that.
Optimistically there is a better way. Measures which value best care where high quality and good patient outcomes and effect management of costs are being rewarded. We are moving in that direction. I was in a conversation with a great provider partner yesterday in this community. That was said and we agreed that we are not moving fast enough. It’s hard work, but the pace of that change needs to pick up, but we continue to see an evolution in the cost and quality equation around our state and we are encouraged that one of these days while we are all continuing to consume and grow older that we can get to the place where the transformation will catch up with they need and last but not least, I’ll go back to where I started. We’ve got to figure out a way to make the ACA sustainable otherwise the cost burden that’s associated with the ACA is on that list of things that are driving up the cost to both individuals, patients, tax payers and to our provider partners.
As I get ready to conclude, let me leave you with 4 points that I always get asked this question so I’ll answer it now before you ask me. If you were king, what would you do to improve the ACA tomorrow? Now what that means is, number 1 you need to be king. We don’t have one of those. Secondly, what could you do that wouldn’t involve Congress because a lot of the fundamental changes will require and needs an act of Congress. This is what I would do. Stronger enforcement of the individual mandates that requires coverage. Mandate has been too weak. Last night I had a question, why doesn’t health insurance work like automobile insurance? Well, you are required by law to have automobile insurance. Even with that mandate 10% of the folks in North Carolina ride around without any kind of automobile insurance. Well, 90% do so the pool is a lot bigger and when that happens, when there are more participants that makes more things possible in terms of price.
I will also say that tighter control of special enrollment periods during the year. Those need to shrink. Right now there’s far too many opportunities for people to jump in and jump out. That destabilizes the whole market and it runs costs up. I would say you have normal enrollment period, October 1 to December 31. Get in or you’re out until the next year with certain limited exceptions like certain life circumstances: you have a baby, you get a divorce, somebody dies. There’s lots of examples in the commercial space about how that works and works well.
Shorter grace period for paying premiums. In the ACA you get 90 days to catch up on your premium if you don’t pay. What that has caused is a behavior where folks pay through the end of September, stop paying October, November, December, continue to consume services and the reward for that is you get sign up again January 1st. There are no consequences to not paying except for the fact that for the first 30 days if there are claims and the premium doesn’t come in, Blue Cross Blue Shield of North Carolina pays for those claims. The remaining 60 days, we don’t pay the claims and our provider partners have to pick up that tab and finally, fully fund the Federal program that stabilize the health insurance market. That’s the 3 R program that I won’t bore you with, but that would certainly be very, very helpful as we stabilize the market.
Let me simply say in concluding that situation can and should and will change. With these and other adjustments the ACA will become sustainable in my opinion and begin to work as intended to give millions of Americans a better option than remain uninsured. In the meantime, what can you do? What can we do together as a business and community and health care leaders here in Charlotte? You need to raise your voice. You need to educate yourself and you need to advocate for making health care more affordable. You can remain committed to offering competitive health benefits to your employees if that’s a business that you are in and I would urge you to consider offering incentives to those employees to change their lifestyle so that they will be healthier and by the way, a healthier employee is a more productive employee. I think if you do these things it will help accelerate the transformation and we look forward to working together with all of you to make these things happen. That’s the only way transformation and change occurs is when people of good will work hard together to solve a common problem. I look forward to your ideas on how to do just that.