Last October, all anyone seemed to be talking about was the Affordable Care Act (ACA). The first open enrollment period had just begun, and nothing seemed to be going right.
Millions of Americans were receiving cancellation notices from their health insurance providers because their existing health insurance policies didn’t meet the minimum coverage requirements. On top of that, the website for the federally operated insurance exchange repeatedly crashed, unable to handle the volume from a crush of consumers shopping for new coverage.
ACA implementation certainly got off to a rocky start, but one year later, the program seems to have regained momentum. Despite rollout problems, over 8 million Americans signed up for health insurance coverage on the state and federal marketplaces and another 8 million or so consumers gained coverage through other provisions of the new law.
Now, as the start of the second enrollment period looms on November 15, what changes can we expect nationally, and more specifically, in North Carolina? Will the website work this time, and what else will change for 2015?
Success But Challenges Remain
According to the Department of Health and Human Services (HHS), between October 1, 2013, and April 19, 2014, nearly 2.6 million people signed up for health insurance coverage on State-based Marketplaces and over 5.4 million signed up in the Federally-facilitated Marketplace. An additional 4.8 million people gained coverage through Medicaid expansion, and HHS estimates another 3 million young people under the age of 26 gained coverage under their parents’ plan, bringing the total Americans securing new health care coverage to over 16 million.
Health care advocacy group The Commonwealth Fund conducted a national survey of 19- to 64-year-old adults this spring to compare to a similar survey conducted in the summer of 2013, prior to the first enrollment period. The survey found that the uninsured rate for the 19-to-64 age group declined from 20 percent in 2013 to 15 percent in 2014. The uninsured rate for young adults 19 to 34 declined the most of any adult age group, falling from 28 percent to 18 percent.
In North Carolina, 357,584 people enrolled through the Federally-facilitated Marketplace. Of those, 91 percent qualified for federal premium subsidies. Most popular were the mid-tier Silver plans, chosen by 74 percent of enrollees. North Carolina was in the top five nationally in ACA enrollment.
As the only insurer to offer products on the exchange for all 100 North Carolina counties, Blue Cross and Blue Shield of North Carolina (BCBSNC) signed up over 230,000 customers through the Federal Marketplace. (Aetna’s Coventry subsidiary, which offered coverage in 39 counties, accounted for the rest of the NC total.) But with an estimated 1.3 million marketplace-eligible consumers in the state, BCBSNC President and CEO J. Bradley Wilson says there is still a huge opportunity to tap.
“There’s great opportunity out there for 2015 and beyond,” says Wilson. “There are plenty of people who did not choose to purchase for 2014. It was a strong start, but there are many more people who can come into the system beginning this fall.”
With the success of the 2014 enrollment, one additional competitor will enter the North Carolina marketplace for 2015. United Healthcare will become the third company on the N.C. exchange, but may not offer products in every county.
Despite the strong start, Wilson says there are reasons for concern moving into 2015. A massive effort is underway to get the Federal Marketplace website functioning properly, but he says technology concerns remain for the second enrollment period, which runs from November 15, 2014, through February 15, 2015.
“As we all know, the technological capability of the federal exchange fell far short of anyone’s expectation,” says Wilson. “I know they have been working diligently since the close of open enrollment in April to get ready for reenrollment in November. But while great strides have been made, our concern is that it is still going to fall short.
“People who are looking for the Amazon-type experience this fall will not have that. It is still going to be challenging and complicated, but we are all committed to working together to make it as seamless and as painless as possible.”
The renewal process for 2015 plans is intended to make it easier for customers to keep the plan they selected last year. However, it is important for customers to update their information for 2015 subsidy eligibility. There is a new calculation, so even if customers do not have any changes to their personal information, they will want to make sure they receive the amount they are qualified to receive in 2015. If no updates are made, the system will automatically renew with 2014 information.
But the technical challenges are not the only issue for 2015. As it turns out, the health demographics of the 2014 enrollees were somewhat different than expected.
“We’re also concerned because the pool of new customers was generally less healthy than what we had anticipated,” says Wilson. “The pool was also older than what we anticipated. Not surprisingly, those folks who needed insurance most desperately probably stayed with it longer, worked through the technical challenges, and procured their insurance. But that means the cost pressure will continue to be there as we go forward. So we clearly need more young people to enroll and purchase through this program.”
Wilson says that while the health and age of the marketplace pool will put upward pressure on premiums, the primary reason rates continue to increase is that overall medical costs keep rising. Whether it’s a new drug like Sovaldi that can cure Hepatitis C, but costs over $84,000 for a 12-dose regimen, or the increased use of medical services caused by aging baby boomers, or whether it’s the obesity epidemic, uncompensated care for the uninsured, or rampant waste and inefficiency in hospitals, overall health care costs continue to rise.
“Insurance premiums reflect the underlying cost of care,” explains Wilson. “If you really want to think about it simplistically, insurance premiums basically reflect the average cost of care in the particular geography where they are charged, plus an administrative cost for product construction, maintenance, and customer service.”
BCBSNC will announce rates for individual under 65 plans this month.
Uncompensated Care and Medicaid Expansion
One component of rising health care costs has always been uncompensated care, which is defined as care that is delivered, but for which the health care provider does not receive any or sufficient compensation—usually because the patient is uninsured. A hospital must try to recoup that loss through other mechanisms, which include looking to commercial insurers to pay more for the services their customers are receiving. The cost of uncompensated care gets calculated into the premium paid by people who buy insurance in the commercial and public marketplaces.
One of the primary goals of the ACA was to increase access to health insurance, thus decreasing the amount of uncompensated care. The act expanded Medicaid eligibility for Americans living at or below the poverty level, and the subsidized plans offered on the federal or state marketplaces were designed to cover those families living above the poverty level.
But in 2012, the U.S. Supreme Court ruled that the federal government could not mandate that the states accept Medicaid expansion, thus turning it into a state option. About half the states opted out of Medicaid expansion—including North Carolina—leaving many of those below the poverty line ineligible for either Medicaid or the subsidized exchanges.
According to The Commonwealth Fund survey, in the 25 states that, along with the District of Columbia, expanded their Medicaid programs, the uninsured rate for adults with incomes under 100 percent of the federal poverty level declined from 28 percent to 17 percent. In the states that did not expand their programs, the uninsured rate remained almost unchanged at 36 percent, compared to 38 percent in 2013.
A study done by the Kaiser Family Foundation showed 319,000 North Carolinians are in the coverage gap created by the state’s decision to opt out of Medicaid expansion. The North Carolina Institute of Medicine estimates 500,000 state residents in total—both those in and slightly above the coverage gap—would qualify for Medicaid under an expansion. The federal government would have funded the entire cost of the expansion for the first three years, with North Carolina’s contribution never rising above 10 percent.
“In my view, it is unfortunate that North Carolina did not expand Medicaid,” say BCBSNC’s Wilson. “Those North Carolinians who would be eligible for that coverage are still accessing care today. When they need medical services they are going to the emergency room, and our hospitals are delivering that care. But there is no mechanism for those hospitals to get paid. Medicaid provides a rational way to get some of that care paid for.
“There is plenty of opportunity to improve the way we do Medicaid, but while we are working to improve it, not covering these people does not add to the solution, in my opinion. The federal money is available, so turning it down does not do anything to balance the federal budget. The money is simply going elsewhere.”
The burden of uncompensated care is particularly acute for many of North Carolina’s rural hospitals, a number of which are highly dependent on Medicaid payments for their revenue model. Wilson says these hospitals are among a growing chorus urging the state legislature to reverse course and opt to expand Medicaid in North Carolina. Only time will tell whether that actually happens.
Impacts on Employers
The ACA “employer mandate” requires that all businesses with over 50 full-time-equivalent employees provide health insurance or pay a per-employee penalty. Originally set to begin in 2014, the mandate was delayed until 2015 for companies with more than 100 full-time employees and to 2016 for those with 50 to 99 full-time employees.
“Employers are evaluating what their options are, whether they are going to be able to afford it, and if not, what the alternative is,” explains Wilson. “Most employers would like to be able to continue to provide the benefits, but for small employers there is high anxiety about the value proposition and whether they are simply going to be able to afford it.
“We will provide the best products and services we can, at the best price, and will help employers make the right decision for themselves and their employees. I also think there will be an ever-growing place for private exchanges as companies try to control costs.”
Private exchanges are similar to the public marketplaces operated under the ACA, but are offered by employers to their own employees. While there are many variations of private exchanges, companies will generally contribute a specific amount for employees to spend on insurance, with the workers choosing from a menu of options.
“According to some estimates, there could be as many as 40 million people—about 10 percent of the population of the country—enrolled in private exchanges by 2018,” says Patrick Brady, Blue Cross’ Charlotte-based director of major and national accounts. “National research shows that a lot of the exchange activity is taking place in mid-sized companies with up to 1,000 employees, but any company with over 50 employees will be able to purchase coverage on BlueBenefits Center, Blue Cross and Blue Shield of North Carolina’s private exchange.”
Most large companies are not directly impacted by the employer mandate since they already offer coverage to their employees. But the ACA also mandated minimum coverage levels, out-of-pocket maximums, and other plan elements that went into effect for 2014. Large employers had several years to prepare, so they should already be in compliance.
“Enrollment by employees of larger employers has actually ticked up some this year,” offers Brady. “I think it is an awareness by employees that the individual mandate requires that they have health insurance, so they need to either look at their employer’s plan or look at the public exchange to see if that is better than what they can get from their employer.”
“Employers are offering more choice, and more choice for the consumer is a good thing,” Brady continues. “It allows them to self-direct what they want to accomplish in health care, much like they would in any financial environment. We’re now in an era when the consumer is being asked to make good decisions, and in order to make good decisions the consumer needs good tools. So we have focused and will continue to focus on providing those tools.”
With greater choice comes the need for the consumer to understand health insurance and the options and tradeoffs they will be faced with in choosing the right plan for their own family and their own situation. Gone are the days when their employer made all of the decisions with a “one-size-fits-all strategy.”
“I believe that having informed and empowered consumers will be the key to improving and transforming our health care system,” concludes Wilson. “Being informed and empowered starts with education and engagement, so I think that is where this country is headed with health insurance.”