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As I have said since the Affordable Care Act launched, it will take some time to determine its full impact on health care costs. Now that we’re getting ready for the third full year of coverage in 2016, we’re starting to get a more complete picture of medical spending under the ACA.

Early on, industry and government officials counted on two assumptions: A healthier mix of customers in the second year (2015), and a leveling-out of medical spending this year following a surge in demand for the initial year. We now have enough data to know that both of these assumptions have not proven true.

The result is BCBSNC must make some changes to continue to provide health plans that our customers depend on. Today we are:

  • Revising our ACA rate filing for 2016 to an average increase of 34.6 percent for individual customers under age 65 with ACA plans
  • Reducing the availability of our Blue Advantage and Blue Select plans in a few geographic markets of the state

We understand the impact to customers of a higher rate increase (our original filing was for an average 25.7 percent increase). But the soaring use of health care services in 2015 was too large to ignore. Our rate request is consistent with others across the country as reported by The New York Times.

Earlier this summer, my colleague Brian Tajlili wrote in a blog post that our ACA customers are reporting even more chronic health conditions than last year, and they’re using a lot of expensive health care services. And he noted that we may need to adjust our filing to reflect a higher increase in order to cover these costs.

Unfortunately, we now know that to be the case. Our claims and expenses are higher than the premiums we are collecting. As we reported last month, the operating losses on our ACA business in 2014 were $123 million — a number that can’t be sustained over time.

 

What Our Claims Data Is Telling Us

About the time we submitted our rates to the North Carolina Department of Insurance in May, we only had data through March. Additional claims information came in and indicated a sharp increase in spending on medical services in 2015 compared to 2014. Based on this, we need to adjust our filing to reflect a higher increase in order to cover these costs.2014-2015 claims graph

The second step we are taking is looking at our product offerings and listening to our customers. We noticed a majority of ACA customers are favoring new, lower-cost plans that offer a smaller, but more than adequate network of health care providers.

In keeping with this approach, we will no longer offer Blue Advantage and Blue Select plans in the counties in the Charlotte, Raleigh and Durham markets. This applies only to people who buy their own insurance. The good news is that our customers will have the ability to choose a more affordable plan with their preferred health system. And BCBSNC will again offer products in all 100 counties in North Carolina. Based on choices our customers have been making over the past two years, we’re confident the new plans will meet their needs.

 

What’s New in 2016?

Look for lower-cost, preferred network plans with customers’ health system of choice with Blue Local and Blue Value in 2016. These plans have proven to be a popular choice as an affordable option that includes highly regarded hospitals and in-network doctors.

It’s important to note that the changes I outlined here affect only those who buy their own ACA health plans. This change only affects 1.4 percent of all our customers. It does not impact you if you get insurance through your employer or a small group — or if you have a grandfathered or transitional plan.

The Department of Insurance is scheduled to review the proposed rates later this month. Current ACA customers will receive renewal notices that explain how these changes affect them this fall.

Patrick Getzen

About Patrick Getzen

Patrick is Vice President and Chief Actuary for Blue Cross and Blue Shield of North Carolina. He has nearly 20 years experience in the health insurance industry with emphasis on the areas of group and individual pricing, valuation, product development, and financial planning.