Blue Cross and Blue Shield of North Carolina returned to profitability in 2015. Our financial health improved from 2014, despite the steeper losses we incurred on our Affordable Care Act (ACA) line of business.For us, and for most other insurers, the story continues to be how the ACA is posing serious challenges for our business. Despite these challenges, we are determined to provide our ACA customers with insurance products that meet their needs.
Costs Continue to Climb
Over the past three years, since the ACA took effect, the rough seas we prepared for have grown into a perfect storm. It is true that the ACA increased access to health care, but it has not helped or addressed underlying health care costs. As medical expenses among our ACA customers continue to climb, the current situation is becoming unsustainable.
Since the passage of the ACA back in 2010, we’ve said that while the reforms provide broader access to health insurance, they do not do enough to slow the rate of increase in costs. There is still a lot of work to do to give Americans a health care system that they can both depend on and afford.
In 2015, we weathered significant financial losses on our ACA business: $282 million in operating losses, on top of $123 million in operating losses in 2014. Our claims experience that led to these losses resulted in an average premium increase of more than 30 percent for this year.
We are not alone. Several large national insurers reported losses on their ACA business in 2015. Collectively, these large losses among insurers are putting coverage at risk for millions of Americans covered by the ACA.
There are two main reasons for mounting losses:
- The federal government assumed that younger, healthier consumers would enroll and that pent-up demand would level off and stabilize the market. Those assumptions were incorrect.
- Larger trends like emergency department overuse, a sicker customer pool and expensive prescription drugs are driving up costs.
Return to Profitability
Despite growing ACA losses, we returned to profitability in 2015. Our portfolio of investments provided a strong return, and other areas of our insurance business, including our group plans, were profitable.
It’s clear that the losses on our ACA business aren’t sustainable. Our challenge in 2016 and beyond is also clear. We have to find ways to make the ACA financially viable and sustainable in order to maintain Blue Cross’s financial health. We are working hard to meet this challenge.