Health insurance works by having a large pool of customers paying in. So when a fraction of that pool drops out, it’s no big deal since there are a lot of people left, correct?
It turns out that it actually is a pretty big deal. In the first six months of this year, BCBSNC paid roughly $34 million in claims to customers enrolled in an Affordable Care Act plan who used their health benefits and then dropped coverage. They were among the almost 60,000 customers who quit making payments, cancelled their coverage or had their plans terminated because of data-matching issues related to their citizenship or immigration status.
Statewide, total enrollment stood at 459,714 ACA customers as of June 30, the federal government reported this week. During the April-June quarter alone, 32,300 North Carolinians dropped their ACA health insurance coverage. That’s 6.6% of total enrollment statewide.
These numbers matter because the people who drop are no longer paying into the system. It puts a ripple in the insurance pool by reducing the amount of money paid in to offset the cost of people who need a lot of expensive medical care. And it makes predicting future insurance rates even more challenging.
The ACA Was Designed to Encourage Enrollment
Any insurance market has some churn as customers come and go. By design, the ACA is intended to be fairly stable: The individual mandate in the law requires virtually every American to have coverage. If you don’t, you’re subject to a penalty when paying federal taxes.
But a higher-than-anticipated number of customers not paying premiums or dropping coverage has introduced volatility to the rate-setting process. It contributed to BCBSNC revising its filing in August to seek an average premium increase of 34.6% for 2016 (for individuals under the age of 65 with an ACA plan). Our initial filing in May was for a 25.7% increase.
In crunching the numbers from our ACA business this year, a few trends stood out:
- More than half of the 60,000 customers who dropped in the first half of the year used expensive medical services.
- Most of the rest who dropped were customers who had not filed any claims.
- Overall, our ACA customers have been using medical services at a higher rate than expected.
National Enrollment Down 1.8 Million
Nationally, the federal government reported that 11.7 million people had signed up for ACA coverage by the February end of the enrollment period for 2015. By the end of June, the number still enrolled had dropped by 1.8 million, to about 9.9 million.
Insurers across the nation anticipated that some customers would drop coverage or not pay their premiums, despite the law’s requirement to maintain coverage. It happened during the first year of ACA coverage in 2014.
Still, the significant loss of paying customers goes to show how important a stable insurance market is when it comes to establishing premiums. To keep premiums as affordable as possible, it requires a large number of healthy people in the pool to begin with, and those with high medical expenses staying in the pool after their medical claims are paid.
“Are people continuing to be able to afford insurance, and are they seeing value in their coverage?” Avalere Health consultant Elizabeth Carpenter told The Washington Post. “That is a big question for exchanges long-term.”