Blue Cross Blue Shield of North Carolina to Raise Rates by 24.3 Percent for ACA Marketplace Plans

Company contends the increase was necessary due to decrease in 2017 marketplace competition

Blue Cross Blue Shield of North Carolina to Raise Rates by 24.3 Percent for ACA Marketplace Plans
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October 18, 2016

Health insurer Blue Cross and Blue Shield of North Carolina (BCBSNC) will raise premiums for Affordable Care Act (ACA) plans on the individual market by an average of 24.3 percent in 2017. Some consumers will pay more, while others will pay less.

As The News & Observer reports, this increase is higher than the original rate request of 18.8 percent filed by the insurer in May. The North Carolina Department of Insurance approved the rate, and BCBSNC announced it on its blog.

In 2016, the company received an average increase of 32.5 percent, one of the highest increases in the country. ACA critics have argued that the law is failing partly because increases in premiums for individual market plans have been going up more than expected.

BCBSNC states that it was necessary to raise rates higher because two other insurers—UnitedHealthcare and Aetna—are both withdrawing from North Carolina's ACA marketplace in 2017, citing losses.

Blue Cross has also reported losses on its ACA business: $405 million in 2014 and 2015. It had also been considering pulling out of the marketplace in 2017, but it announced last month that it had decided to stay and will continue to offer plans in all 100 North Carolina counties.

The company currently insures more than 300,000 consumers throughout the state through the federal exchange, and it is expecting to enroll approximately 260,000 more who had been insured either by UnitedHealthcare or Aetna.

The only other ACA insurer on the marketplace in North Carolina for 2017 will be Cigna, which is planning to offer insurance coverage in five counties around the Raleigh area.

BCBSNC's new rates will not apply to most of the 3.9 million consumers throughout the state who are covered by the company through employer plans, state plans, and other policies.

Cynthia Cox is the associate director for the study of health reform and private insurance at the Kaiser Family Foundation. "It's not uncommon this year to see double-digit increases," she said. "This is the first year we've seen such significant premium increases across the board."

Increases were overall "flat" during the second year of marketplace enrollment and mostly "modest" in the third. According to Cox, such high increases for the fourth year suggest that insurance companies had initially underpriced their plans.

Though many consumers will balk at the new increases, current premiums for ACA plans are still below 2009 Congressional Budget Office (CBO) projections, even when taking the hikes into account. The CBO had predicted that an unsubsidized silver plan would cost an average of $5,200 annually in 2016; however, said Cox, the actual average annual cost is $4,583, roughly 12 percent lower than expected.

Cox believes that the withdrawal of insurers from the marketplace is more concerning than the rate hikes.

"Premiums could be a one-time market correction, but the exits raise concerns about the sustainability of the marketplace in the long term," she said.

The designers of the ACA anticipated that there would be an influx of older, sicker consumers but believed that the cost of their treatment would be offset by the attraction of younger, healthier people. So far, however, this has not been the case for BCBSNC, in spite of its marketing campaign designed to pull in "young invincibles" as well as federal penalties for consumers who do not have health insurance. One fourth of 2016 customers are in the 18-34 age bracket, while 60 percent are between 35 and 65.

BCBSNC continues to have a large number of people who are chronically ill and require expensive medical care. It is illegal under the ACA for insurers to refuse coverage to people who have pre-existing conditions and to charge older customers exorbitant rates, both of which practices were common in the past and helped insurance companies control expenses.

The company's 2017 rates do not take into account federal tax credits, which more than 90 percent of consumers throughout the state who purchase coverage in the marketplace will qualify for. Subsidies rise along with premiums.

"About 72 percent of our ACA customers who enroll through Healthcare.gov will pay less than or the same next year as they're paying in 2016," wrote Blue Cross.

The company acknowledges that paying for premiums without a subsidy will be a "significant challenge for many people."

"The 24.3 percent average rate increase for 2017, on top of a 32 percent rate that took effect this year, is evidence that rising costs are not sustainable for the long term," it said.