From The AIS Report on Blue Cross and Blue Shield Plans. Not affiliated with the Blue Cross Blue Shield Association or its member companies.

Without Subsidies, Many Non-Group Blues Members Aren’t Insulated From Rate Hikes

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September 2016Volume 15Issue 9

The Obama administration is playing down the impact large rate hikes will have on consumers who buy coverage through the public insurance exchanges for 2017. But a substantial percentage of the non-group market doesn’t receive federal subsidies, according to an informal survey of Blues plans conducted by The AIS Report at the end of August.

Thanks to the subsidies, an estimated 73% of HealthCare.gov members could purchase a 2017 individual insurance policy for less than $75 per month, CMS said Aug. 23. “Our study shows that, even in a scenario where all plans saw double-digit rate increases, the vast majority of consumers would continue to have affordable options,” Kathryn Martin, HHS’s acting assistant secretary for planning and evaluation, said in a prepared statement.

But the statement avoids the fact that about half of the individual health insurance market doesn’t get a subsidy, says industry consultant Robert Laszewski, president of Health Policy and Strategy Associates, LLC. While subsidies will insulate millions of Blues members from substantial rate hikes for policies sold through public insurance exchanges this fall, individual policies sold outside of an exchange make up about 50% of individual health plan enrollment among some Blues plans.

“Every time I hear the administration or Obamacare supporters say 83% or 85% of those purchasing on the exchange are getting a subsidy, it is just terribly disingenuous,” he tells The AIS Report. “The middle class is getting killed by these already high premiums and deductibles...and they will take the full hit from these new increases.” A family making $100,000 a year might pay $800 to $1,000 a month for premiums this year, he says. And premiums and deductibles could be substantially higher for the 2017 plan year.

“The political calculus being missed is that those with incomes between about $50,000 and $100,000 vote…and they’re going to be increasingly unhappy with the pricing as well as the plan designs,” adds William Pewen, Ph.D., who served as senior health policy advisor to former Sen. Olympia Snowe (R-Maine) during the crafting of the Affordable Care Act (ACA). The drafters of the law, he says, expected that competition among carriers would help to push coverage costs down. But the administration is now saying that the coverage is affordable because the premiums are subsidized for most enrollees.

Avalere Health LLC recently concluded that nearly 36% of exchange market rating regions could have just one participating insurance carrier for 2017, and about 55% will have two or fewer carriers. Residents of some counties might not have any carrier options.

Hikes Are in Line With Historical Trends

Avalere also estimates about 20 million people have coverage in the non-group market — about half of them purchase coverage through a public exchange. “Clearly, there are many individuals who are not getting federal premium subsidies who could face significant increases in their costs next year. These increases are likely to be bigger than those that occurred in 2015 and 2016. However, prior to the ACA, annual premium increases in the exchanges were around 10% per year. So, the 2017 rate hikes will be more in line with historical trends,” says Caroline Pearson, senior vice president at Avalere. While some Blues plans have requested substantial rate increases for 2017, Avalere’s data indicates that average proposed rate increases among all carriers are closer to 12% and below 10% for the lowest- and second lowest-cost plans. “That varies considerably by state and plan. However, we don’t just look at single plan increases because in most regions you can still switch carriers to get a better price,” she explains.

It’s unknown if large rate hikes will force non-subsidized members to drop coverage. Pearson notes that the individual market outside of the exchanges hasn’t grown dramatically since the ACA was enacted. “Many of these people were also buying coverage pre-ACA. That means they are motivated purchasers. Even with meaningful premium increases, these people are committed to buying insurance [and] are likely to stay in the market. Of course, we don’t know exactly what level of premium increases would be high enough to drive non-subsidized purchasers out of the market,” Pearson says.

Blues Have Many Non-Subsidized Members

In some states, Blues plans have large numbers of people covered by a grandfathered plan that doesn’t include the essential health benefits called for by the ACA. Laszewski says it’s a safe bet that most people covered by a grandfathered plan aren’t subsidy eligible.

Here’s a look at exchange and non-exchange enrollment in the non-group market among selected Blues plans:

  • Anthem, Inc.: The publicly traded company, which operates Blues plans in 14 states, ended the second quarter of 2016 with 1.8 million members in the individual market. About 923,000 are covered by policies purchased through an exchange, the company reported July 27. The remaining 877,000 are covered by an individual policy purchased outside of an exchange. A little more than half of those members are covered by an ACA-compliant plan, says spokesperson Jill Becher. Using CMS’s estimate that about 85% of people who purchased coverage through an exchange qualified for federal subsidies, for Anthem that would translate to about 784,550 people with a subsidy. That leaves a little more than 1 million people — 138,450 on the exchange and 877,000 off the exchange — who won’t get a subsidy.

  • Health Care Service Corp.: HCSC operates Blues plans in Illinois, Oklahoma, Montana, New Mexico and Texas. As of Dec. 31, 2015, HCSC says 61% of its 1.7 million individual members across five states purchased their coverage through an exchange. That works out to a little more than 1 million lives. But if 15% of those members don’t qualify for a subsidy — and the other 663,000 purchased ACA-compliant coverage outside of the exchange — 818,550 individual members won’t have a federal subsidy.
    In Montana, HCSC’s Blues plan is seeking an average rate increase of 62.1%. Likewise, HCSC’s Texas affiliate, which has about half of the state’s exchange population, requested an average rate increase of more than 50%, according to preliminary rate filings posted by HealthCare.gov. In Oklahoma, the Blues plan affiliate wants to increase rates by 49%. And after pulling out of the exchange for the 2016 plan year, HCSC affiliate Blue Cross Blue Shield of New Mexico filed to sell an individual HMO 82% above the rates charged for the 2015 plan year (The AIS Report 8/16, p. 6).

  • Arkansas Blue Cross and Blue Shield: As of July 1, 215,271 individuals were enrolled in on-exchange metallic plans. That includes people who enrolled through the state’s Blues plan and the multi-state plan, says spokesperson Max Greenwood. Another 59,915 individuals are enrolled in non-ACA-compliant insurance policies purchased outside an exchange.

  • BlueCross BlueShield of Kansas: At the Kansas Blues plan — and its subsidiary BlueCross BlueShield Kansas Solutions — 46% of non-group members purchased coverage outside of the exchange and 54% purchased coverage on the exchange. Of those who purchased coverage outside of the exchange, more than half (56%) are in non-ACA-compliant plans, while 44% are compliant. Of those that are in non-compliant plans, 78% are in grandfathered plans that will continue. The 22% enrolled in non-grandfathered transitional plans will need to select new plans for 2017 as “we phase out these plans that were previously extended,” says spokesperson Mary Beth Chambers.

  • Blue Cross Blue Shield of Louisiana: Of the Blues plan’s 206,793 people covered by an individual product, 21% enrolled outside of HealthCare.gov. Another 36% are covered by a policy purchased on the exchange, and 43% are covered by a non-ACA-compliant plan.

  • Blue Cross and Blue Shield of Massachusetts: Of the Massachusetts Blues plan’s 43,000 non-group members, just 3,000 have coverage through the state-run insurance exchange. The low exchange enrollment is likely due to the unique dynamics of our market,” where people tend to buy directly from the carrier, says spokesperson Jay McQuaide. All the plans are ACA-compliant.

  • Blue Cross Blue Shield of Michigan: About 160,000 lives are covered by an individual policy sold through HealthCare.gov, while 82,000 enrolled outside of the exchange, says spokesperson Meghan O’Brien Edwards.

  • CareFirst BlueCross BlueShield: As of July 2016, CareFirst had 275,170 members covered by individual policies in its service area of Maryland, Northern Virginia and Washington, D.C. Of those, 117,093 were covered by a policy sold through an exchange. Outside of the exchange, 121,331 were enrolled in an ACA-compliant plan and 36,746 had a non-ACA compliant grandfathered policy.

  • Independence Blue Cross: For 2016, the Philadelphia-based Blues plan offered 17 HMO and PPO plans across all metallic levels. The plans are available both on and off Pennsylvania’s federally run exchange. Of the 180,000 individual members, 70% enrolled through HealthCare.gov. The Blues plan doesn’t have enrollment in transitional plans.

© 2016 by Atlantic Information Services, Inc. All Rights Reserved.


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