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GREATER CHARLOTTE BIZ – Ballooning Health Care Costs

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Year three of ACA finds higher utilization rates, rising drug costs, and increased emergency room visits leading factors driving rate increases.

2016 marks the third year of the Affordable Care Act (Obamacare) and employers, consumers, and insurers alike are concerned the “affordable” component of the healthcare reform legislation is proving elusive.

In direct response to higher than anticipated claims data seen during the first half of 2015, North Carolina’s largest insurer, Blue Cross Blue Shield of North Carolina, adjusted their 2016 ACA rate filing with the North Carolina Department of Insurance. They upped their request from an earlier asked for 25.7 percent for 2016 to an average increase of nearly 35 percent. The increase affects rates for individual customers under age 65 with ACA plans both on and off the Exchange beginning January 1, 2016.

“We are working in a volatile environment with high risk,” said Gerald Petkau, senior vice president and chief financial officer. “While disappointing, this year’s results are not surprising given the trends we observed throughout the year. Having adequate reserves means we are well-positioned to weather this difficult year. The company is strong, well capitalized and well positioned for the future.”

BCBSNC is the state’s only insurer with products available in all 100 North Carolina counties. The company is one of four providers in 2016 to offer plans to North Carolina residents through the Healthcare.gov exchange. BCBSNC, Coventry Health Care of the Carolinas (merging with Aetna), and United Healthcare are joined in 2016 by Humana who will offer plans in the Winston-Salem and Charlotte areas.

While the rulings on the filings determining final rates approved by North Carolina Department of Insurance and the Federal Centers for Medicare and Medicaid Services had not been made as of this reporting, it’s a fair assumption that rate increases will far exceed initial projections.

Petkau said that a number of factors were driving BCBSNC’s rate increase request including an unhealthier than projected mix of subscribers, spending that did not level out as anticipated, dramatic increases in prescription drug costs, and increased access to costlier Emergency Room care.

Like other insurers in the state and nationwide, BCBSNC is still in the learning phase regarding ACA, what’s working and what still needs additional focus.

“The industry generally had two expectations of ACA customers,” said Patrick Getzen, vice president and chief actuary for BCBSNC, “First, that we would see healthier customers enroll in the second year, and second, that healthcare costs would level out as pent-up demand for services minimized. Based on our data, neither expectation is proving true. Our claims and expenses are higher than our premiums and we need to take steps now to protect the sustainability of plans for our customers over the long term.”

Losses Unsustainable

“We experienced operating losses in our ACA business of $123 million dollars in 2014, this is an unsustainable figure,” said Petkau.

A review of BCBSNC’s recent claims data showed a sharp increase in spending in medical services in 2015 compared to 2014 fueling the necessity for the rate increase request.

Insert: http://blog.bcbsnc.com/2015/08/why-were-adjusting-our-2016-aca-rate-filing/ – blue bar chart.

BCBSNC’s recent claims review found the following unfavorable trends:

• Health care spending among ACA customers increased each month, up 30 percent in January through June of this year compared to the first six months of 2014.

• A 27 percent increase in the number of emergency department visits in January through June of this year compared to the same period of 2014. Many of these were for conditions that could have been better treated in a different, less expensive care setting, such as urgent care.

Insert Chart: http://blog.bcbsnc.com/2015/08/how-non-emergency-er-visits-skyrocket-health-care-costs/ – Emergency Room Usage.

• Drug spending increased 33 percent in the first half of 2015 compared to January through June of 2014. This makes prescription drugs the fastest-growing component of medical spending in BCBSNC’s ACA business.

An additional, somewhat hidden cost borne by the insurer is found in ACA customers dropping coverage or stopping premium payments. Other customers who cancelled their plans were among the healthiest customers, those who had not filed any claims. Lacking a balance of healthy and sick customers is yet one more factor figuring into rate increases.

“Most of these customers purchased a plan, paid their initial premium, used costly health care services, then dropped their coverage,” said BCBSNC’s Getzen. “This is an unintended consequence of the way the law is written.”

North Carolina’s ACA Market Compared Nationwide

North Carolina has the fourth highest enrollment level under the ACA behind only Texas, Florida, and California according to the Centers for Medicare & Medicaid Services. Statewide enrollment saw 459, 714 North Carolina residents enrolled under the ACA as reported in June.

“As far as projected rate increases across the nation, North Carolina is certainly not an outlier,” said Petkau.

The New York Times reported health insurance companies across the nation are seeking increases between 20 and 40 percent for 2016.

Minnesota alone saw four separate insurers seek increases of 50 percent or more. Fluctuations in rate requests by states are attributed to differences in population demographics, price of services, local practice patterns and the population of uninsured.
Uncompensated Care – Opportunities through Increasing Enrollment
Uncompensated care is another contributing factor to rate increases. Defined as care delivered yet not reimbursed to the provider, uncompensated care is frequently due to the uninsured status of the patient. Providers seek to recoup these losses, often by looking to insurers to pay higher rates for services. The associated costs get calculated into premium rates by those who purchase coverage in commercial and public marketplaces.
Nearly 40 percent of North Carolina’s uninsured are eligible for Medicaid or subsidized insurance yet have not enrolled, according to a recent Kaiser Family Foundation report. The report showed 289,000 people or 25 percent of the 13 million uninsured had not enrolled through ACA exchanges.
The report indicated because the ACA envisioned low-income people receiving coverage through Medicaid, it does not provide financial assistance to people below poverty for other coverage options. As a result, in states that do not expand Medicaid (such as North Carolina), many adults will fall into a “coverage gap” of having incomes above Medicaid eligibility limits but below the lower limit for Marketplace premium tax credits.

More and better education may help address the inherent contradiction between the high subsidy rate and stubbornly high rate of uninsured.

Petkau noted that while income based subsidies provided by the ACA help defray insurance costs for persons with incomes between 100 percent and 400 percent of federally established poverty levels, many residents eligible for coverage are not obtaining it.

The National Center for Healthcare statistics reported during ACA’s first year, North Carolina’s uninsured rate fell 13 percent in 2014.

Estimates indicate nearly 90 percent of North Carolinians covered in 2015 got subsidies. More than 94 percent of BCBSNC customers received subsidies under ACA plans according to the insurer. Yet according to a recent survey conducted by the Commonwealth Fund, a private quality healthcare advocacy group, affordability remains a top reason among people seeking healthcare coverage today.

Their research found among those adults who said they did not enroll because they could not find an affordable plan and did not enroll through a different source, more than half had incomes that made them eligible for subsidies. It is unclear whether the subsidies are insufficient across income levels to help all those eligible enroll or whether there is a lack of clear information about the subsidy assistance and the actual net costs of insurance to potential enrollees.
Transparency – Enlisting Customer Support in Managing Costs

BCBCNC is working hard to underscore transparency at all levels in the healthcare equation, confident that better informed members make better and more cost effective decisions regarding their healthcare.

“Price transparency is tremendously important to us,” said John Roos, senior vice president, sales, marketing and communications at BCBSNC. “We recognize health insurance and healthcare can be complicated. We’re working to provide resources to make plan and healthcare service shopping and provider quality information easily accessible to our members.”

Healthcare consumers are well served to evaluate not only premium rates but co-pays, deductibles, drug coverage and quality of care information regarding providers and facilities they may access.

To that end, BCBSNC is also better arming their customers, and the general public, with information and tools to help them make better and more informed choices about their care.

Earlier this year the company made available to all consumers information they need to comparison shop based on cost and quality.

“We’re working to take the mystery out of health care by providing cost information about more than 1,200 procedures,” said BCBSNC President and CEO Brad Wilson. “This information will help consumers get more bang for their health care buck.”
With the new web-based tool, consumers can easily compare the cost of common procedures – an important factor in ensuring they get the best value for their health care dollar. For example, the amount a customer might pay for a knee replacement in the Triangle can vary by nearly $15,000 depending on which hospital the customer chooses.
“Many consumers believe that the highest cost facility is the highest quality facility, but that’s often not the case,” said BCBSNC Chief Medical Officer Susan Weaver, M.D. “We know that our customers want the highest quality health care, but like any purchase they make, they don’t want to pay more than they have to. Our tool allows them to make informed decisions about health care just as they would any other major purchase.”
The cost comparison tool, bcbsnc.com/healthcarecost, enables consumers to compare cost of common health care procedures at hospitals and other health care providers based on BCBSNC’s broad-network Blue Advantage plan and its narrow-network Blue Value plan.

BCBSNC customers can access a more specialized tool through Blue Connect, the company’s new customer portal. The customer tool includes quality information as well as more specialized cost estimates based on a customer’s specific health plan.

Plan Changes for 2016
BCBSNC will continue to offer products in all of the state’s 100 counties. Blue Advantage and Blue Select products will no longer be available in 16 counties, including the Triangle and Charlotte regions.
Customers in these areas will have the option to choose a lower-cost, limited network plan with their preferred health system of choice through Blue Local® and Blue Value®. These plans have been a popular and affordable choice. Nearly 60 percent of customers in the Triangle and Charlotte areas are currently on a lower cost plan.
“North Carolinians are more actively involved in health care decisions – including choosing a health plan – than ever before,” added Getzen. ”Offering the right balance of cost and plan design for consumers is vital to our business.”
Affected customers will not have an interruption in their insurance coverage. They will receive renewal notices in the fall that explain how these changes affect them.
Better – Not Simply More Care

Those searching for silver linings for the future of ACA and the state of healthcare are not without hope.
Better informed consumers can make better choices about their healthcare and drive an increasing industry movement towards better, not simply more healthcare.
Accountable Care Organizations are one example employed by BCBSNC where doctors and hospitals work together as a team to deliver high quality efficient, results based care. Efforts to reduce medical errors are returning multiple benefits, notably patient safety. Here hospitals are incented in reducing their error rates which contributes to higher quality care.
The company is working to make more affordable, convenient care options and alternatives to costly emergency room visits. These options include urgent care centers and 24/7 staffed nurse advice hotlines to help customers choose the right treatment options.
BCBSNC’s experience and purchasing power is used to negotiate discounts on its customers’ behalf so they don’t pay more than they have to. The company has on site representatives at hospitals throughout the state to directly answer questions and provide support to customers.
Establishing and maintaining a healthy lifestyle are arguably the first, and best, line of defense against illness. BCBSNC continues into 2016 with their very enthusiastic Live Fearless campaign inspiring North Carolinians to get inspired to take action to work hard, play hard and live life to the fullest.
The insurer has a number of programs including nutrition counseling, fitness discounts, community gardening activities and a network of greenways and trails contributing to a healthier state.
With nearly two years of ACA experience under their belt, insurers and consumers continue to look for market stabilization and better, more affordable healthcare. Clearly, there is still much work to be done.

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