Blue Cross says it overestimated expenses, lowers 2018 rate request

Blue Cross Blue Shield is lowering its requested rate increase for 2018.
Blue Cross Blue Shield is lowering its requested rate increase for 2018.

More than a half-million North Carolinians on individual health insurance policies from Blue Cross and Blue Shield will pay a significantly smaller rate increase in 2018 than previously expected.

Blue Cross, the state’s largest health insurer, said Wednesday that it wants to lower its rate increase request from 22.9 percent to 14.1 percent. Blue Cross had asked the N.C. Department of Insurance to approve the higher amount in May, based on three months of medical claims submitted earlier this year by customers on federally subsidized policies under the Affordable Care Act. Those customers tend to be older and in worse health than the general population, resulting in higher medical claims for expensive surgeries and costly medications.

On Wednesday, however, Blue Cross said that it overestimated its medical expenses for 2018. The Durham company said customers’ medical claims from June and July were lower than expected, producing a lower projection for next year’s costs.

Blue Cross is the only insurer that offers ACA policies in all 100 counties in North Carolina. The newly proposed 14.1 percent rate increase is a statewide average and would range from 0 percent for 23 percent in specific cases.

The company said that the ACA market, now in its fourth year of health insurance coverage, is beginning to show signs of stabilization and predictability.

“The individual market in North Carolina has become less volatile,” Brian Tajlili, Blue Cross’s chief actuary, said in a blog post.

“Put simply, we got information in June and July that made us confident we could reduce our requested rate increase for 2018,” Tajlili blogged. “At Blue Cross NC, we have gotten a better handle on the anticipated medical costs of people covered in this group which has made it easier for us to estimate the necessary price of our ACA health plans.”

The proposed reduction runs counter to Blue Cross’s past cost increases in North Carolina and also bucks national health care trends. Blue Cross raised rates on individual plans, including ACA plans, by 24.3 percent rate increase this year, on the heels of a 32.5 percent increase in 2016. Nationwide, a number of large health insurers are proposing rate increases exceeding 20 percent, The Wall Street Journal reported Wednesday.

Most people insured under the ACA do not pay the full cost of premiums, deductibles and co-pays because they are federally subsidized. In North Carolina, 94 percent of Blue Cross’s ACA customers qualify for a federal subsidy to offset the cost of their monthly premiums.

Blue Cross had initially requested a 22.9 percent rate increase in May, just as Congress was considering a Republican plan to repeal and replace the Affordable Care Act. At that time, Blue Cross said if Congress kept the ACA in place and fully funded customer subsidies, Blue Cross would request a much smaller increase in North Carolina: 8.8 percent.

The single biggest factor for the company’s 22.9 percent request in May was a Republican proposal to defund cost sharing reductions for low-income individuals on the ACA. About 67 percent of Blue Cross’s ACA customers in North Carolina qualify for these cost sharing reductions on deductibles, co-pays and other out-of-pocket costs.

It’s not clear whether the failure of the Republican repeal effort factored into Blue Cross’s reduced rate request. In other states company executives say large increases are being driven by uncertainty about the Trump Administration’s future enforcement of ACA coverage mandates and federal funding.

“What this is based on is claims data,” said Blue Cross spokesman Lew Borman. “There is still great uncertainty surrounding the future of the Affordable Care Act.”

John Murawski: 919-829-8932, @johnmurawski