Because of Aetna’s recent business decision to withdraw from North Carolina’s exchange, Blue Cross and Blue Shield of North Carolina (BCBS NC) has had to re-file its rate request to account for the high-risk enrollees it could be absorbing. As a result, BCBS NC CEO Brad Wilson says that his company may have to serve an additional 200,000 enrollees. I’ll bet that the influx of members won’t effectively spread the risk across the carrier’s already skewed high-risk pool, since Blue Cross could be overwhelmed with even more medically needy patients who previously accessed insurance through Aetna or UnitedHealth Group. It doesn’t take many of these patients to create a volatile Obamacare exchange. Just 5 percent of BCBS’s customers consumed $1.3 billion in health care during the first year of the law’s exchange rollout in 2015. From that population, the carrier received just $108 million in revenue from collected premiums and funding streams (two of which are temporary) that were built into the law to mitigate initial market instability.
High-risk enrollees aren’t to be blamed for insurance companies’ financial hemorrhaging. Rather, the way in which the exchanges are designed has caused detrimental disruption to the non-group market as a whole. Insurance regulations like community rating and a weak individual mandate provide an incentive for sick people to sign up and healthy people to opt out of health coverage. The exchanges’ loose enrollment policies have also generated all sorts of unpredictable projections on the actuarial front.
For example, policyholders can pay only 9-months worth of a 12-month product. Let me repeat that. Policyholders are allowed to pay their premiums for 9 months and still have an insurance plan for the full year. This is because Obamacare grants people a three-month grace period before their plan defaults. Therefore, it’s technically legal to use health care services and not pay monthly premiums for three consecutive months until the plan is up for renewal. For the first 30 days within this grace period, the insurance carrier is on the hook. Medical providers are then responsible for any outstanding tabs for the remaining 60 days.
The individual mandate also doesn’t apply to Obamacare’s three-month grace period for not having health insurance. Naturally, people have leveraged this policy to their advantage by purchasing coverage, navigating the medical system as needed, and then dropping coverage for three months at a time. While annual enrollment periods are supposed to prevent this type of behavior, the law’s laundry list of special enrollment qualifiers allows policyholders to game the system. Just Google it.
How should Congress go about Obamacare damage control? Click here to read more on how large health savings accounts (HSAs) can restart health reform by bringing price transparency to health care, which ultimately makes health care more affordable and more secure – especially for the most vulnerable patients.
