Health and Science

North Carolina's big Obamacare insurer wants steep rate hike for '18 — but would take lot less if Trump, GOP promised funds

Key Points
  • Blue Cross and Blue Shield NC wants an average rate hike of 22.9 percent.
  • The company would have asked for just an 8.8 percent increase if Trump guaranteed payments of cost-sharing reductions to insurers.
  • Experts say uncertainty over those payments could impose a 20 percent or more surcharge on individual health plan prices in 2018.
President Donald Trump greets Blue Cross and Blue Shield of North Carolina CEO Brad Wilson during his meeting with health insurance company executives in the Roosevelt Room of the White House in Washington, Monday, Feb. 27, 2017.
Pablo Martinez Monsivais | AP

North Carolina's largest Obamacare insurer wants to raise premiums by nearly 23 percent, but said most of the increase is due to the failure of President Donald Trump and congressional Republicans to guarantee crucial payments to insurers.

Blue Cross and Blue Shield of North Carolina said Thursday it would have asked the state regulators for an 8.8 percent increase if Trump and the GOP-led Congress agreed to continue funding payments to insurers for so-called cost-sharing reductions.

Instead, the insurer is requesting an average increase of 22.9 percent for Obamacare plans that now cover about 502,000 people.

Insurers currently are reimbursed for the costs of charging lower-income Obamacare customers reduced amounts for out-of-pocket costs such as deductibles and co-payments.

But a legal dispute with Congress and the political stance of the Trump administration have raised the serious possibility that the federal government will stop paying insurers for the cost-sharing reductions.

Trump last month in a Wall Street Journal interview threatened to withhold the payments, as a tactic to get Democrats to negotiate with the administration on legislation to reform Obamacare.

If the government stops paying insurers, the insurers would still be on the hook for the cost of the CSRs because Obamacare requires them to offer low-income customers the discounts.

Many insurers are saying they will need to charge higher prices next year, or could possibly exit Obamacare markets, because of uncertainty over the reimbursements. Those payments are valued at $7 billion this year.

Andy Slavitt, who served as chief of the Centers for Medicare and Medicaid Services in the Obama administration, said earlier this week that uncertainty over CSRs would lead insurers to seek rates for next year that will be on average 19 percent higher than they otherwise would be if the payments were assured. Other experts said the surcharge could be up to 25 percent in some cases.

"The biggest single reason for the sharp increase in rates is the lack of federal funding for 'cost-sharing reductions' beginning in 2018," Blue Cross NC said.

Blue Cross NC also warned that while it "intends to sell health insurance plans" in all 100 counties in the Tar Heel State next year, the possibility of a Republican repeal of Obamacare "could impact whether or not Blue Cross NC can offer plans" next year.

"We'll continue to evaluate the market and make and announce a final decision this fall," the insurer said.

A Blue Cross and Blue Shield executive, Brian Tajlili, said that after three years of selling Obamacare plans in North Carolina, "we're seeing the market begin to stabilize." Blue Cross NC obtained average prices hikes of 24.3 percent for 2017 plans.

"Unfortunately, the lack of CSR funding significantly increases the rates for all ACA customers," said Tajlili, director of actuarial and pricing services for Blue Cross NC.

"We are still required to offer the additional CSR benefits to participate in the [federal Obamacare] exchange, so covering these costs without CSR funding will drive up our average rate next year."

The company also said that the return of the federal health insurance tax "accounts for roughly 3 percent of the total increase" being sought for next year.

Tajlili told CNBC in an interview that state insurance regulators have in past years allowed Blue Cross NC to resubmit rate requests. He said that if the insurer learns that CSRs will be fully funded in 2018 by the federal government, it expects to be able to refile its rate increase rates at a lower amount to reflect the availability of that money.

"We've had a conversation with them, and they're aware of the situation," Tajlili said, referring to state insurance officials.

The vast majority of Blue Cross NC customers qualify for federal tax credits that will largely, and possibly completely, insulate from the requested price hikes. Tajlili said that 94 percent of the company's 460,000 customers who buy coverage through the federal Obamacare marketplace qualify for those subsidies, whose value increases as premiums rise.

About 67 percent of those customers also qualify for cost-sharing reduction subsidies that lower their out-of-pocket health expenses due to their relatively low incomes.

Cigna, another insurer that sells plans Obamacare plans in North Carolina is requesting average rate increases of 31.9 percent for next year.

Cigna said it did not break out elements of its pricing decisions when CNBC asked what share of that requested hike was due to concerns about CSR funding.

"Pricing reflects market conditions and underlying economics," said Cigna spokesman Joe Mondy, whose company currently covers almost 21,400 North Carolina customers enrolled in plans sold on the federally run marketplace

"Our 2018 rate filings are based on our customers' historical claims experience, expected medical costs trends, product changes, overall market performance, along with the evolving rules, regulations and design of the marketplace," Mondy said.

American Bridge, a progressive advocacy group, on Thursday said that "Donald Trump is sabotaging the Affordable Care Act marketplaces and now the people of North Carolina are going to pay the price."

"Trump's efforts to deliberately undermine the insurance markets are hurting people right now, and his reckless behavior is unconscionable," Andrew Bates, spokesman for American Bridge. "North Carolinians deserve far better. It's time for Donald Trump and Republicans in North Carolina to side with the majority of the American people who want them to work across the aisle to improve the Affordable Care Act instead of actively sabotaging the health insurance market."

The CSRs have become a major issue for insurers this year for several reasons.

The first is the election of Trump, a staunch Obamacare foe who wants to repeal and replace the health-care law.

The Republican bill pending in Congress to accomplish that goal would end cost-sharing subsidies to low-income customers.

But even before Trump's election, the CSRs were at risk.

House Republicans several years ago sued the Obama administration, claiming the federal government did not have the right to reimburse insurers for the CSRs because Congress never appropriated money for that purpose.

A federal judge agreed with that claim last year. But she allowed the Obama administration to keep paying insurers as it appealed her decision.

However, Trump's election raised the prospect that the new administration would drop its defense of the House's lawsuit, and stop paying the CSRs on its own accord.

But Trump has taken neither step.

Instead, both the administration and the House have asked a federal appeals court to delay action in the case while both sides discuss a possible resolution.

Their refusal to jointly end the CSRs despite their strong opposition to Obamacare suggests that they fear political backlash from ceasing the payments, and having insurance prices rise sharply as a result.

The parties are next supposed to update the appeals court on that progress, or seek another 90-day extension, in three months.

At the same time, the Trump administration has indicted it will continue making the CSR payments for at least the next three months.

Correction: This story was revised to correct that Blue Cross and Blue Shield NC wants an average rate hike of 22.9 percent.