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North Carolina's largest health insurer is warning its Obamacare members that it may have to hike rates more than 20 percent for the second year in a row, and the reason has everything to do with mixed messages from Washington over subsidy funding.
"This is an urgent situation, and we simply need to know what the rules of the game are going to be for 2018 in order to hit affordability as well as stability," said Brad Wilson, CEO of Blue Cross Blue Shield of North Carolina.
While Republicans have pointed to health insurer exits from Affordable Care Act exchanges as signs that Obamacare is in an irrevocable death spiral, executives at Blue Cross Blue Shield North Carolina say that's not the whole story.
Blue Cross detailed what went into its rate requests in a blog, telling its members that the key driver of their 2018 rate request has to do with uncertainty over cost-sharing reduction subsidies for low-income enrollees, which are built into the ACA.
Source: Blue Cross Blue Shield North Carolina
Wilson said his company wrote the blog because customers need to understand the situation.
"We felt it was important as we go into the rate approval process for 2018 that our customers understand the importance of the CRS funding, hence disclosure of the information," he said.
More than two-thirds of its 500,000 Obamacare customers rely on CSRs to help with out-of-pocket costs. Insurers on the exchange make the payments up front — an estimated $7 billion this year — and up until now the federal government has reimbursed them.
If CSRs are funded next year, Blue Cross NC said it will only need to raise rates by 8.8 percent: 5.8 percent for rising medical costs, and 3 percent for the health insurance industry tax.
But if the Trump administration pulls the plug, the insurer said, it will need to increase rates by an additional 14.1 percent, for a total of 22.9 percent rate hikes.
"We feel it's important that we work very hard to try to continue the stability that we're actually seeing in the North Carolina marketplace," Wilson said.
"What we're doing is we're saying the same thing to our elected officials in Washington that we're saying to our customers," he continued. "We're explaining what makes up a rate. Yes, it's the CSR money. It's also the ever-increasing volume and pricing of our medical underlying health-care expense. And also part of this rate is a reflection of the health-insurer tax, which will come back in 2018."
A federal judge ruled in favor of House Republicans, who sued the Obama administration over funding for CSRs, ruling that they had to be authorized by Congress. The administration appealed the decision. But now it's up to the Trump administration to decide whether it wants to continue that appeal.
Earlier this month, the Trump administration asked the court to keep the case on hold until next September, but the president has not made clear whether his administration plans to continue paying for CSRs in 2018.
According to Kaiser, cutting CSRs would actually increase federal Obamacare costs by more than $2 billion, because higher premiums would result in bigger tax credits for both low- and middle-income enrollees.
Health insurers must submit rate requests by June 21 for 2018 plans. So far, Aetna, Humana and a handful of others have pulled back from the exchanges, citing the uncertainty. Those insurers who do submit rate requests do not have to commit to staying on the Obamacare exchanges until late September.
Wilson said there are a number of factors that will influence Blue Cross NC's decision, but "a fair and competitive rate is critical to that."
"For all practical purposes, we are certainly the largest and effectively the only ACA alternative for most North Carolinians," Wilson said.
Wilson also urged Congress to focus on affordability and stability in any health-reform legislation that they consider, and to act quickly.
While the House passed an Obamacare repeal bill known as the American Health Care Act by a narrow one-vote margin, the Senate may consider crafting its own legislation.
—CNBC's Michelle Fox contributed to this report.
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