ObamaCare insurers are losing money. The latest to report huge losses is BlueCross BlueShield of North Carolina.
Just like its competitor UnitedHealth, BlueCross BlueShield of North Carolina (BCBSNC) is reporting losses on the ObamaCare exchanges of more than $400 million in the first two years. Despite the fact that they dominate the state’s insurance market with 72% of the large group business, the company cannot make money selling ObamaCare insurance.
The company has responded by eliminating sales commissions for agents, terminating advertising of ObamaCare policies, and stopping on-line applications through a web link that provides insurance quotes – the same moves UnitedHealth announced recently. You know you’ve got a bad business model when you’re trying to avoid customers!
The company received approval from the North Carolina insurance commissioner to raise rates by an average of 32.5%. This may increase the profitability on the sale of future premiums but will surely lead to fewer customers – but that seems to be their intent.
Special Enrollment Period Problems
Chris Conover, writing in Forbes, says the special enrollment period is a major problem. He reports that those enrolling during this period cost the company twice as much as regular open enrollment people. These special enrollment periods allow those whose circumstances have changed to purchase insurance outside the normal enrollment process. This includes those who have recently married, had children, lost or changed jobs, or similar situations. However, experience has shown that these same people frequently stay insured only for a few months, run up high medical bills, and then drop the insurance.
This “gaming of the system” has been common since ObamaCare passed since the law prevents insurance companies from excluding pre-existing conditions and has no penalties for dropping coverage – unless they remain uninsured for over a year. Even then the tax penalty is small enough that many prefer this to expensive premiums.
Rising Premium Costs
It is inevitable that consumers will bear the brunt of the cost of widespread insurance company losses. University of Minnesota economist Steven Parente has calculated that the cost of the least expensive ObamaCare exchange premiums will more than triple in North Carolina between 2016 and 2017!
He says the average premium for Bronze plan policies that cost $1777 in 2016 will be $4,336 in 2017. For high-deductible catastrophic plans the average premium will jump from $783 in 2016 to $2,929 in 2017. He anticipates the number of uninsured will rise 5% in 2017 – and he projects this number will continue every year until 2024. If his numbers are correct, 2016 will represent the peak of ObamaCare enrollment.
This situation must change. The only question is whether the change that comes leads to more government intervention – as Democratic presidential candidates Hillary Clinton and Bernie Sanders prefer – or less government regulation and more free market competition – as most Republican candidates prefer. The American people will ultimately decide this issue at the ballot box in November.