Most health insurance executives will demur when you ask questions about whether the Trump administration is making Obamacare more expensive.
Not Brad Wilson.
He’s the chief executive of Blue Cross Blue Shield North Carolina, a health insurance plan that just filed a 22.9 percent Obamacare rate increase in 2018. Wilson had hoped to have a smaller rate increase this year; he feels like, after years of losing money, the North Carolina marketplace is finally stabilizing.
“2017 is so far, so good,” he says. “It’s still early and our numbers for the year run about 30 to 45 days behind. But the analysis underway so far in 2017 appears to show stability in the market in terms of price, utilization, and the customer base.”
But Wilson is asking for a big increase in 2018 because it does not expect the Trump administration to fund a key Obamacare program, the cost-sharing subsidies. This is a $7 billion program that lowers copays and deductibles for low-income enrollees. The Trump administration has been aggressively ambiguous on whether it will continue to finance that program, which is currently being challenged in a federal lawsuit.
“The May payment has been made,” Health and Human Services spokesperson Alleigh Marré told Vox last week. “Going forward, we are weighing our options and still evaluating the issues.”
Wilson would have filed an 8.8 percent rate hike if he knew those funds would be paid. But he bumped it up to a 22.9 percent increase because he doesn’t think the Trump administration will come through.
“The information we’ve seen coming from the administration actually creates more uncertainty rather than creating greater certainty,” he says. “The last thing I saw was the president has said he intends to make available the CSR money through May 2017. That is good news. We’re grateful for that assurance. What is not said is what about June through December. There’s a big void.”
Wilson and I spoke last Friday afternoon about his plan’s big rate increase, what kind of information he gets from the Trump administration, and what he thinks of the president’s prediction that Obamacare will “explode.” What follows is a transcript of our conversation, lightly edited for length and clarity.
Tell me a little bit about what your plan’s experience with Obamacare has been so far. I understand you all had some pretty significant losses. Were things starting to stabilize at all going into this year?
Let’s go back to the beginning. The first two years, we lost $450 million on the Affordable Care Act business. In year three though, the marketplace began to stabilize after some pretty significant rate increases. It wasn’t just the ability to have more predictable prices, but also we had more predictable utilization. In 2016 we lost a little money but it was much closer to breaking even than it had been in the previous two years.
In the fall of 2016, when two competitors [UnitedHealthcare and Aetna] left our market, that became a pricing challenge as well as an operational challenge … but we made the decision that we would stay in the marketplace for 2017. That’s how we find ourselves where we are today. We undertake a year-by-year analysis of whether or not we can stay in the market.
2017 is so far, so good. It’s still early and our numbers for the year run about 30 to 45 days behind. But the analysis underway so far in 2017 appears to show stability in the market in terms of price, utilization, and the customer base.
So does that mean you’re on track to break even or make a profit?
The first quarter looks like we’re on track to break even. Now, you also have to remember one quarter doesn’t predict an entire year. As people hit their deductibles, they tend to have heavier use toward the end of the year. We’ve had a tough flu system that probably hasn’t fully hit us. But I’d say 2017, based on first quarter, so far, so good. It appears to be stable.
Let’s talk about the rates you set for 2018. You’re requesting a 22.9 percent rate increase in North Carolina. How did you settle on that particular number? How do you set prices in a pretty uncertain environment?
We’ve always started with the attitude that we want to figure out how to stay in the market, and work hard to do so. The health insurer tax is going to come back in 2018, so we forecast the consequences of that, and we forecast the consequences of having more membership.
We ultimately filed a 22.9 percent rate increase. We filed that rate based on what we know today. Part of what we know today is that there is no guarantee the cost-sharing reductions will be available in 2018. There is evidence they will not be available. The primary piece of evidence being the House bill, which does not contain an appropriation for the money.
The biggest single reason for that rate increase is the lack of the federal funding for CSRs in 2018. We cannot assume nor should we that the money is going to be there based on what we know today. The president and the administration have made several statements about CSRs that don’t give any comfort that they will be available.
If we’d had those assurances [that the subsidies would be paid], our rate would have been 8.8 percent. You can do the math and see the delta there.
Can you talk about the role that the Trump administration plays in all of this — the statements you see from them, how they talk about Obamacare — and how that affects the premiums you set?
Let me start with the principle of certainty. The more certainty, the more guarantee there is that CSR money will continue for 2017 and also for 2018, the more predictability there is in the market, that puts us in a position to file a lower rate.
The information we’ve seen coming from the administration actually creates more uncertainty rather than creating greater certainty. The last thing I saw was the president has said he intends to make available the CSR money through May 2017. That is good news. We’re grateful for that assurance. What is not said is, what about June through December. There’s a big void.
We have no assurance, we have no guarantee that it will be available for the rest of this year or into 2018 based on what has been said. We try to deal with reality, what is being said and what we can reasonably rely on. We had to file a rate last week; that’s the process. If things change, or money is available, or deposits are made into the CSR account and we’re certain its available, I’m sure we’d take that into account.
What do you think this big rate increase will mean for your customers? I understand a good number get subsidies to help pay part of their premiums, and are a bit insulated, but I presume you have some people who pay their entire premium who this could hit pretty hard.
Any rate increase is material to people’s lives and pocket books. I would suspect that depending on individual circumstances it will be yet another challenge to balance all of the things that people have to provide their families with.
What’s your relationship like with the Trump administration right now? Do they have you and other insurance executives in for meetings about the health care law?
We have an open dialogue with different channels, with the Center for Medicare and Medicaid Services, with Secretary [Tom] Price. We are not bashful about asking questions and letting our point of view be know.
I was with a group of colleagues Tuesday, before the House bill passed. We started our day with a [Trump administration] domestic policy adviser. We had a great conversation with Sen. [Mitch] McConnell and finished our day with Speaker [Paul] Ryan. We had the opportunity to explain the importance of CSR funding and the impact on rates we were going to have to file imminently. We have been frank and candid.
Are those meetings frustrating? The people you’re talking to are the exact people who could fix the problem you’re identifying.
Of course it would be terrific if, when you express a problem and potential solution, that everybody would agree with it. But you also understand the world is a more complex place.
I’ll use your word: frustrating. It is frustrating when you are in a position, if the CSR is funded, that a single digit rate could be filed with the department and put into the marketplace. It’s frustrating when you’re not able to do that.
I also understand there are lots of complex forces at work. All I’ve tried to do is present the facts, explain the best I can, provide evidence to back it up, and advocate for our customers. That is what we will continue to do. Ultimately, the authority to finalize these decisions lies elsewhere.
There was a report in the Los Angeles Times that Medicare administrator Seema Verma had made an offer to some insurance executives to fund the CSRs if they agreed to support the Republican health care bill. Has anyone in the Trump administration ever made you such an offer?
No. Absolutely not.
President Trump has said multiple times that Obamacare will “explode” on its own, that the law is falling apart. Does that assessment feel true to you in North Carolina? You’re in a state that has lost some marketplace insurers but, as you were saying earlier, it sounds like you were getting close to stability this year.
We saw in Missouri, Blue Cross KC made the decision to get out, and that leaves some counties bare. That seems like evidence of implosion. I’m concerned that, with the continuing uncertainty, more companies will feel compelled to make that decision. I understand that. There is evidence of implosion around.
In North Carolina, if we had abundant certainty about what the program was going to look like in 2018 and the extent to which CSR money would be made available, and nothing else changes, we would be able to commit to the 2018 market. That suggests to me it’s not imploding. But the market could be better if the price we could charge were lower. I’m worried about sustainability around the country. But in North Carolina, I’m more optimistic.