On the Obamacare exchanges, there are large disparities in how health insurance premiums are changing next year based on where you live. While coverage is getting cheaper in states like Indiana and Mississippi, in North Carolina, it's becoming much more expensive. Federal data show that North Carolina's average premium increase is among the highest in the country.
Sue Martin of Mebane, N.C., couldn't afford treatment for Lyme disease and a thyroid condition without health insurance. She got covered through healthcare.gov, and a federal subsidy cut her premium to $238 a month.
But the insurance company is cancelling that plan and suggesting a similar one for next year, with a big caveat. Martin says it'll cost her $491 a month.
“To go up that much on premium, that's prohibitive for me,” she says. “There's no way being a retired single lady, that's, well, double what I was paying before.”
The company behind that plan, Aetna, declined our interview request. Instead, Aetna provided a statement that says its goal is to use rates that'll cover the cost of doing business.
In North Carolina and across the country, many insurance companies are still figuring out what that rate is. There's a sweet spot with premiums. Companies want them high enough to cover the cost of people's medical care but low enough to attract customers.
Georgetown University researcher Sabrina Corlette says when the Obamacare exchanges first opened two years ago, “for many insurance companies, that was a real guessing game.”
“They didn't know what kind of policyholder they would attract,” she says. “They just had no idea what their costs would be.”
Corlette says now that companies have actual data on who signed up and how much care they needed, “they’re saying, whoa, wait a minute, we didn't price the way we should have to actually reflect our costs, and so we need to adjust.”
In North Carolina, the adjustments are huge. All three insurers on the exchange are raising average premiums at least 20 percent. The dominant player, BlueCross BlueShield, is raising rates 33 percent.
Managing Actuary Brian Tajlili says BlueCross is a long way from that sweet spot.
“The assumption was the sick would come in the first year in 2014 but then in 2015, healthier people would enroll,” he says. “We made that assumption. Many others in the industry did as well.”
Preliminary research is mixed on whether that happened nationally. But Tajlili says it didn't in North Carolina.
“Another thing that we had assumed is many people would go in, get a lot of services done all at once in the first year - something we sometimes call pent-up demand - and that cost would level out after that,” he says. “That proved to not be the case either.”
The bad projections meant premiums weren't even close to covering costs, and BlueCross lost more than $120 million on that part of its business.
To be sure, it's a small part of the business: less than 10 percent of its customers are on the exchange. The premium increases we're talking about don't affect most people, who have insurance through their jobs.
So were North Carolina's insurance companies just worse at predicting who'd sign up?
“Premium increases really vary state by state and there hasn't been, at least at this point, a really clear pattern that has emerged,” says Elizabeth Carpenter of Avalere Health. She consults with insurance companies and other clients navigating the exchanges nationwide.
North Carolina Insurance Commissioner Wayne Goodwin has his own theory for why premiums are so high in this state.
“North Carolinians would have had lower rate adjustments and more competition and more choices for plans if we had gone a state-based route,” he says.
Goodwin says Republican state lawmakers and the governor made a mistake by choosing the federal exchange (as about three dozen other states did) rather than setting up their own.
The data is not clear on that. Jon Gabel at the University of Chicago has researched this point.
“Last year the rate of increase in state-based exchanges and the federal exchanges was basically, there was no statistical difference,” he says.
There's huge variation among each kind of exchange. Government data show that a benchmark plan for Indiana is dropping an average of 13 percent, while the same plan in Oklahoma is rising an average of 36 percent – and both states use the federal exchange.
Gabel says there can be advantages to the state exchanges though.
“You have much more decision making power, that is for sure,” he says.
In other words, you're in control of the red tape. Commissioner Goodwin argues that could've allowed North Carolina to attract more insurance companies.
“That alone would've been a major factor for consumers here if there were more companies available,” Goodwin says.
The data does back up the idea that more competition equals lower premiums. North Carolina and the other states with the highest increases tend to have the fewest insurance companies.
Back in Mebane, Sue Martin shopped around healthcare.gov and found a new plan she could afford, albeit with skimpier benefits.
“Even if the premiums are a little higher than I like or everything isn't covered or whatever, I still have the option to see my doctor,” she says. “I can still afford my medications. I hate to sound hyperbolic, but it's kind of a matter of life and death.”
About half a million North Carolinians are on the Obamacare exchange. They have until January 31 to decide on their next plan.
