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Patrick Springer, Published November 16 2013

‘Perfect storm’ means higher insurance rates for Blue Cross Blue Shield customers

FARGO – Increasing demand for health care services and new provisions under the Affordable Care Act will combine to drive up insurance costs for many individuals and small groups next year.

Beginning on Jan. 1, Blue Cross Blue Shield of North Dakota has approval to increase premium rates for group plans.

Generally, group plans that were in place when the health reform law was passed in 2010 and meet the law’s provisions will see increases ranging from 10 to 20 percent, according to the insurer which covers about 400,000 North Dakotans.

For small groups, those that cover fewer than 50 employees, the increases are sharper and range from 20 to 30 percent.

Coverage for most individuals through Blue Cross Blue Shield of North Dakota renews May 1, and the company has yet to file a requested rate increase, but it expects to ask for a rise of 10 to 20 percent, its top actuary said.

Similar increases confront members of Blue Cross Blue Shield of Minnesota starting Jan. 1.

For individuals, the average increase should be close to 25 percent, said Scott Keefer, the Minnesota Blues’ vice president of policy and legislative affairs.

The increases will depend largely on individuals’ previous coverage. Those who had coverage with comprehensive benefits will not see dramatic changes, while those with leaner-benefit, high-deductible plans will see sharp rises, Keefer said.

The increases are largely due to the Affordable Care Act, said Jim McManus, a Blue Cross Blue Shield of Minnesota spokesman.

“This is all being driven by changes the law is bringing to the market,” McManus said. “Price is an indicator of those changes.”

Thousands of individual insurance customers have received notices informing them their coverage is being discontinued because it does not meet coverage and affordability standards under the Affordable Care Act, the reform law also known as Obamacare.

Because of the outcry from angry consumers, President Barack Obama last week announced that health insurers will be allowed to extend that individual coverage.

With the Jan. 1 start date fast approaching for coverage under the new marketplaces created by the Affordable Care Act, insurers and state regulators are scrambling to determine whether extensions will be workable.

For groups, the effect of changes under the Affordable Care Act will be to drive premium costs in a way that there are no longer such wide differences between those experiencing high or low utilization, Keefer said.

The scope of benefits really isn’t an issue for groups in Minnesota, since the essential benefits required under the Affordable Care Act were similar to benchmarks already in place, he said.

Growth in demand for health services slowed significantly during the recent recession and sluggish recovery, but usage is increasing again.

“We’ve kind of come up from those historic lows,” said Brad Bartle, the North Dakota Blues’ vice president of actuarial and member services.

Still, the increase in members’ demand for medical services for North Dakota’s dominant health insurer lags behind historic trends, he said.

Over the past few years, annual growth in demand for medical services averaged about 4 percent – half or less than the 8 to 10 percent annual increases that once were common in North Dakota, Bartle said.

Now, usage increases are running between the “historic low” of 4 percent but below the once-common 8 to 10 percent rise, he said.

The trend line for health insurance premiums reflects the upswing in demand for services, following an unusual softening in demand in 2011 and 2012.

In North Dakota, figures for Blue Cross Blue Shield show that group plan rates dropped from an average increase of 9.7 percent in 2010 to 3.5 percent in 2011. The increase for group premiums slowed to 0.2 percent in 2012, then jumped 13.5 percent this year.

For the sharp premium hikes looming for 2014, new taxes under the Affordable Care Act account for about 3 percent of the increase for Blue Cross Blue Shield of North Dakota members, Bartle said.

“It’s kind of a perfect storm,” Adam Hamm, North Dakota’s insurance commissioner, said of the combination of rising demand for health services and higher costs to expand coverage under the Affordable Care Act.

“The claims experience is going up and the costs of the Affordable Care Act are having a real impact,” Hamm said.

Health premiums for Medica in North Dakota will increase in the “low single digits” for small groups and “double digits” for individuals, spokesman Greg Bury said.

The Sanford Health Plan also is seeing members’ use of health services grow, resulting in rate increases of 11 percent to 14 percent, said Ruth Krystopolski, the plan’s president.

That includes an increase in members’ use of 7 to 8 percent and tax increases ranging from 3 to 6 percent.

Over the next five years, the Sanford Health Plan projects annual utilization increases of 5 to 6 percent, she said.

She said the many changes in the health insurance market brought by the Affordable Care Act has added complexity and makes predictions more difficult.

“I think the whole market doesn’t know what’s going on because of the ACA,” she said, referring to the health reform law, with many provisions slated to take effect next year.

The Minnesota Blues’ McManus agreed that the changes coming with the Affordable Care Act have the health insurance market in flux.

“I think everything now is in play because of health care reform and the Affordable Care Act,” he said.


Readers can reach Forum reporter Patrick Springer at (701) 241-5522