RALEIGH — Blue Cross Blue Shield of North Carolina has just been approved to raise the premiums of its health plans within the state’s Affordable Care Act exchanges by an average of 24 percent. This is larger than Blue Cross’s original request for a 19 percent hike, and comes after last year’s 34 percent premium hike — one of the largest in the country.
Don’t blame Blue Cross, at least not for this latest news. The insurer has lost hundreds of millions of dollars over the past two years on its ACA business. This is not a case of corporate price gouging. It is, rather, a case of Obamacare working as it was intended by many of its drafters, as a precursor to a single, government-run health plan.
In other words, from the beginning the exchanges were doomed to fail as a long-term business enterprise. Customers with preexisting conditions requiring expensive medical services were always destined to flock into the ACA plans, where the prices (premiums) were set artificially low for many of them while the actual costs of care were to be transferred to paying customers or general taxpayers.
In theory, the government planned to keep the exchange plans viable by forcing younger, healthier customers to buy the ACA plans. In practice, the penalties for noncompliance were always likely to be lower than the soaring premiums. Many young people have rationally responded by saying no.
As insurers in North Carolina and elsewhere responded to their larger-than-expected initial losses by seeking more ongoing subsidy from taxpayers, they ran up against congressional opposition in Washington and some basic political facts. Do you think big bailouts for health insurers will ever be a popular idea? Me, neither.
So, again rationally, insurers are pulling out of state exchanges. In North Carolina, Blue Cross is the only provider left that sells ACA policies in all 100 counties. Next year, their only competitor will be Cigna, and only in five counties. Blue’s rate increase is partially due to the fact that it is inheriting the money-losing subscriber bases of the insurers that are pulling out.
Although the exchanges have gotten the lion’s share of the attention, the Affordable Care Act was always primarily about expanding Medicaid. Most of the projected decline in the uninsured population was to happen via Medicaid. Moreover, as exchanges get increasingly wobbly and costly, expect advocates to demand a “public option,” in the form of Medicaid or a Medicaid-like program, while continuing to put lobbying pressure on North Carolina and other states that haven’t yet expanded Medicaid to do so.
In the governor’s race, Roy Cooper has been trying to use the issue against incumbent Pat McCrory. While calling for Medicaid expansion, Cooper also blames North Carolina’s ACA problems on the fact that the state allowed the federal government to set up the exchange rather than creating its own. But many state-run exchanges are in trouble, too. The Obamacare legislation didn’t really allow state governments much leeway in creating stable insurance markets with sustainable pricing and logical rules. Again, to be blunt, that was never its intent. Most framers of the bill truly believe that a Medicare/Medicaid plan for all is and should be the ultimate destination for American health care.
Does Roy Cooper agree? I think he is trying to score political points by running the wrong plays. The people who care most about expanding Medicaid are either ideological liberals, who already support him, or the hospitals and other interests that actually receive all Medicaid dollars. I don’t think average North Carolinians want their own health care arrangements shredded by intrusive federal bureaucrats, or for their elected leaders in Raleigh to enable Washington’s power grab.
With the federal budget wildly out of balance and the nation’s unfunded liabilities for health care entitlements already extending into the tens of trillions of dollars, expanding Medicaid never made any fiscal sense. Nor does keeping the ACA exchanges in their current form. But Cooper still wants to bet on Obamacare — with your money.
John Hood is chairman of the John Locke Foundation.