Spiking health insurance costs for individuals falls on “middle of the middle class”

Aug. 27--Dave Tucker, a Memphis homebuilder, is one of the health insurance customers in Tennessee facing price increases that could top 60 percent next year.

The state's biggest insurer, BlueCross BlueShield of Tennessee, is keeping all of its options open for 2017 as escalating costs and politics rock the individual health insurance market created by the federal Affordable Care Act.

Tucker, 56, and his wife are among tens of thousands of Tennesseans who earn too much to receive federal subsidies that slashed the cost of coverage for almost 88 percent of those who bought policies last year on the HealthCare.gov insurance marketplace or exchange.

The cost of his health insurance has tripled since health care reform hit the individual insurance market in 2014, he said.

Last week, Tennessee's insurance commissioner approved average rate increases for health insurers beginning next year of 62 percent for BlueCross, 46.5 percent for Cigna and 44 percent for Humana.

Tucker said that health coverage for him and his wife now costs $1,200 a month, not including co-pays and a deductible. If the price rises another 60 percent, he said, the IRS fine for not having health insurance for those who can afford it may be an option.

"I tell you what, if they do, I'll take the fine," he said. "I mean, it's just crazy."

Chuck Hudspeth, who markets his insurance services at Hudspeth Benefits Group in Memphis as the Obamacareanswerman.com, said that a 33-year-old man paying $311 a month for a BlueCross policy this year is looking at a cost of $522 a month with a $3,800 deductible for the same policy next year.

Strategies for coping with rising costs may include adjusting expected income to quality for subsidies, seeking group insurance, participation in a health care sharing ministry or buying temporary insurance and paying the fine, Hudspeth said by email.

"For those who can't make any of these alternatives work, they may end up having no health insurance in 2017," he said. "This newly insured class will be right in the middle of the middle class."

Of more than 230,000 Tennesseans who bought coverage through the health insurance marketplace during last year's open enrollment period, nearly 28,600 didn't qualify for premium tax credits or cost-sharing subsidies to help with out-of-pocket costs, Centers for Medicare & Medicaid Services figures show.

BlueCross won about 69 percent of the insurance marketplace customers for this year; Cigna about 8.5 percent and Humana about 6.5 percent, state figures show. The nation's largest insurer, UnitedHealthcare, sold nearly 16 percent, but is exiting the public insurance marketplace in most states next year, including Tennessee and Arkansas.

BlueCross alone has more than 215,000 customers for individual coverage, of which 138,000, or about two-thirds, purchased through the health reform law's marketplace. More than 77,000 purchased outside of that marketplace, where no federal subsidies blunt the rising costs.

Tax credits, based on a sliding scale and family size, are available for people earning from 100 percent to 400 percent of the federal poverty level, which in 2015 ranged from $15,730 to $62,920 for a family of two. Because the subsidies are pegged to the price of a benchmark plan, they rise with the costs.

"While it is true that premium costs are increasing in Tennessee, the good news is that the amount of financial help available to a person is not only dependent upon their income and family size, but on the cost of plans in their areas, so that as rates go up, so does the amount of financial help available," Jacob Flowers, Memphis-based state director of Tennessee's Get Covered America campaign.

The health reform law forced insurers to provide coverage to people with pre-existing conditions, limited factors for raising prices, increased the benefits that must be provided and mad other dramatic changes that made individual insurance unfamiliar territory for insurers.

Companies cite higher costs than expected as insurance became available and affordable to previously uninsured, older and less healthy people while fewer younger and healthier people than hoped for signed up.

"We didn't fully understand this new market and we got the pricing wrong," Roy Vaughn, chief communication officer for BlueCross said by email.

BlueCross offered the lowest rates nationwide when the marketplace started in 2014 and offered "some of the lowest priced in the country for three years, even though Tennessee has one of the least healthy populations," Vaughn said.

After weathering losses in the individual market of $141 million in 2014, $170 million in 2015, losses this year are expected to bring the three-year total to $500 million, he said.

"The rates we proposed for 2017 are simply designed to cover our anticipated costs that year," Vaughn said.

In addition to increasing rates, BlueCross is citing uncertainty with Obamacare at the federal level for not yet deciding how it will participate in the 2017 HealthCare.gov insurance marketplace, with open enrollment starting Nov. 1.

Those uncertainties include possible elimination of the cost-sharing that reduces out-of-pocket costs for consumers, the expiration of risk programs to cushion insurers and potential action in Congress, where Republicans vow to repeal the law.

"We anticipate making a final decision in mid-September," says the insurer providing more than two-thirds of the coverage for Tennesseans through the act's health insurance marketplace.

Economic Professor Cyril Chang, at the Fogelman College of Business and Economics at the University of Memphis, said he's puzzled by the conflicting reports about the stability of the federal health insurance exchanges.

Earlier this month, the Centers for Medicare and Medicaid Services provided an optimistic analysis of that shows the "risk pools" of those insured are actually improving. Costs per customer in the Tennessee marketplace actually fell by at least 2 percent during the first two years and were generally flat elsewhere, Chang said by email.

If the analysis is correct, premium increases sought nationwide may stem from large losses in the first half of 2016 not covered by the data, insurers catching up for losses after initially underestimating costs, or in anticipation of future costs, Chang said.

"In any event, under Obamacare, insurers must pay out 85 percent of what they take in and refund the extra premium revenues if they have over-collected from rate payers," he said.

Expanding the risk pool, with additional younger and healthier people, for example, is needed for the long-term stability and viability of the exchanges, he said.

Meanwhile, Bob Rowe, a 61-year-old Memphis real estate broker, said the changes the Affordable Care Act brought about are a bitter pill to swallow for people who are self-employed and paying the full cost for health coverage.

The $1,300 per month he and his wife pay now for coverage will escalate to over $2,000 a month next year, which will included a deductible in the $10,000 range.

"I feel that BCBS (and perhaps the other insurers) are recouping last year's losses via the wallets of the self-employed and small business owners," Rowe said by email.

Tim Finnell, certified health care reform specialist at Group Benefits LLC in Memphis, said the individual market -- which stands on its own and is separate from the large-group and small-group insurance markets -- didn't get an influx as some expected from the small group market, for employers with under 50 employees.

Employers offering health insurance may see a rise in the number of dependents covered because employees who had been buying separate individual policies for family members may find group insurance more attractive, he said.

Finnell said these costs are driving the insurance cost increases, with drug costs as the biggest culprit.

"Drugs are by a mile the fastest growing segment in health care costs and I don't know how that can go unchecked," he said. "It's killing our clients."

With Republicans and Democrats sharply divided on the future of Obamacare, and with November's presidential election as a key deciding factor, Tucker said he'd like to see a compromise.

"Honestly I'm glad that I don't have to decide, but I think there's got to be a happy medium at some point," said the Memphis homebuilder. "I don't think I should bear the burden of everyone that's uninsurable when I'm complying, paying $1,200 a month and my total medical expenses this year so far are less than $2,000."

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