Tuesday is the day tens of thousands of Kansas City-area consumers can begin signing up for 2017 health insurance coverage through the Affordable Care Act.
Many of them will suffer sticker shock.
Kansas Citian Joyce Thompson, who has purchased her policy through the online federal marketplace for the last three years, will see her monthly premium more than double — from $406 to about $900.
“And it’s not exactly the same plan because the deductible is higher,” said Thompson, 60. “But thank God they are still here.”
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By “they,” Thompson meant Blue Cross and Blue Shield of Kansas City, one of a dwindling number of insurers still participating in the HealthCare.gov marketplace that provides coverage options for people in Missouri, Kansas and other states that aren’t operating their own health insurance exchanges.
Like many individuals who turned to what’s popularly called Obamacare to get health coverage, Thompson earns too much to qualify for a federal subsidy to defray her costs.
But while almost all insurance customers — on the ACA marketplace and in the open market — will see cost increases or tighter benefits for 2017, “the person who gets subsidies won’t feel as bad as those who don’t,” predicted Ron Rowe, Blue KC’s senior vice president of sales and marketing.
In fact, up to 90 percent of those nationally who do get subsidies, the Department of Health and Human Services points out, will see little or no increase in out-of-pocket costs for their coverage and will still be able to find insurance for less than $100 a month.
However, that means taxpayers in general will make up for the higher subsidies needed to limit the premium increases.
In the Kansas City area, Blue KC’s individual and family plan consumers — on and off the exchange — will see average rate increases ranging from 13 percent to 42 percent. And the jumps would have been higher if area hospitals hadn’t agreed to accept lower reimbursement rates next year, Rowe said.
The sticker shock that many will feel was inevitable, here and nationwide, said Cary Hall, an insurance broker with Benefits by Design.
“Carriers have pulled off the exchange after experiencing hundreds of millions of dollars in losses in the first three years,” Hall said of the national situation. “The problem is the way the system was designed. It was expected that young, healthy people would balance the books, but 11 million millennials didn’t get the memo. They’re not buying insurance, and instead a massive amount of people with medical issues were dumped on these (ACA) plans.
“Now we have very few policy choices, and consumers are getting hit with huge rate increases because it’s not a sustainable system.”
Blue KC is the sole insurer participating in the ACA marketplace in 25 of the 30 western Missouri counties where Blue KC operates. In the five Missouri counties where Blue KC has competition on the ACA exchange, Cigna and Humana are offering plans.
On the Kansas side of the metro area, Blue KC operates only in Johnson and Wyandotte counties, and is joined on the ACA exchange solely by Medica Insurance.
(Anthem, Cigna and Humana participate in the ACA exchange for consumers outside of Blue KC’s 30 counties in Missouri. In Kansas, the other ACA insurers outside of Blue KC’s two counties are BlueCross BlueShield Kansas Solutions and Medica.)
All of the insurers are raising prices for 2017.
Because of Blue KC’s dominance in the local market, the information its policy holders receive when they plug their individual data into HealthCare.gov is broadly indicative of local cost increases.
First, here are some numbers to put the local trend in context:
Blue KC has about 100,000 policy members. About 30,000 of them kept the insurance plans they had before ACA introduction. About 70,000 of them bought ACA plans. Among those 70,000, about 40,000 qualified for federal subsidies, leaving about 30,000, like Thompson, to shoulder premium increases on their own.
Rowe helped with some back-of-the-napkin figures to explain the situation. Start with the fact that, for 2016 coverage, the majority of Blue KC customers with qualifying ACA plans paid less than $75 a month out of their own pockets.
The government — meaning taxpayers at large — picked up most of the premium tab, or for the sake of this example, $375 a month out of the $450 total cost.
“In other words, this subsidized person is paying 16 percent of the premium this year,” Rowe said.
Take the worst-case rate increase of 42 percent for next year and apply it to that example. The cost then rises to $639. If the subsidized person still pays 16 percent of the total cost, that individual share jumps to $102 instead of $75 a month.
“But we don’t yet know if the person will still be asked to pay 16 percent,” Rowe said. “It could go up or down.”
The subsidy rate, by ACA rules, is tied to the cost of the second-lowest cost of a silver-level plan on the exchange and thus varies by location according to the plans being offered. The subsidy size also varies according to consumers’ incomes.
When exact numbers are clear for each policyholder, “there will be folks who say they can’t afford this any more,” Rowe predicted. “They’ll opt out of the qualifying plan, maybe opting for a short-term security plan” (that doesn’t qualify as adequate coverage under federal rules) and “pay the penalty at the end of the year.”
The penalty for failing to have adequate health insurance next year is $695 or more, based on a person’s income.
That relatively modest penalty — compared to the annual cost of insurance — is part of the problem. Insurers say the penalty — assessed by the Internal Revenue Service via people’s tax filings — generally hasn’t proved steep enough to induce plan participation.
“If the penalty had more teeth, we’d probably get more people in the (insurance) pool,” Rowe said.
As it is, four years into Obamacare, younger and healthier people haven’t bought health insurance, and the ACA insurers — required to accept all comers regardless of prior health conditions — were left with older, sicker and more expensive customers.
Rowe said Blue KC is “definitely having conversations” with the U.S. Department of Health and Human Services and other ACA stakeholders about changing the penalty schedule. But that requires Congressional action, unlike some other ACA amendments that can be handled administratively.
Insurance broker Hall criticized Congress for failure to set big enough penalties to persuade people to buy insurance.
“They didn’t want to deal with the backlash, so they created a bad structure,” Hall said. “There should have been a significant penalty.”
Here’s another consumer note concerning those 30,000 Blue KC customers who kept the insurance plans they had before the ACA went into effect. The law, as it now stands, sets Dec. 31, 2017, as the final date to be able to keep their old plans under what was called “transitional relief.”
Rowe said a transitional relief extension would require only an administrative change, not Congress. He said that extension is doable enough, that he put it in the category of good news, a bright spot at a time when most other health insurance-related news is dark.