Supreme Court Decision on ACA Stabilization Program is a Big Win for Blue Cross NC Customers

It’s remarkable to consider how much American life has changed since 2014 – really a very short time ago. Things that were considered groundbreaking just six years ago are everywhere today: smartwatches, streaming television, ridesharing, drone cameras.

In health care, the most significant change in 2014 was the implementation of the Patient Protection and Affordable Care Act (ACA), which is very familiar to Americans today. The ACA has expanded access to health insurance, and that’s a good thing for all of us.

When more people can get health care, there is a better chance that health issues can be addressed before they become chronic – and costly for everyone. COVID-19 has caused many North Carolinians to lose their employer-sponsored health insurance, highlighting the importance of making coverage available to those whose only option is an ACA plan.

But the implementation of the ACA was not without difficulties. Beyond technical glitches with the federal enrollment website, there were financial problems for many insurers – including Blue Cross and Blue Shield of North Carolina (Blue Cross NC). Our company lost more than $450 million from 2014 through 2016, the first three years the ACA was in place in our state.

Risk Corridor: An Insurance Policy for Insurers

There are a number of complex reasons for the losses incurred by insurance companies during the initial years after implementation, but the basic explanation is fairly simple: ACA customers’ medical claims were much higher than the premiums they were paying.

The ACA legislation foresaw the potential for these losses during the initial years of implementation. Many ACA customers’ health status was a mystery and it was likely there would be pent-up demand for health care among a population that hadn’t had access to insured medical care for many years. To address these issues, the law called for a temporary program to provide financial stability for insurers and consumers called the “risk corridor” program. Through the risk corridor program, the government would share losses and gains (to the extent there were any) with insurers. This was designed to enable insurers to continue offering ACA plans without facing unsustainable financial losses.

Other insurers pulled out of the ACA market in our state. Despite our company’s significant financial losses in the early years of the ACA, Blue Cross NC has been and continues to be the only insurer offering ACA plans in all 100 counties of North Carolina. As a not-for-profit company that does not answer to shareholders, our mission is a commitment to improve the health and well-being of our customers and communities. For us, the question of whether to offer ACA plans across the state was answered by our mission. 

Advocating for Our Customers

The risk corridor program gave us some reassurance that we could weather short-term ACA losses to achieve long-term sustainability. But the federal government didn’t make the reimbursement payments for our losses in 2014, 2015 and 2016. Everything we do is for our customers, so we looked at these payments as amounts that should be collected on their behalf.

Blue Cross NC joined other insurers in a lawsuit to enforce the contractual obligation of the ACA to make the risk corridor payments. The case was heard by the United States Supreme Court, which ruled in favor of consumers in April 2020. Blue Cross NC will pass the money to our customers in two forms. 

A portion of the risk corridor money is being used to lower 2021 premiums for our individual, under-65 members because we believe that driving affordability for our customers is a critical part of our mission. But the majority of the funds – about $200 million – will be distributed in the form of health and wellness cards to more than 600,000 eligible subscribers across the state.

The health and wellness cards will be pre-loaded with funds that will help individuals and families prioritize and support health and wellness during the ongoing COVID-19 pandemic. We chose health and wellness cards as the fastest and most flexible way to deliver the risk corridor funds to our customers. The cards can be used for health-related expenses such as over-the-counter medications, healthy foods, first aid and baby care items, exercise equipment and vitamins at retailers like Walmart, Walgreens, CVS, Rite Aid, Dollar General and Family Dollar. The cards cannot be used to pay for prescription drugs, tobacco, alcohol or firearms.

Eligible subscribers are those enrolled in individual under-65 and fully insured employer plans, including vision and dental plans. These customers will receive a health and wellness card with a balance between $100 and $500 depending on the products in which they’re enrolled. They can expect to receive their cards in the mail between October 19 and November 7.

More Work to Do on Costs

While plenty of risks remain, the market has taken significant steps toward stabilizing since those first several years of the ACA. We are particularly proud that we have lowered individual ACA premiums for three straight years, including an average decrease of about one percent for 2021. This adds up to 10% in decreases over the three-years since 2018, totaling nearly $1 billion in cumulative savings for our customers over this period.

Even with the strong actions we have taken, including our most recent steps, we know health care still costs too much; we have more work to do. And we’re up for the challenge. Blue Cross NC will continue to work hard for our customers and communities every day – pursuing our goal of better, simpler, more affordable health care.