NC’s cost of obstinance of Obamacare

Editorial by Ned Barnett, News and Observer, October 6, 2013.

Many North Carolinians were frustrated by glitches at healthcare.gov last week as they tried to shop online for health insurance, but none was more miffed than North Carolina Insurance Commissioner Wayne Goodwin.

The mission of Goodwin’s department is to help people with insurance, but in this case it could do almost nothing. The General Assembly, in a fit of pique against the Affordable Care Act lawmakers deride as “Obamacare,” barred the state from any participation in the rollout of the historic effort to insure the nation’s 48 million uninsured. The Republican-led legislature and Republican Gov. Pat McCrory rejected billions of dollars in federal aid to expand Medicaid to about 500,000 low-income state residents. They also refused to set up a state-run marketplace to sell insurance to individuals. North Carolina left that job to the federal government.

The state’s decision not to participate in “Obamacare” means Goodwin’s department was barred from setting up a more nimble exchange focused on North Carolina’s needs. It also meant forgoing $27 million in federal money that would have supported efforts by the Department of Insurance to educate and assist about 700,000 North Carolinians who are expected to shop for insurance on the exchanges.

“It’s extremely frustrating that we can’t help,” Goodwin said.

Goodwin, a Democrat and a former state legislator, was eager to set up an exchange that could attract more insurance companies and offer advice on the new health care law. Involvement by the state likely would have produced plans better tailored to the state’s needs and with more coverage per premium dollar. As it was, a basic compliance review of plans being offered by Blue Cross and Blue Shield found an error in the numbers, faulty assumptions and a benefit not required under the new law. As a result, Blue Cross policies went onto the exchange at rates 10 percent lower than originally proposed.

Imagine what might have been if the Department of Insurance was fully involved. Goodwin has.

“I firmly believe that if it had been a North Carolina exchange, most of the components would have functioned much more efficiently and at a better cost,” he said.

The folly and cruelty of refusing the Medicaid expansion have been much discussed. But the cost of also saying no to a state-run exchange has not been so apparent or much debated. Its effects didn’t begin to materialize until last week, when Blue Cross and Blue Shield and Coventry Health Care posted their plans and premium prices on the North Carolina exchange being run by the federal government.

Considering the meager competition – Blue Cross is the only statewide provider, and Coventry is offering plans in only 39 of the state’s 100 counties – the premium prices are surprisingly reasonable after federal subsidies are included. But while rates may be affordable, it’s harder to calculate how much may be missing from North Carolina plans compared with those at the same price in states that fully cooperated with the new law.

North Carolinians who buy insurance through the exchange will pay more because of the Republicans’ temper tantrum. The extra cost is a mix of hard and soft numbers. One hard number is 3.5 percent. That’s the percentage the federal government adds to premiums to cover its cost for running an exchange. If North Carolina had run its own, the cost could have been lower and broadly dispersed across the state’s tax base – an allocation from the general fund, for instance – with little or no effect on premiums.

On top of the 3.5 percent are higher premium rates attributable to diminished competition. The idea behind the health care law is that putting more younger and healthier people into the risk pool will attract more insurance companies, and their competition will keep rates as low as possible. But in North Carolina, that competition was discouraged by the state’s lack of involvement. Companies prefer doing business with a state-run exchange in which state officials know the market and can help companies fashion policies that fit it.

“We really believe that health care is local,” said Susan Millerick, a spokeswoman for Aetna, which recently acquired Coventry. “There is definitely value in having a state-run exchange because the state knows the state’s needs.”

Insurance companies were also wary of North Carolina because it refused to expand Medicaid, meaning thousands of people whose incomes are between 100 and 138 percent of the federal poverty level were not picked up as planned. Instead, they will go to the exchange. Because lower income people tend to have less preventative care and more chronic illness, the redirecting of those near the poverty level made the state’s risk pool riskier and less attractive to insurance companies. A Rand Corp. report estimated that failure to expand Medicaid in three states – Texas, Louisiana and Florida – would increase premium rates on their exchanges by 8 percent to 10 percent.

It’s not too late to fix the problem. The legislature can still accept the Medicaid expansion, and it can set up a state exchange and let North Carolina’s state insurance experts help North Carolinians. But federal funds that support those moves will dry up before long.

It’s up to the Republicans in power. They can get with the program or they can stay on the barricades long after Obamacare has come through and let North Carolinians keep paying the price of their protest.