The opening of the North Carolina Health Insurance Exchange as mandated by healthcare reform legislation is quickly approaching. It is expected to be in place by 2014, per federal regulations. However, if NC government doesn’t establish its own exchange, then the federal government will administer the program to North Carolinians. The primary purpose of the exchange is to provide easy comparisons between plans and companies, to require a minimum benefit threshold, and to facilitate premium subsidies based on income. The exchange will have the largest impact on individuals and families who purchase their health insurance for themselves.
The exchange model is a well-conceived idea, as long as insurance company complaint ratios, plan ratings, and network density are provided along with the typical copay and deductible comparisons. This is important because complaint ratios give a strong indicator of a health insurance company’s conduct and its customer’s satisfaction. Also, it will be important that those agents or plan navigators who help consumers decide between plans, be aware of plan limitations or exclusions, so that fair and accurate comparisons can be made between health insurance companies and their plans. If the agents or navigators assigned to assist with exchange based plans aren’t knowledgeable about these nuances, then it would be best for those who purchase through the exchange to already be well versed on health insurance and to read the full policy before purchasing a plan. Those who are not experienced at this level would be best served to contact an agent for guidance.
Plans offered through the exchanges will be categorized into four benefit levels: bronze, silver, gold, and platinum. Insurance companies who offer plans through the exchange must offer a plan in both the silver and gold benefit levels. The meaning of each level is the actuarial value of the plan. Plans must pay for a defined average percentage of medical costs as follows: bronze plans pay an average of 60%, silver plans pay 70%, gold plans pay 80%, and platinum plans pay 90%. These rigid guidelines mean that plans offered through the exchange are likely to be very expensive, and even more so for young adults due to rate range compression.
The expense of plans offered through the exchange will be offset for those who are eligible for income based subsidies. Subsidies are offered based on the number and total income of those in your household. So those who make up to 133% of the Federal Poverty Level (FPL) must pay 2% of their income towards the health insurance premium and the rest is paid by the government. Those who make between 133% and 150% FPL must pay 3-4% of their income. Those who make between 200% and 250% FPL must pay 4-6.3% of their income. Those who make between 250% and 300% FPL will pay 8.05-9.5% of their income, and those who make between 300% and 400% of the FPL will pay 9.5% of their income towards the health insurance premium. So, using 2012 FPL numbers, a person who makes 133% FPL or $14,856.10 per year would pay $297.12 per year or $24.76 per month. At 150%, this person would pay $55.85 per month. At 250%, this person would pay $146.61 per month, and at 300% FPL the person would pay $265.29 per month and at 400% FPL they would pay $353.72 per month.
These premium levels are very affordable at lower income levels, but quickly balloon as income increases. If private companies offer separate plans outside of the exchange at more competitive rates, these plans will likely attract many subscribers. Furthermore, if the plans outside of the exchange are permitted to rate and or decline applicants based on health, then these plans will be composed of subscribers who are more healthy than the average pool of subscribers inside the exchange, because inside the exchange, premium is based on income and not health. As a result, it seems very likely that health insurance exchanges will attract those with lower incomes and those with health risks.
In conclusion, assuming that insurance companies are allowed to offer plans outside the exchange in separate risk pools and if they are able to rate and decline applicants, it seems that the net effect of health insurance exchanges will be to provide coverage for those with higher health risks and for those who previously weren’t able to afford coverage. In this way, exchanges will successfully increase the number of insured people in North Carolina.
David Goebelt has been a health insurance agent with Blue Cross Raleigh NC since 2006, of which two years were spent brokering with a variety of health insurance companies. His offices are located at Blue Cross Blue Shield Raleigh North Carolina Agency - Goebelt Health Insurance Raleigh NC , Inc. , 212 South Tryon Street, Suite 1605, Charlotte, NC 28281, 704-733-9015.