For the last three years, health insurers and health care providers have been preparing for the start of open enrollment for the Federal Health Insurance Exchange or Marketplace created by the Affordable Care Act (ACA). And for the last several months, insurers from coast-to-coast have been announcing their rates for the health plans which will be offered through this new health insurance market beginning on October 1.
As has been the case in most other states where ACA-conforming rates have been announced, the rates to be offered by Blue Cross and Blue Shield of North Carolina (BCBSNC) are lower than many had been expecting. That may be a bit of a surprise given that there will be only two competitors on the North Carolina exchange and only BCBSNC will offer plans in all 100 counties.
“The opportunity to participate on the exchange was open to any company in the country, so we find it curious that many of them chose not to invest in our state,” says Brad Wilson, president and CEO of BCBSNC, “but our obligation is to North Carolina, so we didn’t calibrate our engagement based on how many competitors there would be on the exchange.”
BCBSNC traces its roots back 80 years, when few people even had health insurance. Today, they cover one of every three people in North Carolina. They serve more than 3.75 million members and are the state’s largest health insurer. Their network includes more than 97 percent of medical doctors and 99 percent of hospitals in the state.
BCBSNC executives believe that after the subsidies are taken into account, over two-thirds of the people who are candidates for an ACA-compliant policy will see either a decrease in their cost of insurance or a very minor increase. They also point out that ACA plans will generally offer richer benefits than most of today’s individual market plans. BCBSNC thinks that these cost dynamics will be the primary factor in determining eventual participation rates.
Since many of the people who will buy through the ACA insurance marketplace have never bought health insurance before, education will be key to obtaining good participation rates. BCBSNC is helping educate the public through television commercials as well as their LetsTalkCost.com website, and meeting customers face-to-face through community events and meetings.
“We’re doing some unique things we’ve never done before,” acknowledges BCBSNC Vice President of Sales—Group Markets Steve Crist. “For example, we’re inviting people who don’t historically seek out health insurance to movie premieres where we spend anywhere from 10 to 15 minutes talking generically about the importance of insurance and how easy it is to get. We’re also opening our own storefront retail venues.”
The Political and Economic Costs
Ever since it was passed on March 23, 2010, the Affordable Care Act has been a political lightning rod. Due to their opposition to the Act, many states with Republican-controlled state governments—including North Carolina—have refused to set up their own state-based insurance exchanges, deferring to the federal government to establish and administer the exchange for their state.
Many of these same states—again including North Carolina—have also chosen to opt out the ACA’s expansion of Medicaid to individuals and families with incomes up to 133 percent of the poverty level. However, these individuals will still be eligible for subsidies when purchasing coverage on the federally run exchange.
Those two decisions by the North Carolina General Assembly have had differing impacts on the rollout of the ACA in the state. But, say Wilson and Crist, North Carolina’s decision not to operate a state-based exchange probably had little or no impact on the rates charged.
“I don’t think the lack of a state-based exchange has added to the cost of the insurance,” explains Chist, “it just takes away some of the flexibility and decision-making authority from our state government and puts it in the hands of the feds.
“Frankly, there were some theories that a federally facilitated exchange might be more inviting to national competitors like United Healthcare, Aetna and Cigna because they wouldn’t have to deal with the idiosyncrasies of a state-based exchange. But that did not prove to be the case.”
“Our corporate position from day one has been that a state-based exchange was in the best interest of North Carolina,” adds Wilson. “We believe that the government that is closest to you is typically the best.”
On the other hand, the BCBSNC executives argue North Carolina’s decision to opt out of Medicaid expansion has increased the rates that must be charged on the ACA exchange. They say the rates have to increase to cover the cost of providing care to people without the ability to pay.
“We think between 500,000 and 800,000 North Carolinians would have been covered by the Medicaid expansion,” explains Wilson. “But those people are still accessing care when they need it, so the demands and cost on the system did not go away just because North Carolina chose not to accept additional money from the federal government to pay for that care.
“Doctors and hospitals still are not being paid, which leaves a debt on their balance sheet that has to be made up by the private commercial side of the business.
“As long as people are showing up and getting care that is not paid for, it is going to manifest itself somewhere,” he continues. “The question is: Are we going to do it rationally and appropriately, or are we just going to let this unsustainable economic model continue?”
Another real risk with the insurance exchange is what insurers call “adverse selection,” where only those customers who are in immediate need of insurance actually sign up. Any insurance plan needs a diverse pool across which to spread the risk, so younger, healthier people need to sign up for the plans as well as the old and the sick.
The ACA addresses that situation through what is called the individual mandate—a requirement that every individual not covered by an employer-sponsored plan, Medicaid, or Medicare secure an approved private insurance policy or pay a penalty.
“We are fairly confident that those who need it the most are going to come onto the exchange—as they should,” says Wilson. “But I think one of the weaknesses of the ACA is the participation incentives for young, healthy people are not aggressive enough. There has to be enough incentive so that the cost of not participating outweighs the cost of the insurance.”
BCBSNC also worries that the negative political energy directed toward the ACA will have a negative effect on the participation rate. In fact, some interests that oppose the ACA have launched a campaign to persuade the young and healthy to boycott the exchanges to, in effect, sabotage the ACA by actually encouraging the adverse selection insurers fear most.
“There is so much political energy around it, our fear is this misinformation, coupled with the national ambivalence about the ACA, will keep people from signing up,” admits Crist.
Changing the Health Care Model
In addition to expanding the availability of coverage, the ACA was designed to make health care more affordable by driving innovation and moving providers away from fee-for-service arrangements to more outcome-based reimbursement models that reward higher quality and greater efficiency.
“There’s not a day that goes by that we don’t get a half dozen calls from providers saying they would like to do something collaboratively and differently,” offers Wilson. “Those trends have been initiated and accelerated by the passage of the legislation.”
One significant accomplishment along those lines has been the partnership between BCBSNC and UNC Health Care Systems in forming Carolina Advanced Health. Established in 2011, it resulted from collaboration between Wilson, then new to his role as CEO of BCBSNC, and Dr. Bill Roper, CEO of UNC Health Care and dean of the UNC School of Medicine, as they discussed ways post-health reform could “move the needle” and truly make a difference in health care delivery.
“We came up with the idea based on the patient-centered medical home model,” explains Wilson. “Now that Carolina Advanced Health is up and operational, it’s created a lot of buzz and we believe it will result in higher quality of care at a lower cost.”
The medical home concept was first introduced by the American Academy of Pediatrics (AAP) in 1967 and defined as the center of a child’s medical records in special health care needs situations. Over time, however, it has evolved to signify a home base for any patient, child or adult, family, and primary provider in cooperation with specialists and support from the community.
It has broad support in the medical community as an integral model for health care reform. In a rigorous discussion and analysis entitled The Strategy That Will Fix Health Care (Harvard Business Review, October 2013), authors Michael E. Porter and Thomas H. Lee describe the ultimate strategy for health care reform as maximizing value for patients by achieving the best outcomes at the lowest cost.
They maintain that it will require restructuring how health care delivery is organized, measured, and reimbursed, and they applaud the medical home concept as an important step toward establishing better-coordinated, team-based care that has the ability to improve outcomes and lower costs.
Carolina Advanced Health is certified as a Patient-Centered Medical Home (PCMH), the recognition for the most widely-adopted model for transforming primary care practices into medical homes. Established to help boost quality outcomes, streamline care and reduce medical costs, Roper describes the new practice as representing “the next generation of the PCMH.”
“This is just the beginning of what we hope will be a new era in personalized health care that leads to improved patient health, greater efficiency, and lower health care costs,” he says.
Specifically, doctors, nurses and other health professionals at the practice work together to manage every aspect of patient care to help improve the patient experience. The collaborative approach, aimed at improved health and quality standards and a reduction of complications among patients, will help reduce medical costs in the national transition from production-based to value-based medicine.
Practices that are certified as a PCMH must meet a wide range of standards for technology use, patient access, care plans, care coordination, measurement, and performance improvement. Interestingly, North Carolina is second only to California in PCMH designations, with over 30 percent of statewide primary care practices having received the PCMH certification.
Among the requirements for PCMH certification are electronic medical records, a capability that has proven to be a problem for smaller primary care physician offices that lack the capital to install the necessary systems. However, BCBSNC partnered with health care technology provider Allscripts to offer their electronic solution at cost and provide training and maintenance for a year with BCBSNC paying for 85 percent of the cost for physicians’ offices and 100 percent of the cost for 39 of the state’s free medical clinics.
The Spirit of Collaboration
“Establishing the new clinic didn’t have that many challenges or anything insurmountable,” explains Wilson. “The first step was deciding that these two organizations would come together on this project. If you think about it classically, a health insurer and a major academic medical center typically don’t come together to build things. Once we decided we had the spirit and the will to work together and bring this to pass, the hard work started.
“Along the way, there were bumps in the road on very important issues like governance, how to pay providers working in the clinic, what kind of technology to employ, and how to handle specialty referrals. There were lots of important conversations. The key agreed-upon aspect of the project from the onset was that failure wasn’t an option.
“When we got to a tough place, we stayed together, kept working, and found a solution. Then we moved down the road. All the teams that brought this clinic into being did exactly that. The work got done.”
Carolina Advanced Health is currently available to about 5,000 eligible BCBSNC members, adults 18 to 62 with chronic illnesses. “The parameters were necessary,” says Wilson, “to make sure we had a well-defined population that we could accommodate and not lose our focus trying to determine best practices. As we learn what’s working well, we certainly intend to translate that into other age categories and populations.”
Addressing the future of health care reform, both Wilson and Crist say the ACA is helping to drive more incentive-based wellness programs like the one available to BCBSNC employees. In that plan, each employee can earn up to $750 per year by achieving health goals set in a personalized health risk assessment. An employee’s goal might be weight loss, cholesterol management, blood pressure management, or a combination of goals.
“The fascinating conversation is going to be a year from now when we have a full 12 months under our belt,” admits Wilson. “We’re getting ready to go to school here, and while most of our assumptions are fact-based, there has still been a lot of intuition involved.”
He also suspects that other national competitors will take a look at the data after the first year and may opt to enter select markets where they believe the opportunity for reward is the greatest.
“I’m optimistic about the future,” concludes Wilson. “I believe that we are at the beginning of a revolution, and in 10 years we will have a better system of care delivery and finance in this country.
“I think it is going to look dramatically different than even what we’re talking about today, and I’m not sure exactly what it will look like, but we all have to get beyond the political acrimony that is consuming so much energy.
“We need to focus on making sure that we as Americans become healthier and know how to use the system that will be created over the next 10 years—both for the financial well being of our nation as well as our overall health,” asserts Wilson.
Photo by Wayne Morris