Even with a rate increase recently approved by the North Dakota Insurance Department, the cost of health care for the nearly 30,000 members of Blue Cross Blue Shield of North Dakota individual health products groups will be significantly more than BCBSND will collect in premiums over the next year.
Over the past 29 months, BCBSND paid out more claims for this line of business than it collected from member premiums. The premiums also did not cover the cost of paying those claims, for a total loss to BCBSND of $20.6 million. Despite the loss, BCBSND did not pursue a premium increase that would totally cover the anticipated claims for the next year. Instead, the organization is spreading the increases over a three-year period.
The reason? "Spreading the increase was done out of concern for members to continue to afford coverage," said BCBSND President and CEO Paul von Ebers. "We understand the impact on our members and are committed to being part of the solution. The new Sustainable Health Initiative that we and health care organizations across the state announced in January is one step to help providers work with their patients to better manage their health and outcomes. While North Dakotans pay some of the lowest cost for health insurance premiums in the nation, we know that having to pay more for health insurance is a significant burden for many families."
The Sustainable Health Initiative, a collaborative effort between BCBSND and North Dakota health care providers, is working to reduce medical inflation by moving to a different payment method and incentives. The immediate goal is to impact the average rate of medical inflation over the next three years. The long-term goal is to sustain the health care system across North Dakota.
Additionally, BCBSND is committed to operational efficiency. It has actually reduced administrative expenses over the past two years by 6 percent. In 2010, BCBSND spent 91 cents on member claims, 6.8 cents on member wellness programs and expenses necessary to pay member claims (the national average is 14 cents), 1.2 cents for taxes and government fees. As a result, BCBSND ended 2010 with a net gain on the business of insurance of 1 percent, which was put into reserves so that the company will be able to pay claims even if a major health event occurs like a major flu epidemic.
"The cost of insurance reflects the cost of claims, and we process those claims more efficiently than most other insurance companies. The reality is that all our members are using more costly medical services, more often, so the cost for premiums is going up," von Ebers explained. "We know our current system, with this rate of medical inflation, is simply unsustainable."
Due to health care reform, members rates vary if 1) they had policies prior to the passage of the Affordable Care Act (ACA), 2) they purchased policies after the passage of ACA but before Sept. 24, 2010; and if 3) they purchased policies after Sept. 24, 2010. For the largest group of individual members, members who purchased policies before the passage of ACA, the new approved premium base rate is more than 14 percent, which is much lower than the rate necessary to cover the amount of claims, or 23 percent.
- Without this current increase, the individual product line would have lost $1.5 million per month—a total of almost $20 million in 2011. With the increase, the loss will be $6.3 million.
- Premium rates are calculated using the projected amount of medical services likely to be used by members based on history and trends.
- All increases have to be approved by the North Dakota Insurance Department.
Blue Cross Blue Shield of North Dakota, a not-for-profit mutual company, serves more than 56 percent of the state's population, providing health coverage and related benefits to more than 460,000 members. BCBSND is an independent licensee of the Blue Cross and Blue Shield Association.