King v. Burwell – subsidies are safe
The Supreme Court ruled on June 25 that subsidies are legal in every state, regardless of whether the exchange is run by the state or federal government. That means 16,000 people in South Dakota no longer have to worry about their subsidies evaporating. If the Court had ruled that subsidies could only be provided by state-run exchanges, coverage for many of those 16,000 South Dakota residents would have become unaffordable; the Kaiser Family Foundation estimates that their premiums would have increased an average of 178 percent if their subsidies had been eliminated.
In addition, the loss of subsidies would have destabilized the entire individual market in states like South Dakota that rely on the federally-run exchange. The Urban Institute had projected that even for people who don’t currently receive subsidies, premiums would have increased by 55 percent – in addition to the regular annual rate increases based on medical cost inflation – if subsidies had been eliminated. And the size of the individual market insurance pool would have dropped by 70 percent, with most of the current insureds joining the ranks of the uninsured.
In short, the Court’s ruling to uphold subsidies is very good news for the residents, insurance carriers, and medical providers in South Dakota and across the country.
Healthcare.gov has a rating tool that displays proposed rates with increases of at least 10 percent (single-digit proposed rate increases are not included), and there are eight individual exchange plans in South Dakota that have requested rate increases of ten percent or more. Sanford and Avera both have one plan with a proposed rate increase of a little over 13 percent. DAKOTACARE (SD State Medical Holding Co. Inc.) has six plans with an average proposed rate increase of 18 percent.
By far the highest proposed rate increases for 2016 in South Dakota are from Wellmark – the carrier has requested an average rate increase of nearly 43 percent. But Wellmark doesn’t sell plans on the exchange, so their rate increases will only impact off-exchange plans.
No rates have been finalized yet, and regulators will review each carrier’s proposed rates this summer to determine whether they need to be adjusted. In general, carriers have cited higher-than-expected claims costs for 2014 enrollees as a reason for the proposed premium increases, but some experts believe that the “pent-up” demand for healthcare in that group of enrollees will not continue to be seen in future years, since 2014 enrollees were more likely to have been previously uninsured.
Also, it’s important to remember that the average premium in South Dakota decreased in 2015, and the possibility of higher rate hikes for 2016 have to be viewed with that in mind.
As long as subsidies remain available after the King case is resolved, they will absorb most of the rate increases. It will be important for consumers to shop around during open enrollment (November 1 to January 31) however, as subsidies are tied to the second-lowest-cost silver plan in each area, and that “benchmark” plan can change from one year to the next.
21,393 people had enrolled in private plans through the exchange in South Dakota as of the end of open enrollment on February 22. This was a 63 percent increase from the total enrollment at the end of the 2014 open enrollment period last April. Of the 21,393 people who enrolled for 2015, 86 percent are receiving premium subsidies. 53 percent of the 2015 enrollees were renewing coverage from 2014, while the other 47 percent were new to the exchange this year.
Enrollment in South Dakota for 2015 was the fourth lowest among states with HHS-run exchanges – North Dakota, Alaska, and Wyoming all had lower total enrollment.
In addition, 2,861 South Dakota residents enrolled in Medicaid or CHIP through the exchange between November 15 and February 22. Medicaid enrollment continues year-round, but tends to peak during the general open enrollment due to the additional outreach and exchange marketing.
Open enrollment has ended for 2015, although there’s a special enrollment period from March 15 to April 30 for people who didn’t know about the ACA’s penalty for being uninsured, and find out about it when they file their taxes. Otherwise, you can only purchase a plan for 2015 (in or out of the exchange) if you have a qualifying event.
Lower rates for 2015
In 2015, three insurers are offering policies through the marketplace in South Dakota: Avera Health Plans, Sanford Health Plan, and DAKOTACARE. The three companies are offering a total of 38 options for individuals and families.
Although there are no new carriers in the South Dakota exchange in 2015, the three existing carriers are offering a variety of plans, including some new HSA-qualified options from Avera and an Avera plan that gives insureds lower out-of-pocket costs if they use an Avera provider.
The South Dakota Division of Insurance announced in their fall 2014 newsletter that 2015 rates were available on their website. The page includes links to all of the participating medical and dental carriers, as well as a searchable rates page and summaries that show minimum, maximum, and average rates based on age and location within the state.
According to a report released by the U.S. Department of Health and Human Services (HHS), the average cost for a bronze plan —the lowest-cost option — in South Dakota is $298 a month in 2014. The national average for a bronze policy was $249 a month in 2014. The lack of competition is one of the main reasons South Dakota’s premiums are higher than the nation average.
But the news is much better for 2015. A Commonwealth Fund analysis of average premiums across all metal levels for a 40 year-old non-smoker found an average premium decrease of 21 percent in South Dakota from 2014 to 2015. And an interactive map from the NY Times Upshot shows that in most areas of the state, people who switch from the benchmark (second lowest-cost silver) plan last year to the new benchmark plan for 2015 can see premium decreases.
When we include both on and off-exchange plans and look at the entire individual market in South Dakota, the average premium increase for 2015 is 2 percent, as calculated by PricewaterhouseCooper LLC. This is still dramatically lower than the nationwide historical trend for the individual market.
Insurance ballot initiative making headlines
South Dakota has been in the national news this fall because of a ballot initiative pertaining to health insurance networks that voters overwhelmingly approved in November. Amendment 17 was billed by supporters as “freedom to choose your doctor” but critics point out that it’s not as simple as proponents make it seem. Doctors and small or specialty hospitals were generally in favor of Amendment 17, while large insurers (including Sanford and Avera) and hospital networks were opposed. Ultimately, the measure passed 62 percent to 28 percent.
This does not mean that patients can choose any doctor they want though. Rather, it means that any doctor who is willing and able to comply with the terms and conditions of the health insurance carrier could enter the carrier’s network.
Because narrower networks have become commonplace over the last year, policy experts in other states were closely watching the outcome of the SD ballot initiative. A total of 27 states have “any willing provider” laws on their books, although only about half of them are as broad as South Dakota’s.
Three nonprofits providing enrollment help
Open enrollment began November 15 and runs through February 15. Three nonprofit agencies in South Dakota have navigators who can assist residents with their enrollments. Great Plains Tribal Chairmen’s Health Board, Community Healthcare Association of the Dakotas, and Community Action Partnership have all received funds to allow them to provide enrollment assistance at various places around the state.
Wellmark avoids SD exchange, still #1 in sales
Wellmark Blue Cross Blue Shield had 73 percent of the market share in South Dakota prior to the 2014 open enrollment period, but the insurance giant opted to stay out of the exchange in 2014, and has decided to avoid the exchange again in 2015. People who wish to purchase coverage from the state’s largest insurer must do so off-exchange, without the ACA’s subsidies. It appears that Wellmark may join the exchange in South Dakota in 2016; open enrollment for 2016 is scheduled to begin on October 1, 2015.
Despite that caveat, Wellmark says it sold more policies outside the exchange in South Dakota in 2014 than the two on-exchange carriers combined (new policies sold outside the exchange are still fully compliant with the ACA).
So exchange enrollment low in 2014
13,104 people had enrolled in private plans in the South Dakota exchange by April 19, at the end of the first open enrollment period. Of those enrollees, 11,000 selected plans from Avera. Sanford enrolled 2,262 people and had another 500 applicants whose enrollment was pending because of unpaid premiums.
During the first half of the 2014 open enrollment period (October 1 – December 24), the large majority of the enrollments in South Dakota were with Avera (1,889). Sanford reported 629 enrollees by December 24, while DAKOTACARE – which is focusing more on the small group market – had fewer than 50 enrollees. The carriers have not yet released total enrollment numbers for the second half of open enrollment.
89 percent of South Dakota residents who enrolled in the exchange during the 2014 open enrollment period received a premium tax credit, and the average after-subsidy premium was $101 per month – a 73 percent reduction from the $372 per month average pre-subsidy premium.
But during the 2014 open enrollment period, only 11.1 percent of South Dakota’s subsidy-eligible residents enrolled in coverage through the exchange – tying Iowa for the lowest percentage in the nation.
The fact that Wellmark did not participate in the exchange is cited as one of the reasons for the low enrollment in the state. The carrier’s huge market share and name recognition coupled with the fact that existing Wellmark members had no means of keeping their carrier and also obtaining subsidies, meant that enrollment lagged behind the rest of the country in South Dakota.
No Medicaid expansion
3,850 exchange applicants enrolled in the state’s Medicaid program by mid-April, qualifying under the state’s existing eligibility guidelines. South Dakota has not expanded Medicaid under the ACA, although Governor Dennis Daugaard has twice submitted a proposal to HHS for a waiver that would allow the state to expand Medicaid to people with incomes up to 100% of poverty level, instead of 138% of poverty level. As of mid-January, Daugaard is still holding firm with his position, pushing for Medicaid expansion just for people with incomes below 100 percent of the poverty level.
HHS has rejected Daugaard’s proposals though, saying that expansion must extend to people with incomes between 100% and 138% of poverty level in order to be approved. Because the state has not accepted federal funds to expand Medicaid, 26,000 South Dakota residents fall into the coverage gap – they earn too much money to qualify for Medicaid, but too little to qualify for subsidies in the exchange.
As of late October, 45 percent of surveyed South Dakota residents said they favored Medicaid expansion, while just 37 percent opposed it.
The decision to not expand Medicaid disproportionately affects the Native American population in South Dakota. Officials estimate that there are 14,000 Native Americans who would gain access to Medicaid if the state were to expand the program. This includes people who earn between 100 percent and 138 percent of poverty and are currently eligible for subsidies in the exchange. Many of them have not opted for private exchange plans though, for a variety of economic and cultural reasons.
But uninsured rate lower than average
Despite the lackluster exchange enrollment and the state’s refusal to expand Medicaid, the uninsured rate in South Dakota is lower than the national average. In South Dakota, 14 percent of the population was uninsured in 2013, and that number had dropped to 11.3 percent by mid-2014 (the average for states that did not expand Medicaid and also opted to have HHS run their exchanges was 16.5 percent by mid-2014).
Grandmothered plans can renew
On November 26, 2013 the state announced that it would allow carriers to extend existing policies per President Obama’s suggestion that non-compliant plans be allowed to remain in effect for one more year. Sanford, Wellmark and DAKOTACARE all opted to allow existing policies to be renewed into 2014, giving insureds another option to compare with the new 2014 plans.
The state also accepted the HHS proposal to allow those plans to renew again in late 2014.
Exchange history and outreach
Gov. Daugaard announced in late September 2012 that HHS would be running the state’s exchange, citing the high cost — estimated at $6.3 to $7.7 million — for ongoing operation of the exchange.
The state is not playing any role in promoting the new health insurance options or educating consumers about the marketplace. That decision leaves outreach efforts to the insurers and federally funded “navigators.” Navigators are affiliated with established community outreach and advocacy groups, and they are trained to help consumers understand and use the new online marketplace.
South Dakota health insurance exchange links
State Exchange Profile: South Dakota
The Henry J. Kaiser Family Foundation overview of South Dakota’s progress toward creating a state health insurance exchange.