Alabama uses the federally-facilitated marketplace, which means residents enroll in exchange plans through Healthcare.gov.
Blue Cross Blue Shield of Alabama is the only health insurance carrier offering plans in the Alabama exchange in 2017, but they already insured the majority of the state’s exchange enrollees. Their rates increased by an average of 36 percent in 2017, but subsidies offset that for the vast majority of Alabama’s exchange enrollees.
In 2015, Blue Cross Blue Shield of Alabama spent $1.20 in medical claims for every $1 they collected in premiums, which is clearly unsustainable. Their medical loss ratio improved in 2016, when they spent 98 cents of each premium dollar on medical claims. Although that’s more sustainable, it still doesn’t leave enough left over to cover administrative expenses. The 36 percent rate increase for 2017 is an effort to make premiums more closely mirror the cost of paying for health care in Alabama.
However, enrollment during the 2017 open enrollment period was 8.5 percent lower than it had been the year before. 178,414 people enrolled for 2017, down from 195,055 in 2016. Average enrollment declined by about 5 percent across all states that use HealthCare.gov, due in part to uncertainty about the future of the ACA, and the Trump Administration’s decision to cut advertising for HealthCare.gov in the final week of open enrollment.
The average pre-subsidy premium in Alabama’s exchange in 2017 is $575/month, which is considerably higher than the $476/month average across all states that use the federally-run exchange. But 90 percent of Alabama exchange enrollees are receiving premium subsidies, and their average after-subsidy premium is just $111/month.
Is Alabama’s exchange in a death spiral?
There has been considerable talk about whether the ACA exchanges are in a “death spiral.” That describes what happens when premium increase substantially, leading healthy people to drop their coverage. In turn, that begets more rate increases, since the risk pool becomes more skewed toward the unhealthy end of the spectrum (sick people will keep their coverage and pay the higher premiums, since they have no other choice). The cycle continues on until the risk pool collapses due to unsustainably high premiums and sick enrollees.
The ACA’s premium subsidies provide significant protection against this phenomenon, since they grow to keep pace with increasing premiums. That prevents healthy people from dropping out of the risk pool, even when pre-subsidy premiums climb sharply (it doesn’t help to keep people with income above 400 percent of the poverty level insured, however, since they aren’t eligible for ACA subsidies).
That said, Alabama’s down to just one insurer in 2017, and as noted above, they’ve been spending an unsustainably high percentage of premiums on medical expenses thus far. Their rate increase for 2017 might correct that, but it also has to be noted that enrollment declined by 8.5 percent for 2017, and presumably the people who dropped coverage are those who are healthy, with little in the way of current health care needs. Those are the people who have to be in the risk pool in order to prevent a death spiral.
Alabama has also rejected the ACA’s Medicaid expansion. Although expansion has been considered by lawmakers and by former Governor Robert Bentley (who resigned in April 2017), they never moved forward with it. Expanding Medicaid helps to stabilize the risk pools in the individual market by taking those with the lowest incomes out of the private market. In states like Alabama, where Medicaid has not been expanded, premium subsidies are available in the exchange to people with income at or above the poverty level. But in states where Medicaid has been expanded, premium subsidies start at 138 percent of the poverty level, as enrollees below that level qualify for Medicaid instead. Since there’s a correlation between poverty and poorer health status, Medicaid expansion helps to strengthen the risk pools in the individual market, and Alabama’s exchange has not yet benefitted from this.
The exchange is not in a death spiral yet, but without actions to stabilize the individual market, it could find itself in one. This is particularly true if the ACA’s premium subsidies were to be replaced with a less-robust subsidy system like that called for in the AHCA (the AHCA would increased average after-subsidy premiums in every county Alabama. Although the AHCA was pulled before a House vote in March, it’s still under consideration by Republican leadership).
The impact in Alabama if the ACA is repealed
According to an HHS report released in December 2016, the number of people in Alabama with health insurance increased by 215,000 from 2010 to 2015 as a result of the ACA. This includes young adults who have been able to remain on a parent’s plan and people who enrolled through the exchange, as well as people who have gained coverage through other avenues.
Alabama still hasn’t expanded Medicaid under the ACA, so the poorest residents in the state have not benefited from the ACA, and would thus not see as much of a change with its repeal as their counterparts in states that have expanded Medicaid. But there is little doubt that many of the tens of thousands of current exchange enrollees with premium subsidies would find coverage much less affordable under the proposals that Republican lawmakers have put forth.
There are also worries that pre-existing conditions could once again become an obstacle for people enrolling in coverage in the individual market. Proposed amendments to the AHCA call for allowing states to redefine (and reduce) the ACA’s essential health benefits, and for allowing insurers to charge higher premiums for applicants with pre-existing conditions. Although the ACA’s ban on outright rejection of applications based on medical history would remain intact, the amended AHCA would effectively gut the ACA’s protections for people with pre-existing conditions. At ACA Signups, Charles Gaba estimates that there are 123,438 people in Alabama with individual insurance coverage and pre-existing conditions.
Because so much is still up in the air, there is considerable uncertainty surrounding the future of the ACA under the Trump Administration. But for the time being, nothing has changed. Subsidies are still available to offset premiums and out-of-pocket costs in the exchange, and coverage is still available to people who experience a qualifying event that triggers a special enrollment period, regardless of pre-existing medical conditions.
Humana and UnitedHealthcare left individual market, only BCBS of Alabama remaining
In 2016, five health insurance carriers offered individual market coverage in Alabama, including UnitedHealthcare and UnitedHealthcare Life as separate carriers (UnitedHealthcare Life was the off-exchange carrier, and UnitedHealthcare was on-exchange). But only three — Humana, Blue Cross Blue Shield of Alabama, and UnitedHealthcare — offered plans in the exchange. And Blue Cross Blue Shield of Alabama covered the majority of the state’s exchange enrollees.
But United and Humana both left the Alabama exchange at the end of 2016. The Alabama Department of Insurance confirmed in a phone call that both carriers exit applied to the entire individual market in the state, so individual market United and Humana plans are not available on or off-exchange in Alabama in 2017.
The Alabama Department of Insurance confirmed that no additional carriers filed rates to offer individual market plans in the exchange. As a result, Blue Cross Blue Shield of Alabama is the only carrier offering plans in the exchange in 2017. And only one additional carrier — Freedom Life — has plans available outside the exchange (BCBSAL plans are available both on and off-exchange).
In 2016, Wyoming was the only state with just one carrier in the exchange. But Alaska, South Carolina, and Oklahoma also have a single carrier in 2017, as does Alabama. And numerous other states have portions of the state with only a single carrier offering coverage.
Humana had 15,226 individual market members in Alabama in 2016, including both on and off-exchange. UnitedHealthcare expanded to offer coverage in all 67 counties in Alabama starting in 2015, and their total exchange enrollment in the state was 20,488 in 2015. That was about 12 percent of the total in 2015, up from just 5 percent in 2014.
In 2016, UnitedHealthcare offered the lowest or second-lowest cost silver plan in the exchange in 66 of the 67 counties in Alabama. But Blue Cross Blue Shield of Alabama was still the dominant carrier in Alabama, and the Department of Insurance confirmed that BCBSAL still had the majority of the exchange enrollees in 2016. But enrollees did have carrier choices in 2016, and that is no longer the case in 2017. And for many enrollees, at least one low-cost coverage option disappeared at the end of 2016.
Blue Cross Blue Shield: 36.1% rate increase
In August 2016, Blue Cross Blue Shield of Alabama — the only carrier offering plans in the exchange for 2017 — filed rate increases for 2017 that average 36.1 percent (with a range from 20.6 percent to 38.3 percent). This was a revised rate filing, and was slightly lower than the average rate increase proposal of 39.3 percent that the carrier initially filed in June.
The Alabama Department of Insurance approved the 36.1 percent average rate increase in October 2016, and the new rates are effective for 2017. AL.com reports that pre-subsidy rates for Bronze plans increased between 20 percent and 23 percent, while Silver and Gold plans increased in price between 32 percent and 38 percent.
This was the first year that the state took part in the rate review process for ACA-compliant plans; in previous years, the federal government handled the review process, as Alabama did not have an effective rate review process.
That changed in the spring of 2016 however, and the state collaborated with HHS to ensure that the rates and plans filed for 2017 are in compliance with ACA requirements. Although, like many other states, Alabama regulators do not have the power to reject rate increases or prevent them from taking effect.
Anyone wanting to enroll in an exchange plan in Alabama (keeping in mind that the exchange is the only place where subsidies are available) for 2017 must select a plan from BCBS of Alabama. So the carrier’s 2017 rates apply to everyone in the exchange, including people who are switching from Humana and United plans that are no longer available.
Premium subsidies increased to keep pace with the increase in the cost of the second-lowest-cost plan in each area, so for the almost 90 percent of Alabama exchange enrollees who are receiving subsidies, the price increase has been largely absorbed by a corresponding increase in subsidies (it’s important to note, however, that some enrollees had to switch to a different plan in order to minimize after-subsidy rate increases, and everyone who had coverage under Humana or United plans had to switch to a BCBSAL plan).
For the 10 percent of Alabama exchange enrollees who don’t get subsidies, average premiums are 36 percent higher in 2017. And for anyone who purchases individual coverage outside the exchange, rates are sharply higher in 2017 — a reminder to switch to on-exchange coverage if you experience a qualifying event during the year, if there’s any chance that you might be eligible for subsidies.
The BCBSAL rate increase did NOT apply to people who have coverage via Medicare, Medicaid, or employer-sponsored health insurance. Those categories account for the vast majority of the population, and their rates did not go up the way unsubsidized individual market rates are.
2016 enrollment up 14% over 2015
195,055 people enrolled in private plans through the Alabama exchange during the 2016 open enrollment period, including renewals and new enrollees. This was nearly a 14 percent increase from the enrollment total at the end of the 2015 open enrollment period (171,641). And unlike prior years, HHS began accounting for attrition in real-time, during open enrollment. So the 195,055 enrollment total already reflected canceled and unpaid enrollments as of February 1.
The enrollment total for 2016 includes renewals, but it also includes a significant number of new enrollees (43 percent of the total are new to the exchange for 2016). As of mid-2015, there were 141,361 people with in-force private coverage through the Alabama exchange. The enrollment total as of February 1, 2016 is a 38 percent increase over the total as of June 2015.
By March 31, 2016, the effectuated enrollment total stood at 165,534.
The penalty for not having health insurance in 2016 is much higher than it was in 2014 and 2015. Tax filers who owe a penalty for 2016 are expected to owe an average of $1,000, which is five times the average that they owed for being uninsured in 2014.
2016 rates and carriers
Three carriers offered individual plans through the Alabama exchange in 2015, and that is still the case in 2016 – although two of them will be exiting the state at the end of the year.
In Alabama, HHS was responsible for reviewing proposed rates for 2017 (the state’s effective rate review process wasn’t up and running until the spring of 2016). According to Healthcare.gov’s rate review tool, final 2016 rate changes for Alabama exchange plans were:
- Humana: average rate increase of just under 9 percent
- Blue Cross Blue Shield of Alabama: average rate increase of 28 percent (the carrier was predicting losses of $135 million for 2015, mostly as a result of ACA-compliant coverage).
- UnitedHealthcare: average rate increase of 24.5 percent (their actuarial memo states that the plans in question were sold outside the exchange in 2015, but the notes on the rate review page indicate that the premiums apply on the exchange. Healthcare.gov’s rate review tool does not indicate any other on-exchange individual product from UnitedHealthcare, and UnitedHealthcare’s plans do show up when browsing plans in Alabama on Healthcare.gov).
Although Blue Cross Blue Shield of Alabama (which had the majority of the market share in 2015) raised rates by an average of 28 percent in 2016, the average benchmark plan in Alabama increased in price by just 12.5 percent. Benchmark plan rate changes don’t really tell us much in terms of how individual consumers’ rates will change, since the benchmark plan is just the second lowest-cost Silver plan, and isn’t necessarily the same plan from one year to the next.
But the change in benchmark premium does give us an indication of how premium subsidies will change; in Alabama, average subsidies are higher in 2016, but not by enough to offset the rate hikes on many BCBS plans. This highlights how important it was for existing enrollees to shop around during open enrollment and actively select a plan, rather than relying on auto-renewal.
Once open enrollment was complete and plan changes had been finalized, 89 percent of Alabama exchange enrollees were receiving subsidies – the same as in 2015. For people who are receiving subsidies, the average pre-subsidy premium in 2016 is $410/month, but after subsidies, it drops to just $102/month. Both of those numbers are higher than they were in 2015, when the average pre-subsidy premium was $354/month, and the average after-subsidy premium was $88/month.
How to rates compare to other states?
According to a new analysis by GoBankingRates, Alabama had the third-most-expensive individual health coverage in the country in 2016, when premiums are combined with deductibles, copays for office visits, and the cost of emergency care under the plan. For their analysis, they compared the lowest-cost-silver plan in a major metropolitan area for a 40-year-old non-smoker who earns $40,000/year.
If we only consider premiums – and don’t take into account cost-sharing – Alabama’s average benchmark premiums for a 27-year-old are 19th out of the 38 states that use Healthcare.gov. But although Alabama’s premiums are very much in line with the national average, the GoBankingRates analysis accounts for cost-sharing, which was higher than the average across other states.
When we compare average pre-subsidy rates after all of the plan changes during open enrollment, the average in Alabama is $410/month in 2016. That’s higher than the $396/month average across all 38 Healthcare.gov states, but 13 of those states have higher average pre-subsidy premiums than Alabama. After subsidies, which apply to 89 percent of enrollees, the average premium is just $102/month in Alabama’s exchange, which is lower than the $106/month average across all Healthcare.gov states.
Insurance executive compensation now a secret
Under a law passed in Alabama in 2015 (SB147, which became Act Number 2015-227 when it was signed into law in May), insurance executive compensation in Alabama is now kept confidential, and is not subject to open records requests, freedom of information requests, or subpoena.
The legislation was sponsored by Slade Blackwell (R, Mountain Brook), and passed with nearly unanimous support. It applies to all insurance companies in the state, but it primarily impacts Blue Cross Blue Shield – by far the dominant carrier in the state. That’s because national carriers, including Humana and UnitedHealthcare (the other two exchange carriers in Alabama) have to report executive compensation to the IRS and the SEC. But Blue Cross Blue Shield of Alabama (a state-based carrier) does not file with the SEC and doesn’t have to disclose executive compensation to the IRS.
Reporter John Archibald described the new law as “royal treatment” for BCBS of Alabama, and it’s certainly concerning that executive compensation for the carrier is now protected from the public eye. This is especially troubling given the fact that BCBS of Alabama has requested rate increases that average 28 percent for 2016. But residents of Alabama are still protected by the ACA’s medical loss ratio, which requires carriers to spend at least 80 percent (85 percent in the large group market) of premiums on medical care and “quality improvements,” with administrative expenses – including executive compensation – coming out of the remaining 20 percent (15 percent in the large group market).
2015 enrollment numbers
171,641 Alabamians signed up for qualified health plans (QHPs) through HealthCare.gov during 2015 open enrollment, according to the U.S. Department of Health and Human Services (HHS). That was a significant increase over the 97,870 residents who enrolled during the 2014 open enrollment period.
As expected, not all enrollees paid their initial premiums through, and other enrollees transitioned off their plans for various reasons during the year. In addition, HHS got better at enforcing documentation requirements for immigration status and financial eligibility for subsidies. By the end of June, 141,361 people in Alabama had in-force private plan coverage through the exchange.
91 percent qualified for premium subsidies. Those subsidies averaged $268 per month, reducing the average monthly premium from $360 to $92.
In addition to premium subsidies, nearly 73 percent of Alabama exchange enrollees also received cost-sharing subsidies in 2015. Cost-sharing subsidies, which lower the out-of-pocket amounts that insureds must pay when they receive care, are only available for people with household incomes up to 250 percent of poverty, and only available when the enrollee selects a Silver plan. Cost-sharing subsidies are strongest for enrollees with incomes up to 200 percent of poverty, and for those with incomes under 151 percent of poverty, the cost-sharing subsidies effectively result in coverage that’s even better than a regular Platinum plan.
Nationwide, 56 percent of exchange enrollees are receiving cost-sharing subsidies, so Alabama is far above average in that regard. Only Mississippi has a higher percentage (77 percent) of exchange enrollees with cost-sharing subsidies.
Of the 171,641 people who originally enrolled in the Alabama exchange during open enrollment, 85 percent (146,482 enrollees) had household incomes under 251 percent of poverty, and were thus eligible for cost-sharing subsidies. And 84 percent of those enrollees (122,624 people) selected silver plans and obtained the cost-sharing subsidies. It’s important to note that bronze plans are less expensive than silver plan, and that sometimes leads lower-income enrollees to select bronze instead. But the bronze plans come with much higher out-of-pocket costs that can be prohibitively expensive when medical care is needed, and silver plans with built-in cost sharing subsidies generally present a much better value for eligible enrollees.
Subsidies safe in Alabama …
Alabama uses Healthcare.gov – rather than operating a state-run exchange – which means that the outcome of the King v. Burwell lawsuit was crucial for the state. Subsidies would have disappeared for more than 128,000 people in Alabama if the Supreme Court had ruled that subsidies could only be provided through state-run exchanges.
Fortunately for the residents, insurance carriers, and medical providers of Alabama, the Supreme Court ruled in June 2015 that subsidies are legal in every state, regardless of whether the exchange is state- or federally-run. Not only will subsidies remain available, but the entire individual market will be significantly more stable than it would have been if subsidies had been eliminated. Had that happened, the Urban Institute estimated that premiums in the individual market – for people NOT currently receiving subsidies – would have climbed by 55 percent (in addition to regular annual rate hikes), and the total number of people with individual health insurance would have plummeted by about 70 percent.
But many Alabama leaders disappointed by ruling
Despite the actuarial predictions of the market collapse that would have happened if subsidies had been eliminated, along with the direct impact on the people of Alabama who would have lost their health insurance, many of the state’s leaders – including the Governor – expressed dismay that the subsidies were upheld by the Supreme Court. U.S. Congresswoman Terri Sewell (D, 7th District) was pleased with the Court’s opinion, but most of her colleagues mentioned after the ruling that they will continue to push for repeal of the ACA.
Penalties remains unchanged for 2017
The individual mandate, which says you must have health insurance or pay a penalty, is one of the least popular features of Obamacare. But it was designed to be phased in over three years, in order to be less of a financial burden at the start, when people were just learning about the new regulations.
Many uninsured Americans are eligible for an exemption from the penalty.
For those who do have to pay, penalties increased again for 2016 (penalties for 2016 will be assessed when people file their 2016 tax returns in early 2017). Those who don’t qualify for an exemption will have to pay the greater of:
- 2.5% of annual household income above the tax filing threshold. The maximum penalty under this calculation method is the national average premium for a bronze plan. In July 2015, the IRS announced that the maximum 2015 penalty would be $2,484 for a single individual and $12,420 for a family of five or more. This was slightly higher than the maximum in 2014, and 2016’s maximum is likely to be higher still, given the national average rate increases we saw for 2016.
- $695 per adult or $347.50 per child under 18. The maximum penalty per family using this method is $2,085.
Use the healthinsurance.org penalty calculator to see how much you may owe. The penalty ratcheted into it’s highest position for 2016, and it’s much steeper than it was in 2014 and 2015. The percentage of income penalty will remain level going forward, at 2.5 percent. The flat-rate penalty will increase with inflation, but for 2017, the IRS has confirmed that there will be no adjustment; it will still be $695 per uninsured adult.
Especially for people who qualify for premium subsidies, it’s almost certainly a better financial bargain to get health insurance. Remaining uninsured will not only subject people to the incredible financial uncertainty that goes along with being uninsured, it will also result in a significant penalty when their tax returns are filed.
Coverage for small businesses
Through the federal Small Business Health Options Program (SHOP) exchange, small businesses with 50 or fewer employers can now shop online for health insurance coverage. Small employers and non-profit organizations can shop on their own or work through a broker or agent. After the employer defines the plan to offer, employees enroll online through the SHOP.
There is no defined open enrollment period for the SHOP marketplace. Small employers can set up a plan anytime of the year.
Nearly 125,000 found coverage in 2014
Nearly 98,000 Alabama residents signed up for qualified health plans (QHPs) during 2014 open enrollment. That was about 21 percent of estimated 464,000 people eligible to use the marketplace, according to the Kaiser Family Foundation. Nationally, about 28 percent of eligible people enrolled in a health plan through the ACA marketplaces. In addition, Kaiser also reported 22,564 Alabamans qualified for either Medicaid or the Children’s Health Insurance Program (CHIP) under existing eligibility criteria.
Alabama’s uninsured rate dropped 3.2 percentage points from 2013 to 2014, falling to 14.5 percent according to the Gallup-Healthways Well-Being Index. By the first half of 2015, it had fallen even further, to 12 percent.
How Alabama is handling health care reform
The federal government operates the health insurance marketplace in Alabama, based on Gov. Robert Bentley’s November 2012 decision against a state-run marketplace. Bentley cited annual operating costs of up to $50 million as his reason for opting for a federally operated exchange.
The decision against a state-run exchange came somewhat as a surprise. While the Republican governor consistently opposed many provisions of the Affordable Care Act, he repeatedly expressed support for a state health insurance exchange. He supported exchanges during his campaign for governor, and as governor, he used an executive order to establish the Alabama Health Insurance Exchange Study Commission. In November 2011, that commission unanimously recommended Alabama implement a state-run exchange. However, bills to establish a state-run exchange failed to pass in both the 2011 and 2012 sessions.
Alabama residents had more choices and slightly higher prices during the 2015 open enrollment period. Historically, Alabama’s health insurance market has been considered one of the least competitive in the nation.
Humana and Blue Cross and Blue Shield of Alabama, which dominates the health insurance market in the state, sold individual health insurance through the federal marketplace in Alabama for 2014. UnitedHealthcare joined the exchange for 2015, and its plans are now available through the marketplace in all 67 Alabama counties. Previously, United policies were available only outside the marketplace.
A study by the Commonwealth Fund shows Alabama premiums increased just 3 percent from 2014 to 2015, which is much less than the increases seen in the years leading up to the passage of the Affordable Care Act. Rates for individual health insurance increased about 10 percent each year between 2008 and 2010. But for 2016, the average increase will be much more significant, hovering around 24 percent.
Alabama has not expanded Medicaid. Gov. Bentley opposed Medicaid expansion, and his position became the subject of campaign ads, editorials, billboards, and websites during 2014. Late in 2014, Bentley reintroduced a discussion on Medicaid expansion. Bentley said his administration will explore options to obtain federal Medicaid funding for a state-designed solution with a work requirement for recipients. Conservative groups promptly accused Bentley of flip-flopping.
An August 2014 study published by the Urban Institute shows the impacts of not expanding Medicaid. In Alabama, about 254,000 people will not qualify for Medicaid coverage through 2016. In terms of financial impact, the authors calculated that while Alabama would spend $1.08 billion to expand Medicaid over a ten-year period, the state is losing out on $14.4 billion in federal spending and state hospitals are losing $7.0 billion in reimbursement over the same period.
Alabama health insurance exchange links
Alabama Department of Insurance – Health Insurance Reform Information Center
State Exchange Profile: Alabama
The Henry J. Kaiser Family Foundation overview of Alabama’s progress toward creating a state health insurance exchange.