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Alabama health insurance marketplace: history and news of the state’s exchange

BCBS of Alabama and Bright Health offer 2021 plans; COVID-related enrollment window through August 15, 2021; Subsidies larger and more widely available

Pulpit Rock, Cheaha State Park, Alabama | Image: Ron /

Key takeaways

Alabama exchange overview

Alabama uses the federally facilitated marketplace, which means residents enroll in exchange plans through

Blue Cross Blue Shield of Alabama was the only health insurance carrier offering plans in the Alabama exchange in 2017, and they already insured the majority of the state’s exchange enrollees prior to 2017, when there were multiple insurers offering coverage. But since 2018, residents in the Birmingham area have been able to choose from two different insurers in the exchange, as Bright Health now offers plans in that area.

2016 was the first year that Alabama participated in the rate review process for ACA-compliant plans (for 2017 coverage). Prior to that Alabama did not have an effective rate review process, so the federal government handled rate review for Alabama. The federal government still conducts rate review for Oklahoma, Texas, and Wyoming, but Alabama has joined the majority of the states that have an effective rate review process.

Alabama has not expanded Medicaid, so there’s a coverage gap in the state (the state could close the gap by accepting federal funding to expand Medicaid; the federal government would always pay at least 90 percent of the cost to do so, and as a result of the American Rescue Plan, the federal government would provide two years of additional federal Medicaid funding if the state were to expand coverage). As the federal poverty level increases, the lower-end income requirements for premium subsidy eligibility also increases, potentially trapping more people in the coverage gap. For 2021, a single person must earn at least $12,760 in order to qualify for premium subsidies in Alabama (although this requirement does not apply in 2021 if the person receives unemployment compensation for at least one week during the year; in that case, the person is eligible for premium subsidies regardless of their actual income).

A 2020 analysis by the Robert Wood Johnson Foundation indicated that if Alabama were to expand Medicaid, the state’s uninsured rate would drop by 43% — the largest decline that any of the remaining non-expansion states would see if they all expanded Medicaid.

On the other hand, an Urban Institute analysis indicates that if the ACA is overturned by the Supreme Court, an additional 122,000 people in Alabama would become uninsured, increasing the state’s uninsured population by 25%. The Supreme Court heard oral arguments in that case on November 10, 2020, and a ruling is expected in the spring of 2021.

When can I enroll in health insurance in Alabama?

Normally, enrollment in individual/family plans (both on-exchange and directly through insurance companies) is only available during open enrollment in the fall (November 1 – December 15) or during a special enrollment period related to a specific qualifying event.

But because of the ongoing pandemic and the enhanced premium subsidies created by the American Rescue Plan, the rules are different in 2021. There’s a one-time enrollment window that continues through August 15, 2021, and Alabama residents do not need a qualifying event in order to enroll or make a plan change during this window.

After August 15, 2021, the normal rules will once again apply. Alabama residents will need a qualifying event in order to enroll or change their coverage for 2021, and open enrollment for 2022 coverage will start November 1, 2021.

2021 rates and plans: 22% increase for Bright, 5% increase for BCBSAL

Two insurers offer plans in Alabama’s exchange. The following average rate changes were approved for 2021:

  • Blue Cross Blue Shield of Alabama: 5 percent increase. The filing indicates that BCBSAL has 168,113 members.
  • Bright Health: 22 percent increase. Bright Health offers plans in the Birmingham area (Chilton, Jefferson, Walker, and Shelby counties). Membership details in Bright’s filing are redacted.

An exact weighted average rate change is difficult to calculate, since we don’t have Bright’s official enrollment numbers. But for 2020 coverage, Bright’s filing that was submitted in 2019 indicated 3,266 policyholders. So we can assume they likely had somewhere in the range of 3,000 to 5,000 members, given that BCBSAL has maintained its dominant market share. (About 150,000 people have coverage through the Alabama exchange, but ACA-compliant plans are also available off-exchange, making the total market bigger than the on-exchange market alone). If we use 4,000 members for Bright, we get a weighted average rate increase of about 5.4% for 2021.

Average rate changes are calculated before premium subsidies are applied, and 95% of Alabama exchange enrollees receive premium subsidies. Subsidies are larger and more widely available in 2021, thanks to the American Rescue Plan.

For perspective, here’s a look at how premiums have changed in Alabama’s exchange in previous years:

  • 2020: Average increase of 3.3%. Bright Health increased average premiums by about 9 percent, but Blue Cross Blue Shield of Alabama, which has most of the enrollment, only increased average premiums by 3.5 percent. The overall weighted average increase amounted to 3.3 percent.
  • 2019: Average decrease of 2%. Both of the Alabama exchange insurers implemented 2019 rates that were lower than their 2018 rates. Bright Health had an average rate decrease of 15.55%. And Blue Cross Blue Shield of Alabama had an average rate decrease of 0.5% (ranging from a decrease of 3.8% to an increase of 3.9%, depending on the plan). These rate changes were approved as proposed for both insurers, and amounted to a weighted average decrease of about 2 percent. Both insurers noted in their rate filings that they expected increased morbidity (ie, a less healthy population, and thus premiums that are higher than they would otherwise have been) as a result of the elimination of the individual mandate penalty after the end of 2018, and the expansion of short-term health plans and association health plans. So although the insurers decreased their average premiums in Alabama in 2019, they would have decreased them even more if the individual mandate penalty had remained in place and if short-term and association health plans hadn’t been expanded by the Trump Administration.
  • 2018: Average increase of 15.6% (as described below, the bulk of the increase applied to silver plans, due to the Trump Administration’s decision to stop funding cost-sharing reductions; Alabama’s insurers have continued to add the cost of CSR to silver plan rates in subsequent years).
  • 2017: Average increase of 36%. Blue Cross Blue Shield of Alabama was the only insurer offering plans for 2017, and their average rates increased by 36%. 2016 was the first year that the state took part in the rate review process for ACA-compliant plans (for 2017 coverage); 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 were 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.
  • 2016: Average increase of 24.4%. In 2016, there were three insurers offering plans in Alabama’s exchange. Humana’s average rate increase was just under 9%, Blue Cross Blue Shield of Alabama’s was 28%, and UnitedHealthcare’s was 24.5%.
  • 2015: Average increase of 3%, according to a study by the Commonwealth Fund.

Insurer participation in Alabama’s exchange over the years

Historically, Alabama’s health insurance market was considered one of the least competitive in the nation. And it remains a market dominated by Blue Cross Blue Shield of Alabama, which is currently the only insurer offering plans in most of the state (Bright Health also offers coverage in the exchange, but only in the Birmingham area).

Humana and Blue Cross and Blue Shield of Alabama sold individual health insurance through the federal marketplace in Alabama for 2014. UnitedHealthcare joined the exchange for 2015, offering plans in all 67 Alabama counties. Those three insurers continued to offer plans in Alabama’s exchange in 2016, but Blue Cross Blue Shield still covered the majority of the state’s exchange enrollees.

And United and Humana both left the Alabama exchange at the end of 2016. The Alabama Department of Insurance confirmed that both carriers’ exits applied to the entire individual market in the state, so individual market United and Humana plans were not available on or off-exchange in Alabama as of 2017.

So enrollees with United or Humana coverage in 2016 had to switch to BCBSAL plans for 2017 if they wanted to remain insured. For perspective, 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.

Although BCBSAL was the state’s lone exchange insurer in 2018, Bright Health joined in the Birmingham area in 2018 and continues to offer coverage there in 2020.

How many people have enrolled in health plans through Alabama's exchange?

169,119 people enrolled in private individual market plans through the Alabama exchange during open enrollment for 2021 coverage. This was an increase of more than 5% from the year before, and was also higher than 2019’s enrollment. Here’s a summary of enrollment numbers in Alabama’s exchange over the years:

As was the case in the majority of the states that use, peak enrollment came in 2016 in Alabama. Enrollment in most states that use then declined until 2020, but increased somewhat in 2021 — the same pattern we see in Alabama. The declines are due to a variety of factors, including the Trump administration’s decision to sharply reduce funding for exchange marketing and enrollment assistance, and the shorter open enrollment period that started to be used in the fall of 2017. In addition, confusion about the status of the ACA, particularly the individual mandate, played a role in the declining enrollment, as did much higher premiums in 2017 and 2018 for people who don’t get premium subsidies (people who do get premium subsidies are mostly protected from the impact of rate increases).

Cost of CSR added to silver on-exchange plans starting in 2018

Blue Cross Blue Shield of Alabama confirmed in June 2017 that they would continue to offer coverage in all counties in the state in 2018. Their rates increased by an average of 36 percent in 2017, although subsidies increased enough to offset that for the vast majority of Alabama’s exchange enrollees. And for 2018, they implemented a rate increase less than half that size, despite the assumption (which proved correct) that cost-sharing reductions (CSR) would not be funded by the federal government, as well as an assumption that the individual mandate wouldn’t be well enforced (the mandate is still being enforced in 2018, but the penalty was eliminated after the end of 2018). So although rate hikes were steep for 2017, the rate increase for 2018 would have been in the low single-digits if it weren’t for the uncertainty caused by the Trump Administration.

For 2018, Bright Health joined the Alabama exchange, but only in the Birmingham metropolitan area.

The following average rate increases were implemented for 2018 in the Alabama exchange:

  • Blue Cross Blue Shield of Alabama (statewide): 15.6 percent average rate increase, although the bulk of the rate increase applies to silver plans. The approved rate increases were based on the assumption that cost-sharing reductions (CSR) would not be funded in 2018, and that the individual mandate would not be well enforced.
  • Bright Health (Birmingham metropolitan area): New to Alabama, so there is no applicable rate increase. But a revised rate filing submitted in August noted that the cost of CSR has been added to silver on-exchange plans for 2018 (but not to off-exchange silver plans)

The rate increases are largest for silver plans because those are the plans to which cost-sharing reductions (CSR) apply. BCBSAL’s rate filing noted that “the proposed rate increases for the QHP silver plans are much higher than the proposed rate increases for the remainder of the plans.” The filing indicates that the rate increases range from 2 percent for Blue Cross Select Gold to 21.2 percent for Blue Value Silver. The rate filing also notes that two BCBSAL plans —Blue Secure Silver and Blue HSA Gold — would be sold only off-exchange. So the Blue Secure Silver plan did not have the cost of CSR added to the premiums, since nobody on that plan would have CSR benefits, as they’re only available on-exchange (Blue HSA Gold also did not have the cost of CSR added to premiums, as it’s a gold plan and also off-exchange).

The Trump Administration announced in October 2017 that CSR funding would end immediately, but BCBSAL and Bright Health had already made that assumption in their premiums for 2018. Since the government has stopped reimbursing insurers for the cost of CSR, the insurers have to collect higher premiums for those plans to offset the cost. But the vast majority of enrollees (including virtually everyone who receives CSR plans) are receiving premium subsidies, which fluctuate to keep pace with changing premiums.

The CSR approach that Alabama’s insurers have taken — adding the cost of CSR to on-exchange silver plans, while also making off-exchange silver plans available without the cost of CSR added to their premiums — is the approach that protects virtually all enrollees. People who qualify for premium subsidies are protected from the rate hike, because the cost of CSR is added to silver plans, and premium subsidies are based on silver plan rates (specifically, the second-lowest-cost silver plan in each area). So the subsidies keep silver plan rates fairly consistent from one year to the next, and the larger-than-normal premium subsidies can also be used to cover even more of the cost of plans at other metal levels. This makes bronze plans particularly inexpensive for people who get premium subsidies, and can also result in some gold plans being priced lower than some silver plans, after accounting for subsidies.

People who aren’t eligible for premium subsidies can purchase plans at other metal levels that don’t have the cost of CSR added to the premiums. If they want a silver plan, they can purchase one that’s only marketed off-exchange (no premium subsidies are available off-exchange, so again, this is only a logical choice for applicants who are 100 percent certain that they won’t qualify for premium subsidies).

Insurance executive compensation is a secret in Alabama

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.

Before Act 2015-227 took effect, it was public knowledge that the top ten executives at BCBSAL saw their compensation double from 2011 to 2013.

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. 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).

Alabama exchange history

The federal government operates the health insurance marketplace in Alabama, based on then-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, although it should be noted that the federal government does not run its exchange for free — CMS charges a fee equal to 3.5 percent of premiums (proposed to drop to 3 percent of premiums as of 2020) in states that rely on the federally-run 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 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 would 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, but nothing had come of his Medicaid expansion talk as of 2017 when he resigned amid a scandal. His successor, Governor Kay Ivey, has rejected Medicaid expansion efforts since taking office in 2017.

An August 2014 study published by the Urban Institute showed the impacts of not expanding Medicaid. 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.

And from a humanitarian standpoint, a Kaiser Family Foundation analysis estimates that there are 127,000 Alabama residents in the coverage gap as a result of the state’s refusal to accept federal funding to expand Medicaid. These people are not eligible for Medicaid due to the state’s strict eligibility requirements, but they also aren’t eligible for ACA subsidies in the exchange because their incomes are under the poverty level.

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.

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

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