Workers at a Meridian company move rebar and pack building supplies for Idaho's rebounding construction industry. They used to have health insurance through their jobs at Concrete Construction Supply. But when the Idaho insurance exchange opened its virtual doors for 2014, the company canceled its policy. Now, some workers aren't insured, but those who are bear a lower cost.
It wasn't a change that happened overnight. It was a slow bleed.
Three years ago, owner Ken Fernandez and office manager Shelby Rayl told the Idaho Statesman that Concrete Construction Supply's premiums were out of control.
Fernandez had started offering health insurance in a benefits package in the mid-1990s, footing 100 percent of the bill for workers and their families. Over the next decade, the cost of those benefits grew much faster than the economy. One year, premiums went up by 50 percent. The company pared back, asking workers to pay more of their share, offering skimpier packages and eventually slashing coverage altogether.
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Rayl said the cost of Concrete Construction Supply's plan through Blue Cross of Idaho, plus family coverage, had reached $660 a month when the company decided to send employees to the insurance exchange instead. Insurance for Rayl's entire family purchased through Your Health Idaho cost $199 last year and $349 this year.
"We thought long and hard about our decision to drop company health insurance and ultimately felt like this was the best decision for our employees," Rayl said this month. "The insurance companies had placed double-digit increases on our company insurance for the past 10 years that I have worked here. We went from a $500 to a $5,000 deductible."
Some health insurance costs are soaring in Idaho. Idaho's largest health insurers tacked on double-digit rate increases for people and small businesses in 2015.
Blue Cross of Idaho, the state's biggest insurer, has set rates for certain plans 16.6 percent higher this year.
Regence BlueShield of Idaho, the second-largest insurer, set up a sister company called BridgeSpan to sell insurance on exchanges. BridgeSpan added 10.4 percent to one set of premiums this year on an exchange plan. Rates increase 6.2 percent on average across all BridgeSpan insurance plans sold on Idaho's exchange. The average customer is paying $22 more per month than in 2014.
Insurers cite three key reasons for the increases:
1. Rising medical claims. BridgeSpan cited medical costs rising 7 percent a year.
PacificSource Health Plans - an Oregon-based insurer that covers some Idahoans - raised its rates this year 37 percent for individuals and 10 percent for small businesses. Sujata Sanghvi, executive vice president and chief operating officer of PacificSource, told the Statesman in November that the company projected its customers' medical and pharmacy costs to rise 11 percent in 2015, and for new enrollees to cost more.
Twelve categories of medical problems gobbled up a large share of Blue Cross of Idaho's claims between 2012 and 2013. Orthopedic and cancer care alone took up more than $25 a month per person across the company, according to a Blue Cross summary provided to the Statesman.
2. Costly new enrollees. The companies say Idaho consumers who got insured for the first time by using the exchange cost more than expected.
"We had a large percentage of our new membership was a population of people who hadn't previously had access to health insurance or health care," said Josh Jordan, spokesman for Meridian-based Blue Cross of Idaho, which gained about 50,000 new individual-plan customers last year because of the health law. "They used services more frequently than we had anticipated."
3. Affordable Care Act taxes and fees. Blue Cross also paid $37.6 million - equal to about 3 percent of its 2013 revenues - in taxes and fees "associated specifically with the Affordable Care Act" in 2014, Jordan said. That included $2.2 million to participate in the exchange. State law requires the exchange to be self-sustaining, so insurance companies pay a fee to sell plans on it. Those fees can be passed on to customers through higher premiums.
Any insurer with a double-digit or higher rate increase each year is now automatically subject to review - to make sure that rate increase isn't "unreasonable." That change is part of the Affordable Care Act. There is an exemption for plans that existed before the exchange was created and haven't changed significantly. They are grandfathered, meaning they do not need to comply with Affordable Care Act requirements, including the review for reasonableness.
The state Department of Insurance reviewed and deemed all proposed double-digit rate increases for nonexempt plans this year to be "not unreasonable." Based on justifications filed by insurers, the continuing rise in medical claims is what drives the rates.
BIGGER CASH RESERVES
Rates also rose for a fourth reason: to ensure the companies could maintain their reserves, which far exceed the minimum required by law.
Blue Cross of Idaho had $547 million in reserves last fall, or $862 per customer. Lewiston-based Regence had $144 million in reserves last fall, or $1,182 per customer. (BridgeSpan's reserves were not available for Idaho. Idaho-only financial details including reserves also were unavailable for other insurers not headquartered in Idaho.)
Raising rates while holding on to hundreds of dollars per customer isn't excessive, Jordan said.
"If we were to try to hold down rates and dip into our surpluses, it would hold down rates one time," he said. "We need those surpluses to protect, over a long period of time, our members."
INSURERS LOSE MONEY
Idaho-based insurers hardly made a killing last year - at least through the fall, the period covered by their most recent financial statements. While their bank accounts are flush, Blue Cross of Idaho and Regence BlueShield of Idaho took losses in the first three quarters of 2014.
Those losses were, in a way, a good sign, Jordan added: The pile of claims suggests that previously uninsured people were taking advantage of their newfound access to doctor's appointments, preventive care and medications.
NEW INSURER GAINS MEMBERS
A new competitor entered the Idaho market this year, with a different business model. The Mountain Health CO-OP is Idaho's first Consumer Operated and Oriented Plan - a type of nonprofit organization authorized by the Affordable Care Act and supported with federal seed money.
The co-op's first year in Idaho yielded about 19,000 members by mid-March, with an additional 2,700 who hadn't yet paid their premiums. Most enrolled through the state exchange.
Mountain Health CO-OP expects to charge premiums high enough to allow it to avoid losing money, said spokeswoman Karen Early. "We are trying to have the lowest administrative cost we can," she said. The co-op expects its overhead and profits to be "well under" the 20 percent allowed by the law.
THE REAL WORLD EFFECT
Back in Meridian, Rayl questions whether health insurers are truly justified in their rate increases.
"Insurance companies seemed to be making record profits but still passing on increases," he said.
Concrete Construction Supply arrived at its decision to cut health insurance after realizing that would be the cheaper option for most of the workforce. The Affordable Care Act isn't perfect, "but it is a step in the right direction," he said.
For small businesses like Concrete Construction Supply - which has 29 employees at six locations - there is no penalty for not offering insurance. The Affordable Care Act does offer some small businesses a monetary incentive for offering insurance, though Concrete Construction Supply is too large to quality for it. After reviewing options, the company decided to help employees sign up for insurance through Idaho's exchange - because some of the workers would qualify for exchange-only subsidies to help pay their premiums. Those subsidies come as income-tax credits.
"It did place a burden on those employees that did not qualify for a subsidy" because of their income, he said. "Our higher-paid employees are now paying just as much for insurance through the health exchange as they did with (the company's) health plan. They understood the need for the move, because it now allowed our lower-paid employees to qualify for a cheaper premium through the exchange because of the subsidy."
But even in the new world of Idaho health insurance, the cost-benefit nexus isn't yet at the sweet spot for some employees. Despite the fact that workers could be fined at tax time for not having health insurance, many workers at Concrete Construction Supply have opted to go without, Rayl said.
Audrey Dutton: 377-6448, Twitter: @IDS_Audrey
Spencer Jones, rebar cutter at Concrete Construction Supply, signed up for health insurance last year when he did his taxes and learned he qualified for a tax credit through the Idaho insurance exchange. Most Idahoans who shopped for plans through Idaho's exchange qualified for tax credits to reduce their monthly premiums - a benefit available only to low-income and middle-income residents. Idaho had one of the highest exchange sign-up rates in the nation last year.