A map of North Carolina insurance premiums with 16 diffrent rate areas and each areas's increase shown.
Much of North Carolina will see some increase in ACA premium rates, while the Triangle and Charlotte will see some dramatic drops. Credit: Blue Cross NC

By Mark Tosczak

When Blue Cross and Blue Shield of North Carolina announced, in late July, that average premiums for Affordable Care Act plans would decline by 4.1 percent for 2019, it said some customers would see big cuts while others would see modest increases, depending on where they lived.

On Wednesday, the company revealed which parts of the state will see lower rates in 2019 and which will pay more for ACA health plans.

The winners are about 200,000 people living in or near the state’s two largest urban areas.

In the Triangle, those who stick with Blue Cross can expect average rate reductions of more than 21 percent. In Charlotte pre-subsidy premiums will decline by 17 percent; in nearby Gastonia, rates will drop 16 percent. About 40 percent of the roughly 475,000 people covered by Blue Cross ACA plans live in those regions.

The only other region that’s getting an ACA rate cut from Blue Cross is Forsyth County and five neighboring counties, where rates will decline 2.9 percent.

Related: BCBSNC Says Most of it’s ACA Plans Will be Cheaper in 2019

Across the rest of the state — in larger cities such as Asheville, Fayetteville, Greensboro and Wilmington — as well as in many rural communities, Blue Cross ACA rates will rise.

Keys to cutting rates

So what do all those areas that are seeing big rate cuts have in common? Competition and risk.

a white man in a suit sits in front of an American flag, smiling at the camera
Blue Cross Blue Shield of North Carolina CEO Pat Conway. Photo courtesy: Centers for Medicare and Medicaid Services

“We did two things,” Blue Cross Blue Shield CEO Patrick Conway said Wednesday morning. “We said, ‘We want to compete to lower costs in these areas and we want you to be accountable for quality and total cost of carel for the patients.’”

In the Triangle, where the rate cut will amount to a $1,680 pre-subsidy annual savings, a network of UNC Health Care affiliated doctors, clinics and hospitals called the UNC Health Alliance agreed to share financial risk with Blue Cross.

Eventually, the two organizations hope to move to a model where instead of getting paid for each procedure, the UNC plan will get paid a certain amount of money for each patient. If doctors can help patients stay healthier — keeping them out of the hospital and avoiding unnecessary or costly care — UNC could make more profit.

In exchange, Blue Cross agreed to make UNC Health Alliance the sole provider for its ACA plan members in the Triangle. Though there may be some individual exceptions, such as for pregnant patients or those undergoing cancer treatment, that means that most people who see Duke or WakeMed affiliated physicians will have to change doctors if they want to stay on the Blue Cross plan.

In Charlotte and Gastonia, Blue Cross patients will be able to choose from providers affiliated with Atrium Health, Novant Health or Gastonia-based CaroMont Health, a local health system anchored by a 435-bed hospital.

For all four of these health systems — UNC, Atrium, Novant and CaroMont — the key to the rate reductions are contracts that tie health care and financial outcomes together. They won’t be the last such deals Blue Cross strikes, Conway said.

“We are working with the hospitals and health systems across the state to move … as much of our payments as possible across all lines of business into those accountable care type arrangements or value-based payment arrangements,” he said.

Lessons from Medicare

They are similar to arrangements that federal regulators have been pushing for several years, tying patient health outcomes to payments. Conway was a senior official at the Centers for Medicare and Medicaid Services, the federal agency that runs Medicare, for several years before he came to North Carolina to run Blue Cross.

“There’s good evidence that they can both control the cost of care, but also improve the quality and experience of care,” he said.

Blue Cross is working on ways to provide primary care doctors, hospitals and other providers more information, so they can do a better job of preventing or treating health problems earlier, rather than later when treatment is often more expensive.

For example, Conway said, software tools might mine Blue Cross claims data to identify a diabetes patient with an abnormal lab result, and then prompt a physician practice or hospital to follow-up with that patient.

In a statement, the North Carolina Healthcare Association, which represents the state’s hospitals, welcomed the expansion of so-called “value-based” plans.

“North Carolina’s hospitals and health systems welcome Blue Cross and Blue Shield of North Carolina to the idea that we can, and do, provide high-quality care with better outcomes and lower costs when we invest in our patients, coordinate their care, and share the financial risk,” Julie Henry, the group’s vice president of communications and public relations, said via email. “We look forward to working with Blue Cross to expand this proven method to their exchange plans as well as the state health plan.”

Boosting competition

Other observers point to Blue Cross’s aggressive negotiating in the Triangle as a key factor in the big rate reduction.

“Blue Cross put Duke and UNC in a competitive bidding situation, with the intent that they were going to remove one of the systems from the program,” said Todd Yates, area president of Durham benefits consultancy Hill, Chesson & Woody, which is part of Gallagher Benefit Services.

For UNC, Yates said, the opportunity is to potentially add 50,000 or so patients who had been seeing Duke doctors.

“This is a potential windfall of opportunity for UNC,” Yates said.

But only if enough patients switch from Duke to UNC. Earlier this month, Duke announced that it and WakeMed, which was also cut out of Blue Cross’ Triangle ACA network, would be available to ACA exchange plan buyers through a new company, Ambetter, which has entered the state to provide ACA plans in the Triangle. Ambetter is owned by Centene, a for-profit health care management company based in Missouri that had $48.4 billion in revenues last year.

Cigna offers ACA plans in Chatham, Orange, Wake, Nash and Johnston counties. Outside the Triangle, Blue Cross is the only company offering ACA plans in every county.

“The loudest message that comes through when you see a 22 percent reduction in the Triangle in this product, when you actually take the [health care providers] that are there and put them in real competition with each other … to me that’s the actual story,” Yates said.

Focused on costs

About 90 percent of people covered under North Carolina’s Blue Cross ACA plans receive federal subsidies that reduce the cost of their premiums. The Blue Cross rate cuts mean that taxpayers won’t have to kick in as much money to support the plans.

Blue Cross still does business with Duke across other lines of business, such as small group plans, Medicare plans and services for large employers, and Conway said the company is in talks with Duke to sign agreements similar to its deal with UNC.

But while competition may be helping to drive down ACA premiums in the Triangle, communities with competing hospitals are increasingly the exception, rather than the rule, across North Carolina.

Across the state, smaller hospitals that were independent a decade ago have been absorbed by big health systems. And a growing share of doctors are also employed by health systems rather than operating independently.

“When there is a single hospital in an area it is, by definition, a monopoly,” Conway said. “That creates a challenging situation for us or anyone else to control costs.”

If a hospital didn’t want to move toward a new “accountable care” model, he said, Blue Cross would pressure the hospital to simply accept lower reimbursements.

“We would need to control the cost of care and another way, which is lower rates,” he said. “We would try to push as hard as we can on that.”

Providers must find ways to cut costs, Conway said.

“As I travel around the state, I can’t tell you the number of families I talk to, who are unfortunately, making decisions about whether to buy health insurance versus, you know, feed their family, house their family,” Conway said.  “We don’t want anybody to make that choice. And therefore, we have to bring down the cost of health care.”

Correction: This story was updated to more accurately describe the reimbursement agreement between Blue Cross and UNC.

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Mark Tosczak

Mark Tosczak has worked as a writer and communications professional for more than 20 years, including stints as a newspaper reporter and editor, think tank communications director, marketing agency vice...