North Dakota: Will John Godfread apologize to Medica? (UPDATE: Apparently not.)

Press release from the North Dakota Insurance Dept,, September 28, 2017:

Medica Leaving North Dakota Individual Health Insurance Exchange in 2018
Post date: Sep 28, 2017

BISMARCK, N.D. – Insurance Commissioner Jon Godfread today confirmed that the Insurance Department was informed late Wednesday, Sept. 27, that Medica does not intend to sign an agreement with the federal government to offer coverage on the Affordable Care Act (ACA) Exchange for their individual health insurance in North Dakota for 2018.

“We have had numerous conversations with Medica over the course of the past few months, and given the uncertainty that currently exists around cost sharing reductions, they are unable to move forward in the Federal Exchange,” Godfread said.

Cost sharing reductions (CSRs) are payments made by the federal government to insurance carriers to help low-income consumers with out-of-pocket costs, such as co-payments and deductibles. Recent health care debates have included consideration by the federal government to not provide CSRs to carriers. After originally making the decision to file rates with CSR funding included, Medica has now requested that the Department approve premium rates for 2018 assuming CSRs would not be paid, which would have led to an additional increase in those rates, on top of the initial rate increase already being requested by Medica.

The Department has declined to approve any rates requested under this assumption.

“Although we understand Medica’s concerns regarding the uncertainty of CSR funding, without knowing the intentions of Congress regarding CSRs, we had to make the decision to move forward with rates that assumed payments would be made,” Godfread said. “If the Department approved rates requested by Medica excluding CSR payments, and Congress does fund those payments, it is unknown if the Department would then be able to reduce the rates to reflect the changes made. With this in mind, the Department felt it was our responsibility to err on the side of caution and protect North Dakota consumers from any unnecessary increases. The decision made by Medica, illustrates that North Dakota will not be insulated from the collapse of the ACA, and our consumers who purchase health insurance on the federally run exchange will now face fewer options.”

On the surface this logic seems sound: They didn't want to jack up rates more than necessary and didn't know if they could reverse those rates later if it turned out ot be a false alarm. However, even if they weren't able to do so up front, the ACA's 80/20 Medical Loss Ratio requirement means that any excessive premiums would have to be rebated starting in 2019 anyway. In fact, this is the exact reason the Louisiana DOI gave for why they instructed their carriers TO go ahead and bake the extra CSR rates into the mix.

The "collapse" comment meanwhile, makes it pretty clear where Mr. Godfread's bias stands.

North Dakota consumers will still be able to purchase an individual health insurance plan from Medica through means outside of the ACA Exchange, such as with an insurance agent versus the website. Consumers seeking a subsidy for their health insurance will be unable to purchase plans from Medica on the federally run exchange. Of the 20,691 individuals on the Exchange, Medica provides coverage for 3,073.

Around 2,600 of those 3,073 people should be subsidized, and wouldn't be hurt by the extra CSR load no matter how it was done. North Dakota has around 35,000 unsubsidized individual market enrollees. So the insurance commissioner effectively decided to kick 2,600 people off their policies in order to avoid additional rate increases on another 35,000 people. Again, on paper this might have kind of, sort of made sense, except that he also could have instructed the carriers to go the Silver Switcharoo route to avoid hurting anyone.

Having said that, I might be sympathetic to Mr. Godfread's dilemma here (it is an admittedly tricky situation, and none of the options he faced was ideal at the time)...except for the last paragraph of the press release:

“This situation is one the Department understood to be a possibility but we were hopeful that Congress would come to a resolution regarding health care reform and that we would have more answers at this point. Unfortunately, that is not the case and because of that failure, Obamacare has continued to crumble. Medica’s decision further illustrates just how unstable the ACA Exchange is and will hopefully be a reminder to Congress that Obamacare is indeed in a death spiral. It is no longer sustainable and now North Dakotans are not only facing higher rates, but also fewer options,” Godfread said.

Yeah, Mr. Godfread seems to be pretty much hell-bent on making certain everyone understands his position on the ACA in general. He just lost any benefit of the doubt.

In any event, that was before the CSR payments were actually killed off by Trump.

Cut to yesterday:

Health insurance carriers scramble to recalculate rates for 2018

BISMARCK, N.D. - Health insurance rates were already set to rise next year in North Dakota, but with last week’s news from the White House that it won't be making the Cost Share Reduction, or CSR payments those numbers could be even higher.

Health Insurance premiums in the state were going to rise, as high as 22 percent for some individual plans, but now health insurance carriers are scrambling trying recalculate rates for 2018.

North Dakotans will be paying more for health insurance in 2018, that much we know. How much is a different question.

Insurance Commissioner John Godfread's office released the official rates for 2018 premiums just over a week ago. Rates were set to rise across the board, some individual plans would be hit fairly hard.

But then came Friday's announcement from the president, the Federal Government would not be making Cost Share Reduction payments to insurance companies. That's sent everyone scrambling.

"The next 24 hours or so we've got to make some decisions on what it's going to look like going forward if those CSR payments aren't made," said Godfread.

Reaction from Washington has been mixed from the state's delegation.

"This makes no sense, and we're going to fight with everything that we have to reverse this administrative decision," said Sen. Heidi Heitkamp, D-N.D.

"It's the opportunity now for congress to go about its business to do an appropriation, and I hope we will, I expect we will but with that appropriation will come some policy changes designed not to prop Obamacare up, but rather to fix it," said Rep. Kevin Cramer, R-N.D.

No matter what happens with the CSR payments, open enrollment to buy health insurance begins on Nov. 1 and runs through Dec 15.

Godfread says those who will be impacted the most by the CSR non payments will be individuals who do not receive subsidies from the federal government to buy health care.

It seems to me that Mr. Godfread made those "decisions" about "what it would look like going forward if CSR payments aren't made" about three weeks ago: He stated point blank that he would not allow the carriers to bake CSR costs into their 2018 rate increases, period. He was so unequivocal about it that he chose to allow a major carrier to drop out of the exchange (i.e., causing the very "less choice" and "fewer options" he criticized the ACA over) rather than allow them to pad the numbers just in case the highly likely scenario developed...which it did, just two weeks later.

So what happens now? If Mr. Godfread reverses his position on letting Blue Cross Blue Shield and Sanford refile, he owes Medica (and their 3,100 exchange-based enrollees) a big apology. On the other hand, if he sticks to his guns and doesn't allow them to refile, BCBS and Sanford will take a bath next year and could potentially go bankrupt (OK, I have no idea what their financials are like, but still).

Bear in mind that all three carriers are going to have to eat at least 3 months of CSR losses no matter what, since the Trump CSR cut-off is supposedly immediate (i.e., the last 3 months of 2017 are a loss regardless of 2018).

Don't get me wrong, I'm not losing any sleep over whether or not a major health insurance company had their feelings hurt. However, the North Dakota Insurance Commissioner has to be feeling a bit foolish this morning.

UPDATE: Welp. They just answered that question (h/t Louise Norris for the catch):

Insurance Commissioner to Deny Additional Rate Increases Following Non-payments of CSRs

Post date: Oct 17, 2017

BISMARCK, N.D. – North Dakota Insurance Commissioner Jon Godfread announced yesterday in a live television interview that after careful consideration, following President Donald Trump’s announcement regarding non-payments of cost sharing reductions (CSRs) to insurance carriers, he will deny any additional rate increases to individual health insurance premium rates for Affordable Care Act (ACA)-compliant plans to be offered in North Dakota beginning Jan. 1, 2018.

In a statement to Blue Cross Blue Shield of North Dakota, Medica and Sanford Health Plans, Godfread said, “This decision was made in order to protect the 22,000 covered North Dakotans who have coverage from an individual insurance policy that is off of the federal marketplace along with those on the exchange who do not receive the subsidy. As you know, this is an issue that is between insurance carriers and the federal government and while I understand the strain you are under in participating in this marketplace, it is my duty to look out for those consumers who have had to absorb multiple rounds of increases to their health insurance premiums without receiving any assistance from the federal government.”

As a result of this decision, the approved rates previously released by the North Dakota Insurance Department on Oct. 6, 2017, will continue to be the approved rates for 2018.

Wow. Harsh.

OK, what does this mean? Well, for one thing, it means that Medica just dodged a hell of a bullet.

For another, it means that BCBSND and Sanford are a bit screwed. 

OK, that's overstating it...maybe. I'm assuming that BCBS, at least, is big enough and has enough cash on hand to weather the storm next year while they file a federal lawsuit to get reimbursed (eventually). I don't know how big/small Sanford Health is, but if they're fairly small/don't have tons of cash on hand, they may be in serious trouble, since winning a lawsuit 3 years from now does nothing to pay your bills now.

Of course, they may both simply try to invoke the contractual exit clause instead.

UPDATE 10/18/17: Of course, the just-announced Alexander-Murray bill could make all of this moot (and thus make Mr. Godfread's decision seem wise instead of a jerkmove after all), but there's still little chance of it impacting 2018 rates this late in the game...