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Health insurance marketplace could increase competition in ND

FARGO -- North Dakota's health insurance market, long regarded as lacking stiff competition, will enter a new era when health reforms introduce a new marketplace next year.

The online marketplace, intended to allow individuals and small businesses to easily compare insurance options, also could bring more carriers into a state long dominated by Blue Cross Blue Shield of North Dakota.

That, at least, is a goal of the Affordable Care Act, known to some as Obamacare, the major provisions of which will take effect next year.

Rebecca Ternes, deputy commissioner of the North Dakota Insurance Department, said it's not yet clear whether the new marketplace will significantly change the competitive landscape.

"Until we start seeing what products companies are going to offer here, it's hard to say what the end result will be," she said. "People and businesses will have an easier time comparing plans."

A long list of companies are licensed to sell health insurance in North Dakota, but the market is heavily concentrated, with Blue Cross Blue Shield by far the dominant carrier, followed by Medica and Sanford, a recent entrant in the market.

Although purchasing health insurance through the new online marketplace will be an option, individuals and employers can stick with their existing coverage.

More than two-thirds of employers that provide coverage through Blue Cross Blue Shield of North Dakota, however, have decided to stick with their existing insurance plans.

"That means relatively little has changed for these people," said Paul von Ebers, the North Dakota Blues' chief executive officer, who met last week with the editorial board of The Forum of Fargo-Moorhead.

"We encouraged people to stay in their old plan because we weren't sure how it was going to play out," he added, referring to the uncertainties from the new plans sold through the yet-to-be-launched marketplace.

North Dakota decided to have the federal government set up and operate the marketplace, while Minnesota will establish its own exchange.

Enrollment for individuals and small businesses will begin in October for coverage that will begin in January sold through the new marketplace.

North Dakota might attract new competition because it will be relatively simple for companies to enter states that will have the same online marketplace devised by the government, von Ebers said.

Competition between rival insurers likely will be in terms of price, the network of providers, service levels and special offerings, such as discounted fitness club memberships, he said.

Blue Cross Blue Shield of North Dakota has administrative costs of about 7.4 percent, roughly half the 15 percent cap allowed under the health reform law, which makes it very competitive in terms of cost, von Ebers said.

Similarly, the Blues have longstanding relationships with virtually all the providers in the state, including all major providers.

To enable comparison shopping, health insurance sold through the online marketplace will be offered in four tiers, each with a distinct level of coverage and price.

The so-called "Metallic" categories of plans correspond to differing levels of benefits that will be paid by the insurance company, ranging from platinum, with a 90 percent benefit level, to bronze, 60 percent.

For instance, under a gold-level plan, the insurance company will pay 80 percent of the cost of health care services, on average, with the customer paying the remaining 20 percent through copays, coinsurance and deductibles.

Another big change under the law -- potentially affecting roughly half of North Dakota residents -- is the start of subsidies for individuals who qualify based on income for plans purchased through the marketplace, formerly called exchange, starting in January 2014.

"For those people who are eligible for a subsidy, they're going to be better off financially if they go to the exchange," von Ebers said.

That will be the case for about half of the individual market in North Dakota, according to an estimate by Blue Cross Blue Shield of North Dakota.

For those individuals who choose subsidized coverage through the new marketplace, "It'll be similar to what they have today, but it'll be at a lower price," von Ebers said.

Subsidies generally will be available through premium tax credits for people whose incomes range from 138 percent to 400 percent of federal poverty levels, or between $32,500 and $94,200 for a family of four.

North Dakota will also expand its Medicaid health insurance program, an option under the health reform law, extending coverage to those with incomes up to 133 percent of the federal poverty level.

However, von Ebers said, "For people who are above the subsidy level, it's going to be a mixed bag."

A very small number of North Dakota residents, perhaps a thousand who will be ineligible for subsidies, will see sharp premium rate hikes, he said.

The Affordable Care Act places ceilings on premiums, based on incomes. Those at 140 percent of the poverty level should not pay more than 3 percent of their income, while those close to 400 percent should not have to spend more than 9.5 percent.

Those are the people who might experience some premium price shock, von Ebers said.

Employers can be penalized if their employees have to pay more than 9.5 percent of household income on health insurance, forcing them to verify household incomes, for example an employee's working spouse.

That's not something employers are happy about, von Ebers said.

Health insurers and employers are busy preparing for the coming changes, with the October enrollment period looming.

"It's the law of the land," von Ebers said. "We just have to understand it."

In a few months, so will consumers. Insurers, employers and the federal government will be providing more information in the months ahead.

"We think there'll be confusion early on," von Ebers said, though in time consumers and employers will become more familiar with the marketplace and insurance offerings.