JULY 16, 2009 ISSUE
The State of Healthcare in the High Country
A Local Cost Conundrum
Weaving through the complex conundrum of healthcare and its out-of-control-costs is no small task. All across the United States, skyrocketing healthcare expenditures are hurting families, forcing businesses to cut or drop health benefits and straining state, county and municipal budgets. Unfortunately, the High Country is not immune to the rising cost of healthcare.
From 2000 to 2009, the costs for providing healthcare insurance to Watauga County employees increased 118 percent, the Town of Boone’s expense to cover its staff increased 132 percent and the state of North Carolina’s cost for providing employee health insurance increased 111 percent.
The Town of Boone, Watauga County and the state—which includes the area’s largest employer, Appalachian State University—pay for employees’ coverage. Workers of all three entities shoulder the cost of their family’s or dependent’s coverage and, according to a newly released study by the U.S. Department of Health and Human Services (USDHHS), family premiums in North Carolina average $12,669 per year, about the annual earnings of a full-time minimum wage job.
Home to more than 9 million residents, roughly 5.1 million people in North Carolina get their health insurance on the job. During the same time frame as above—2000 to 2009—average family premiums increased by 91 percent in North Carolina.
Other major implications of the high cost of healthcare in the study show that 17 percent of people in the state report not visiting a doctor due to the expense and that North Carolina businesses and families shoulder a hidden health tax of roughly $1,400 per year on insurance premiums as a direct result of subsidizing the costs of the uninsured.
In Watauga County, 31 percent of the population has no health insurance. Statewide, 17.2 percent are uninsured and the number of the uninsured continues to climb. Much of the decline in insurance coverage is among workers in small businesses. While small businesses make up 75 percent of North Carolina industries, only 43 percent of them offered health coverage benefits in 2006.
Another healthcare insurance problem for High Country and state residents alike is preexisting conditions. In North Carolina, premiums can vary based on demographic factors and health status, and coverage can exclude pre-existing conditions or even be denied completely.
“We’ve tried to put a thumb in the dike for those people with preexisting conditions in our state,” said N.C. Sen. Steve Goss (D-45). “The General Assembly provided $16 million to help in this area, but it’s not enough. The bottom line is that the healthcare system is broken.
“People from the Fifth District are reaching out to me almost everyday. I get multiple calls and emails every week from desperate people who are on the ropes because of healthcare costs. Some can’t even afford their medications much less expensive medical procedures. The disproportionably high costs of drugs must be reeled in. It’s one of the gorillas across the board that needs taming. Even people who have healthcare insurance are afraid that they will lose everything if they encounter a major medical problem.”
Goss’s concerns were recently substantiated by two major reports in The American Journal of Medicine (AJM) and The New England Journal of Medicine. “If there’s one lesson that we’ve learned about health reform in the last few decades, [it’s that] being right doesn’t count for very much. We can come up with lots of stories to evoke moral outrage. And it’s not just about the uninsured. There are many Americans with insurance who have inadequate protection and who file for bankruptcy every year because they’re underinsured,” said Jonathan Oberlander, associate professor of social medicine and health policy and administration at the University of North Carolina at Chapel Hill.
And from a Harvard University study in the AJM, “Before the present economic debacle in 2007, using a conservative definition, 62.1 percent of all bankruptcies were medical. Since then, health costs and the numbers of un- and underinsured have increased, and bankruptcy laws have tightened. Most medical debtors were well educated, owned homes and had middle-class occupations. Three quarters had health insurance.”
Choice of health insurance is limited in North Carolina. Blue Cross Blue Shield N.C. (BCBSNC) alone constitutes 53 percent of the health insurance market share in the state, with the top two insurance providers accounting for 73 percent. BCBSNC has the present state employee healthcare insurance contract. In December 2003, BCBSNC paid a $1.8 million fine and admitted in a settlement with regulators that over a five-year period it knowingly underpaid some 146,000 emergency room claims,” as reported by The News and Observer.
“I’ve never seen a more serious case with more widespread implications in my 19 years as the insurance commissioner of North Carolina,” N.C. Insurance Commissioner Jim Long said. “There is no way to know the full extent of the harm this has brought upon the citizens of this state.”
The fine was the largest ever levied against a North Carolina insurance company.
“My wife is a schoolteacher and for many years I was a dependent on her state plan and I have been dissatisfied with the plan for a long time with its constantly rising co-payments and more costly services,” Goss said. ”I reluctantly voted for the latest plan, it’s too expensive; still way to high for the average worker, but I saw it as a step in the right direction because for the first time, the insurance contract between BCBSNC and the state calls for a third-party independent audit. This is the kind of accountability we need to apply to the whole picture in Raleigh. It can help control our future costs,” Goss continued.
Goss said that he wholeheartedly supports President Obama’s initiative to create a public option government insurance plan, agreeing with 76 percent of Americans. He praised the President for reaching out to all the stakeholders to find a solution to what Goss called, “a dysfunctional system.”
He went on to say that he was deeply puzzled when he learned that BCBSNC was financing television advertisements in a campaign against the President’s proposed public option. “BCBSNC is a non-profit in North Carolina. This flies in all our faces,” Goss said. “My straight-up question to BCBSNC is: ‘Why are you wasting policy holder’s money advocating against those in Washington trying to fix healthcare? Why not use those same resources to create a more affordable plan for the citizens of our state?”
Goss applauded the state’s three-year-old effort to unburden the counties’ cost in delivering Medicaid. “Some of our counties could not afford their portion of the old Medicaid formula,” Goss said. “As planned, each county should realize a savings, on average, of $500,000. Goss thinks the ‘hold harmless’ agreement will withstand the budget axe negotiations for now as the state plans to use federal-stimulus money to support the program for the next two years. “I am concerned about what we do to cover the costs long-term. Medicaid is approximately 15 percent of the state’s budget now. We must plan ahead. In three years, the stimulus funds won’t be available.”
“We are trusting that the state will honor its recent Medicaid commitments to the counties,” said Watauga County Manager Rocky Nelson. “Watauga still pays to run the program. Our Watauga County Department of Social Services administers Medicaid. It’s really too early to tell the amount of revenue Watauga County may save.”
The county presently contracts with the North Carolina Association of County Commissioners (NCACC) for its employee healthcare insurance, which is provided by Cigna. Expecting the obvious, Nelson said that the county’s budget includes a further 15 percent increase for employee health insurance next year. “We will examine plans and negotiate this fall for a new insurance contract. It’s prudent preparing for what has been inevitable, spiraling cost for healthcare insurance,” Nelson said.
“Many years ago, when BCBSNC had the Town of Boone’s employee health insurance contract, the company wanted to change our plan, charging more for less and increasing the town’s premiums way too much in relation to our ‘low-claims’ experience,” said Boone’s Human Resources Director Peri Moretz. “So we went shopping for a more affordable option. After trying other companies, we realized that it would save the town money to be self-insured. And that’s how we fund our employee health insurance plan now. We have a third party administrator, ACS Benefit Services out of Winston-Salem that handles the claims.”
“Having a much smaller pool than a group the size of the NCACC has potential consequences for our bottom line. Our negotiating power isn’t as great and we can realize significant increases in cost if too many of the town’s employees encounter catastrophic illnesses,” Boone Mayor Loretta Clawson said. ”However, we stand committed to providing good health insurance coverage for our worthy employees. We must find a better way; affordable healthcare for everyone is my hope. In my opinion, neither the Town nor its residents can afford the path we are on much longer.”
“The overall quality of care in North Carolina is rated as “Average,” according to the USDHHS report. “Millions are paying more for less,” and it appears that the study’s opening refrain speaks volumes about healthcare costs in the High County, too.
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