Rising health care costs and what we need to do about it.

1. Challenge of our Times:
Rising Health Care Costs
The biggest challenge we face in health care today is how to rein in out-of-control costs. Medical spending continues
to rise at a rate faster than overall inflation, with no end in sight. There are many reasons for the rise, but they all result
in health insurance premiums going even higher. And Americans are spending a bigger chunk of their household budgets
on health care, even to the point of being unable to afford the care they need.
WHY DOES HEALTH CARE COST SO MUCH?
Lack of transparency and consumer involvement in what health care really costs.
• Until recently, consumers had no practical way to compare hospital costs. Blue Cross’ transparency tool,
launched in 2015, shows a cardiac angioplasty with a stent costs $23,306 at one Triangle hospital and
$45,370 at another Triangle hospital.
• An MRI costs about $600 in one setting and $2,400 in another.
Paying for quantity, rather than quality.
• The traditional fee-for-service model creates incentives to overtest and overtreat.
• Some experts believe paying for quantity is the single biggest driver of rising medical costs.1
Too much waste and inefficiency in the health care system.
• Up to 30 percent of medical spending is considered unnecessary, duplicative or wasteful, according
to an Institute of Medicine report.2
Ongoing impact of chronic conditions caused by unhealthy lifestyles.
• Three-quarters of medical spending is associated with chronic conditions, including those caused by
unhealthy lifestyles.3
Increasing use of expensive prescription drugs without offset of medical expenses elsewhere.
• The cost of specialty drugs rose 31 percent in just one year (2014).4
• Just the three most expensive drugs cost Blue Cross $190 million to cover in 2015.5
• Price hikes last year for just four drugs added $12 million to our cost of health care – and your
premiums – whether you take those drugs or not.5
From 2011 speech: “The new health care reform law provides broader access
to health insurance, but it does very little to reduce costs. That must change
if Americans are going to get the health care they deserve…”
Brad Wilson
President and CEO
Blue Cross and Blue Shield of North Carolina

2. ©2016. Blue Cross and Blue Shield of North Carolina is an independent licensee of the Blue Cross and Blue Shield Association.
1
National Commission on Physician Payment Reform, 2013. 2
“Best Care at Lower Cost,” Institute of Medicine, 2013. 3
“A Healthier America,” Trust for America’s Health, 2013.
4
Drug Trend Report, Express Scripts, 2014. 5
Blue Cross Internal Data. 6
Politico Pulse, 2016.
THINK INSURERS ARE
CASHING IN ON THE ACA?
THINK AGAIN.
The cost of care for ACA customers
exceeded the payments we expected
to receive (from customers and the
government) by nearly $300 million.
IS THE AFFORDABLE CARE ACT SUSTAINABLE?
The ACA has improved access to coverage for millions of Americans. But the ACA has done little to address rising health care
costs. In fact, many health insurers are reporting huge losses from their ACA business. Of 23 nonprofit health cooperatives
formed in 2013 to serve the ACA population, 12 have already shut their doors because of heavy financial losses.6
Over the past two years, Blue Cross has lost more than $400 million on our ACA business. This is largely because our ACA
customers continue to be less healthy and use more expensive medical services than anticipated. One example: The sickest
5 percent of our ACA population in 2015 brought in $108 million in revenue, including their government subsidies. We paid
out a staggering $1.29 billion in claims for these customers’ medical care. These kinds of losses are not sustainable.
HOW TO IMPROVE THE ACA
Stronger enforcement of the individual mandate that requires coverage.
The ACA allows too many healthy people to avoid coverage.
Tighter control of special enrollment periods.
Allowing sign-ups outside the open enrollment periods leads to people
enrolling when they’re sick and dropping coverage when they’re better.
Shorter grace period for paying premiums.
The current 90-day grace period gives people three months to pay their
premiums and requires insurers to cover claims for an entire month in which
no premiums are paid.
Fully fund programs to help stabilize the insurance market.
Insurers pay into programs to help even out gains and losses, but the government
made only about 12 percent of payments to insurers for 2014 losses under one
such program.
MORE INFORMATION
“Obamacare Pummels Blue Cross Blue Shield of NC – What Can We Learn from This?”
Chris Conover, Forbes.com, Jan. 30, 2016: http://onforb.es/1Rc47X1
“Health Care’s Price Conundrum,”
Atul Gawande, MD, The New Yorker, Dec. 18, 2015: http://bit.ly/1TW9TJc
2010: “[The ACA] is a
step in the right direction.
However, there is still a
lot of work to do to give
Americans a health care
system that they can both
depend on and afford.”
Brad Wilson
President and CEO
Blue Cross and Blue Shield of
North Carolina
ACA CUSTOMER
MEDICAL CLAIMS AND EXPENSES PAID
$2 BILLION
ACA
PREMIUMS RECEIVED
$1.7 BILLION
BLUE CROSS
LOST
NEARLY
$300 MILLION
$1B $1.5B $2B$500M
2015 REVENUE
2015 EXPENSES
$0