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Smart Benefits: 2013 Health Insurance Rate Increases Expected Soon

Monday, July 30, 2012

 

Will RI's health insurance rates go up more than 4% next year? The answer is probably yes.

Will health insurance premium rates increase more than 4% in Rhode Island next year? We’ll know soon.

The Office of the Health Insurance Commissioner (OHIC) has set a clear expectation with the state’s group insurers that they submit a medical trend less than 4%.  And the state’s three carriers doing business here have responded with initial rate filings closer to that number – the lowest in five years.

For small groups (50 or less employees), the carriers have requested the following increases:

For large groups (employers with 51 or more employees), Rhode Island’s insurers have filed for the following rates:

  • BCBSRI: 4.2%

  • Tufts Health Plan: 6%

  • UnitedHealthcare: 7.8%

BCBSRI’s filings are lower than the other two carriers due to an expected, one-time savings from a contract with a new pharmacy benefit manager that will become effective January 1, 2013.

Trend Drivers

Medical spending increases because members use more services and/or the price of those services increases. This year, the cost drivers behind the higher rates filings include:

  • increases in medical expenses (i.e. inpatient, outpatient and pharmacy costs)

  • administrative expenses

  • contributions to reserves

  • other miscellaneous expenses

What’s missing? The cost of healthcare reform. That’s because the impact of the Patient Protection and Affordable Care Act results in taxes that are added to the approved rate filings.  Therefore, employers should expect another 1.9% to be added to BCBSRI’s rates, .07% to Tufts Health Plan’s and 1.8% to UnitedHealthcare’s rates.

Premiums Vary

No matter what final rates are approved, not every employer group in Rhode Island will see the same increase. Employer-specific characteristics like age, sex and product offerings adjust rates up or down, resulting in wide fluctuations in rates among employers.

Employer Response

While Rhode Island’s insurance carriers are lower than they’ve been in five years, local employers expected something else: a zero increase. During  OHIC’s public comment period, most employers requested no increases in the rate filings for 2013, citing the sate’s poor economy, the sacrifice employers and employees have made year after year to absorb more costs, and reduced benefits as reasons for their plea.

It will be interesting how OHIC responds, and what the impact will be on local businesses.

Amy Gallagher has over 19 years of healthcare industry experience. As Vice President at Cornerstone Group, she advises large employers on long-term cost-containment strategies, consumer-driven solutions and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, is a member of local organizations like the Rhode Island Business Group on Health, HRM-RI, SHRM, WELCOA, and the Rhode Island Business Healthcare Advisory Council, and participates in the Lieutenant Governor’s Health Benefits Exchange work group of the Health Care Reform Commission.

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