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Smart Benefits: Expect Double-Digit Health Insurance Hikes in 2014

Monday, May 20, 2013

 

Starting January 1, 2014, larger employer groups in RI that are fully insured will pay much more in medical insurance premiums.

Starting January 1, 2014, large employer groups in Rhode Island that are fully insured will pay much more in medical insurance premiums – plus an added 4-4.5% because of new taxes and fees stemming from the Affordable Care Act (ACA).

Large Group Rate Filings

On May 15th, the state’s three insurance carriers, BCBSRI, UnitedHealthcare of New England, and Tufts Health Plan, filed their first round of large group rate increase requests. The average premium increases requested are as follows:


If approved by the Office of the Health Insurance Commissioner, these will be the highest rate increases since 2010 – and huge jumps from 2013, when increases were 8.02% for BCBSRI, 5.53% for UnitedHealthcare and 4.10% for Tufts.

Rate Increases are Averages

These rate increases, if approved, would be averages, or starting points. Group-specific rates are adjusted for claims experience, plan design, risk charges and demographics. That means actual employer rates could be higher or lower than these increases. To give employers more definitive expectations for next year, BCBSRI requested the minimum increase be set at 13.1% and the maximum at 21%.

Cost Drivers

All three carriers state that their increases would be 4-4.5% less without the impact of new healthcare reform taxes and fees employers must pay.

Other factors are driving the higher rate requests as well. BCBSRI stated the same key cost drivers it included in its small group filing request in April, including:

  • Increase in outpatient costs
  • Utilization increases for cancer treatment
  • Outpatient surgery costs
  • Specialty prescription cost and usage increases

The company also emphasized that its financial reserves are still well below recommended minimum levels, which should equal 23% of premium, a threshold developed long before the impact of healthcare reform, which will contribute to even higher risks for insurers.

Is Self-Funding a Solution?

In its filing, BCBSRI also predicted continued enrollment erosion from fully insured groups because of healthcare reform taxes. Since self-insured groups are not subject to some of these taxes, there’s been a driving trend toward self-insurance.

In fact, Munich Health North America’s Reinsurance Division surveyed 326 health insurance executives in March 2013 and 82% said they heard more interest over the last 12 months in employers self-funding their group health insurance plans – including 32% who said interest has increased “significantly.”

Changes on the Horizon

With the highest rate increases in four years looming, employers will need to make big changes, so expect more self-insurance, tiered provider networks, and plan designs that promote greater consumer engagement and responsibility.

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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