Smart Benefits: Insurers File 1st Round of Rate Increase Requests

Monday, April 22, 2013

 

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New rate requests are in at the Office of the Health Insurance Commissioner--which companies want increases, and how much do they want?

On April 15, Rhode Island’s insurance carriers filed the first round of rate requests for 2014 with the Office of the Health Insurance Commissioner for individual and small group products. Now it’s up to Commissioner Christopher Koller to approve, modify or reject the rates.

What You Can Expect

If history repeats itself, Koller will require the carriers to lower the rates, as he has done each year since 2010. However, the carriers may insist that higher rates are needed to cover escalating costs tied directly to medical claims, the uncertainty of health Exchanges opening in 2014, and the fees and taxes required as part of healthcare reform.

The Carriers’ Requests

BCBSRI. In an unprecedented move in December, Koller approved BCBSRI’ request for an off-cycle increase due to the carrier’s concerns about its low reserve levels (it ranks last among BCBS organizations nationwide according to Risk Based Capital), as well as some unforeseen increases in outpatient costs in the marketplace. Now, BCBSRI is requesting an overall 18.1% rate increase to individual Direct Pay plans and a 14.7% hike for small groups, claiming trend (average increases in the market) will rise to 7.1%.

In its filing to OHIC, BCBSRI cited the key drivers include:

  • Increased outpatient costs associated with injections and chemotherapy cost increases of 21%, even with a 5% drop in utilization
  • Outpatient surgery costs, which increased 9%
  • Specialty drug costs, up 17% with a 6% spike in utilization
  • Historical losses
  • The impact of the Affordable Care Act, which is adding 3.7% to premiums
  • Concerns over the uncertainty of new health benefit Exchange and the unknown health risks of its current uninsured membership

These rates are meant as a starting point, and are adjusted for age. As averages, they also vary by product so some small groups could receive increases as high as 40% and others as low as 20%. All BCBSRI individual plans, except for one HSA plan, will be offered both outside of the health benefits Exchange and through it.

UnitedHealthcare of New England. In its filing, United stated its trend factors (average increases) will need to be 7.8% for the market, slightly above the 7.1% trend BCBSRI is reporting. The carrier also filed for new coverage options, including in its filing is a table that shows both new plans and discontinued plans designed to meet healthcare reform’s essential benefits and minimum value plan requirements. Most revealing in United’s filing is its estimate that 80% of small groups will purchase through the SHOP for small business on the Exchange, with only 20% continuing to purchase through the private market.

Neighborhood Health Plan. This local nonprofit, mostly known for providing health insurance to lower income individuals and families who need affordable coverage, has filed for new individual and small group plans, intending to only offer these products on the Exchange.

Tufts Health Plan. Tufts, which has very little market share in Rhode Island, is projecting trend to be 6.2%, less than BCBSRI and United. Like United, Tufts will keep a handful of plans, but many will be discontinued on 1/1/14 to better meet healthcare reform requirements. The carrier did not state its Exchange intentions in the filing.

The rates won’t be finalized until late June, when Christopher Koller, who makes the rating decisions, will leave Rhode Island to head to Milbank Memorial Fund in New York City. Koller, who is Rhode Island’s first health insurance commissioner, has been in the position since 2005. 

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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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