Health in­sur­ance rates to soar

State reg­u­la­tor OKs hikes of 20 per­cent or more as ACA providers post losses

Baltimore Sun - - FRONT PAGE - By Andrea K. McDaniels

The cost of health in­sur­ance plans of­fered un­der the Af­ford­able Care Act will jump 20 per­cent or more next year un­der rates to be an­nounced to­day by Mary­land reg­u­la­tors.

The CEO of Mary­land’s largest in­surer de­fended the hefty rate in­creases and said the fed­eral law that ex­panded health in­sur­ance to most Amer­i­cans needs to be changed if it is to re­main sus­tain­able.

“We re­gret that such rate in­creases are needed,” said Chet Bur­rell of CareFirst BlueCross BlueShield. “It is the last thing on earth we want. But no com­pany can sus­tain the kinds of losses we have seen.”

The com­pany projects that its to­tal losses since the law went into ef­fect will amount to $620 mil­lion by the end of the year, Bur­rell said. Peo­ple en­rolling in plans are sicker and costlier than the in­surer pre­dicted, he said.

The losses came even as high de­ductibles and out-of-pocket ex­penses have made health plans too ex­pen­sive for many Mary­lan­ders, said Bur­rell, who said he still sup­ports the law’s ex­pan­sion of health care cov­er­age.

His re­marks came as the Mary­land In­sur­ance Ad­min­is­tra­tion ap­proved dou­ble-digit rate in­creases for the four com­pa­nies that sell health plans through the state ex­change, an on­line mar­ket­place set up un­der the law for peo­ple who can­not buy cov­er­age through their em­ployer.

CareFirst, which holds 68 per­cent of the mar­ket, re­ceived an av­er­age hike of 31.4 per­cent on its PPO plan and 23.7 per­cent on its HMO — the high­est in­creases of any

in­surer.

The rate in­creases sparked crit­i­cism from con­sumers and ad­vo­cacy groups, but Bur­rell said they were needed to help stave off pro­jected losses.

“Peo­ple are just sicker and us­ing more ser­vices, and the rates didn’t re­flect that,” he said. “We filed with the goal of break­ing even and just cov­er­ing the costs. We are not mak­ing any money at it.”

The ad­vo­cacy group Con­sumer Health First said the new rates are too high and ques­tioned whether CareFirst is in­flat­ing pro­jected cost in­creases. The group said the state should look at ways to make the sys­tem more cost-ef­fec­tive. For in­stance, the group sug­gested com­bin­ing the in­di­vid­ual mar­ket with the small-busi­ness mar­ket so there are more peo­ple in the in­sur­ance pool, spread­ing out the risk.

“We are wor­ried that these rates are go­ing to make it even more unaf­ford­able and in fact make a bad sit­u­a­tion even worse, be­cause we know al­ready con­sumers can’t af­ford the rates, and now they’re go­ing up fur­ther,” said Leni Pre­ston, pres­i­dent of Con­sumer Health First.

Carolyn Qu­at­trocki, ex­ec­u­tive di­rec­tor of the Mary­land Health Ben­e­fit Ex­change, which ad­min­is­ters the on­line mar­ket­place, said the law is still in the early stages and each year kinks are worked out. She said the sys­tem is work­ing be­cause the num­ber of unin­sured in the state is at its low­est point ever. Nearly 162,000 pre­vi­ously unin­sured peo­ple en­rolled in pri­vate health plans dur­ing the last en­roll­ment pe­riod.

The ex­change also needs to do a bet­ter job ed­u­cat­ing peo­ple about the fed­eral sub­si­dies they can get to help off­set in­sur­ance costs, she said.

“The pro­gram is re­ally still in its in­fancy, rel­a­tively speak­ing,” Qu­at­trocki said. “While there could be ad­just­ments, we have to look at what is achieved. The gains in the past three years are just sub­stan­tial.”

The in­sur­ance ad­min­is­tra­tion in most cases is­sued lower rates than what the in­sur­ers re­quested. CareFirst asked the ad­min­is­tra­tion in May to al­low it to in­crease rates by 12 per­cent for the HMO plans and by 30 per­cent for PPO plans. The in­surer then re­filed its re­quest and asked for a 27.8 per­cent in­crease on its HMO plans and a 36.6 per­cent in­crease on its PPO plans af­ter re­view­ing claims from the first five months of the year that showed higher costs than the orig­i­nal re­quest was based on.

In­sur­ance Com­mis­sioner Al Red­mer said in­sur­ers across the coun­try are fac­ing fi­nan­cial trou­bles as­so­ci­ated with the Af­ford­able Care Act, com­plain­ing that they’re los­ing money on ex­change plans be­cause the pools of the in­sured are too small and

In­sur­ance rate in­creases

Car­rier the mem­bers too sick. Some com­pa­nies, such as Aetna and United Health­care, are mostly pulling out the ex­change busi­ness.

In Mary­land, some small em­ploy­ers dumped their em­ploy­ees onto in­di­vid­ual plans be­cause they were cheaper. There are also prob­lems with peo­ple churn­ing in and out of the sys­tem and buy­ing cov­er­age only af­ter they fall ill, Red­mer said.

The in­sur­ance ad­min­is­tra­tion also re­leased rates to­day for the small-group mar­ket, where rates will in­crease less than on the in­di­vid­ual mar­ket and in some cases de­cline.

Rates in Mary­land also have been typ­i­cally lower than those na­tion­ally un­der the Af­ford­able Care Act, so there could be some nor­mal­iz­ing go­ing on, said John Ho­la­han, a fel­low in the Ur­ban In­sti­tute’s Health Pol­icy Cen­ter.

“Mary­land rates have been lower than the rest of the nation so it seems some catch­ing up should be ex­pected,” said Ho­la­han.

The ad­min­is­tra­tion or­dered Ever­green Health Co­op­er­a­tive to in­crease its rates by 20.3 per­cent, much higher than the 8.8 per­cent the health care com­pany ini­tially re­quested. Even so, it was the small­est in­crease among the in­sur­ers.

Red­mer said the ad­min­is­tra­tion in­creased Ever­green’s rates to cover costs as­so­ci­ated with the risk-ad­just­ment fees the in­surer must pay, which amounted to $24.2 mil­lion last year. The fees re­dis­tribute money from plans with lower-risk pa­tients to plans with more costly, higher-risk mem­bers in an ef­fort to level the play­ing field.

The co-op sued the fed­eral gov­ern­ment last month over the pend­ing pay­ment, which rep­re­sented more than a quar­ter of its $85 mil­lion pre­mium rev­enue in 2015. Ever­green CEO Peter Beilen­son, who said he re­grets hav­ing to raise rates so much but un­der­stands the need to do so, said changes could be made to the law, par­tic­u­larly to get more healthy peo­ple and more young peo­ple to sign up for in­sur­ance.

The higher rates “are now go­ing make it some­what less af­ford­able for peo­ple go­ing on the in­di­vid­ual ex­change,” he said.

Bur­rell said his com­pany still sup­ports ex­panded cov­er­age but that the cur­rent sys­tem is not work­ing.

“I do think there are changes that need to oc­cur. It re­mains to be seen whether a new ad­min­is­tra­tion can and will do that,” he said of the com­ing pres­i­den­tial elec­tion.

While the law re­quires peo­ple to buy health cov­er­age, penal­ties for not do­ing so aren’t high enough to have a suf­fi­cient puni­tive af­fect, Bur­rell said. As pre­mi­ums in­crease, he said, healthy peo­ple will be more likely to opt out.

Bur­rell said it would be like a property in­surer stuck with cov­er­ing only houses that are burn­ing.

To en­cour­age more healthy peo­ple to en­roll, Bur­rell sug­gested in­creas­ing the penal­ties for not buy­ing in­sur­ance, al­though that would not be po­lit­i­cally pop­u­lar.

He thinks the state should adopt the Ba­sic Health Pro­gram, a pro­vi­sion of the Af­ford­able Care Act that es­sen­tially ex­pands Med­i­caid cov­er­age for peo­ple whose in­comes are just above the el­i­gi­bil­ity lim­its. This could help peo­ple who can’t af­ford out-of-pocket costs even with sub­si­dies. Few states have joined the pro­gram.

“I be­lieve peo­ple should be cov­ered, and we as a com­pany have tried to act on that and … in fact took on the bur­den of the vast ma­jor­ity of Mary­lan­ders and did so at a heavy, heavy cost,” Bur­rell said. “But no­body can sus­tain losses year af­ter year af­ter year.”

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