Crain’s Health Pulse
August 8, 2016
Insurance Regulator Announces Higher Health Premiums for 2017
New York insurance regulators have approved an average 16.6% hike in premiums for individual health plans, including those sold on the New York State of Health exchange. Insurers asked for a 19.3% increase, on average.
The New York State Department of Financial Services said it reduced insurers' proposed premium requests by about 28% in all, saving policyholders $302 million.
In the small group market, DFS approved an average 8.3% increase after insurers asked for an average hike of 12.3%.
Following the collapse of co-op insurer Health Republic in 2015, DFS’s actions this year are being closely watched. Some industry observers said the agency shared responsibility for the bankrupt health plan’s demise because of its regulatory authority to approve premium increases.
DFS said rising medical costs, especially specialty drug costs for diseases like hepatitis C, led to a need for higher premiums.
During the most recent sign-up period, more than half the individuals who enrolled through the state’s health insurance exchange qualified for tax credits that reduced the cost of coverage.
“DFS carefully examined the rates requested by health insurers to reduce excessive health insurance premium increases in the face of rising national health care and pharmaceutical costs,” DFS Superintendent Maria Vullo said in a statement.
Insurers are required to spend 82% of collected premiums on health care costs. Based on the approved increases, plans will spend an average of 87.2% on medical costs in the individual market and 85.5% on medical costs in the small-group market. To see a table of requested and approved rate increases, click here.
After several years of slamming the state agency for irresponsibly slashing insurers' requests, the New York State Health Plan Association took a softer stance following the rate announcement.
“We believe this year’s process, which provided an opportunity for plans and DFS staff to have constructive discussions about the impact of these factors, was an improvement on previous years,” Paul Macielak, the president and chief executive of the state’s Health Plan Association, said in a statement.
This year, DFS told some plans to hike rates even higher than they had proposed. For MetroPlus, the health insurance arm of NYC Health + Hospitals, DFS granted a premium increase of 29.2%, although it had requested only a 20.3% hike. For its small-group plan, Metroplus will charge consumers 18.8% more next year, despite asking for only a 13.1% increase.
DFS also lifted premiums for CareConnect, the insurance arm of Northwell Health, in the small-group market. The agency approved an increase of 23.2%. on average, in the small-group market, even though it requested only a 16.8% increase.
CareConnect said in a statement on Friday afternoon that the federal risk adjustment program, which is designed to help insurers who enroll sicker customers, factored into the need for large rate increases. In the small-group market, the insurer said "flawed methodology" resulted in risk-adjustment payments flowing from CareConnect and other plans to UnitedHealthcare's Oxford Health Plans. CareConnect said in its rate filing it expects to pay $16.4 million this year in risk-adjuster costs.
“We are greatly disappointed that the state did not address underlying problems with the risk adjustment program before the 2017 rates were enacted because we believe DFS has the authority to make the necessary changes,” said Alan Murray, CareConnect's president and chief executive.
DFS has a responsibility to protect consumers from predatory pricing, but it must also assure that plans remain financially solvent.
As of Jan. 31, 2.8 million people had signed up for coverage on the exchange, mostly for Medicaid plans. About 2 million people enrolled in Medicaid plans, and 215,000 children got coverage through Child Health Plus, which covers children in low-income households.
Another 380,000 people enrolled in a new type of coverage called the Essential Plan, which is aimed at lower-income consumers and immigrants who are ineligible for Medicaid. There were 272,000 people who bought qualified health plans.
August 5, 2016
State Approves Largest Insurance Rate Increase Since Start of Obamacare
The Cuomo administration on Friday announced that health insurance rates on the individual market would increase by a weighted average of 16.6 percent, the largest individual market hike since the Affordable Care Act began in 2014.
The new rates take effect in January; open enrollment on the state’s exchange begins Nov. 1.
Rates in the small group market will increase by a weighted average of 8.3 percent.
Health insurance reaction was relatively muted as insurance companies digested the news that they would collect higher premiums — though still not as high as they might have liked — and compared themselves to their competitors.
“We believe this year’s process, which provided an opportunity for plans and DFS staff to have constructive discussions about the impact of these factors, was an improvement on previous years,” said Leslie Moran, a spokeswoman for the New York Health Plan Association, which represents insurers. “We look forward to working with DFS to ensure the rate setting process continues to offer greater transparency.”
For years, insurers have accused the state’s Department of Financial Services of playing politics with the rates, keeping them artificially low at the expense of insurers’ bottom lines, an accusation the Cuomo administration has repeatedly denied.
This year, there was certainly more of a mind meld between the administration and the majority of insurers.
The Cuomo administration acknowledged that medical costs increased, citing a 7-percent average increase on the individual market and an 8.5-percent increase on the small group market. The administration also acknowledged drug prices have impacted insurers, pointing specifically to blockbuster drugs for Hepatitis C.
Another 5.5 percent of the rate increase was attributed to the elimination of the federal reinsurance program, a part of the Affordable Care Act that expires this year.
The risk adjustment program, which has been criticized by some insurers and DFS superintendent Maria Vullo, also helps explain why insurers such as UnitedHealth saw their rate requests slashed while others such as MetroPlus will actually be forced to increase their premiums more than they would have liked.
UnitedHealth, which is scaling back its Obamacare public exchange offerings to just three markets and has lost hundreds of millions of dollars on its exchange plans, asked for a 45.6 percent rate increase on the individual exchange. It was awarded a 28-percent increase. In the small group market, UnitedHealth asked for a 12.8-percent increase. It was granted a 5.3-percent hike.
The company did not immediately respond to a request for comment.
Despite the double-digit hike on the individual exchange, the Cuomo administration touted its vigilance, saying the department reduced insurers’ requested 2017 rate increases by more than 28 percent overall, which will save policyholders more than $302 million. That combines the individual and small group market.
While that is true, the brunt of those savings come from reductions in rates requested by UnitedHealthcare of New York, UnitedHealthcare Insurance Company of New York and Aetna Life.
Most other insurers on the individual market received rates comparable to what they had requested.
That means the roughly 350 customers of Crystal Run Health Plans will see an 80-percent increase in their premiums beginning in January, less than the 89 percent the company requested. Their small group rates are going up approximately 55 percent.
“Crystal Run Health Plans continues to be committed to providing access to high quality healthcare and the triple aim — improving patient care, improving health and reducing cost for to the people and business of the Hudson Valley,” Steve Zeng, executive director of Crystal Run, said in an email. “Our 2017 rates were developed to help Crystal Run accomplish those very commitments. We believe our rates as approved by the New York State Department of Financial Services will remain among the most competitive in the region.”
CareConnect, the insurance company run by Northwell Health, will see its average individual premium jump by 29 percent, in line with what the company asked for after an admission it had mispriced its plans during its first three years in business. Its small group offering will increase 23 percent, more than what the company had requested.
The company said in a statement that a large portion of the current rate increase for small group plans can be attributed to the risk adjustment program, "which includes flawed methodology that is adversely affecting nearly all insurers on New York State’s health exchange. Without risk adjustment fees, CareConnect’s proposed increase would have been significantly lower."
MetroPlus, the insurance arm of the city’s public hospital system, will also see its rates increase 29 percent, even though it only sought a 20-percent hike. That’s in part because of the risk adjustment program, which requires insurers with healthier populations to pay insurers with sicker populations. Earlier this year, the Centers for Medicare and Medicaid Services announced MetroPlus owed $30 million in risk adjustment payments, and that is expected to increase next year.
"We are pleased that in 2017 our health plan, MetroPlus, will continue to be one of the most affordable plans in the health care exchange" said Ana Marengo, a spokeswoman for Health + Hospitals. "While the increase directed by the state of New York was above what was requested, many individuals remain eligible for subsidies that greatly reduce the cost of their insurance."
Fidelis, one of the largest insurers on the individual market, owes $56 million in risk adjustment payments. Its premiums are slated to increase 11.6 percent, slightly less had what it had requested.
Oscar Health, the insurance startup and Silicon Valley darling, and Independent Health Benefits Corporation, will have individual rates increase by about 20 percent, also in line with what they had requested.
Oscar, which is losing hundreds of millions of dollars, recently announced it was drastically narrowing its network.
The company did not immediately respond to a request for comment.
Rate increases generate headlines but they do not necessarily mean consumers pay more for their insurance plans. That's because the majority of people shopping on New York's individual health exchange receive federal subsidies in the form of tax credits, which are based on level of income and the price of the second lowest silver plan. That insulates most consumers from price increases even as it requires the federal government to pay more in subsidies.
"Consumers should shop around for the best value,” Donna Frescatore, executive director of the New York State of Health, said in a statement.