Insurers Cry Foul as DFS Slashes Premium Increases by One-Third

Crain’s Health Pulse
August 3, 2015
Insurers Cry Foul as DFS Slashes Premium Increases by One-Third

The state Department of Financial Services announced last week that premiums for individuals buying insurance in the New York State of Health marketplace will rise an average of 7.1% when open enrollment begins Nov. 1.

Insurers had requested an average increase of 10.4%, but just as it did last year, the agency lessened the rate hikes to ease the effect on consumers. In the small-group market, plans were approved for a 9.8% average increase after insurers requested a 14.4% hike.

DFS said it cut rates by more than 30% on the individual and group markets, saving consumers $430 million. It said the average increase was 8% below the usual increase in health care costs. About half the rate increases were attributed to reductions in the federal reinsurance program, which was enacted as part of the Affordable Care Act to protect against rate spikes by paying plans for higher-cost individuals.

"We closely analyzed each insurer's request and cut rates that were excessive or unreasonable," said Anthony Albanese, acting superintendent of the DFS. "The influx of new consumers into the health insurance market in recent years means that rates for individuals will continue to be nearly 50% lower than before the creation of New York's health exchange.”

The New York Health Plan Association was not pleased with the DFS reductions. The approvals do not reflect rising pharmacy costs and increased expenditures related to hospital consolidation, said Paul Macielak, president and chief executive of HPA, in a statement.

"After suffering two years of financial losses when the state significantly reduced premium requests, the rates requested by plans for 2016 are necessary to ensure plans remain viable," he said. "The actions of the department bear ongoing scrutiny as we monitor the financial stability of plans in the marketplace."

Manhattan-based Health Republic was granted the largest average premium increase: 14%. The health plan is a nonprofit consumer-operated and -oriented plan, created by the Affordable Care Act to promote competition among insurers. It lost $35 million last year, according to a report by the U.S. Department of Health and Human Services, despite having the second-largest market share on the exchange, at 19%. On the opposite end of the spectrum, DFS slashed UnitedHealthcare's proposed 22% rate hike to a meager 1.7% increase.

Not all insurers were upset with DFS' decision. North Shore-LIJ CareConnect saw its individual market rates cut 0.5%, to an average increase of 4.4%, among the dozens of products it offers.

"It’s well within the reasonability factor for us,” said Alan Murray, president and chief executive. "We’re very pleased. We feel like we put forward the right rates, and it looks like DFS agreed with us."

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Gannett News Service
August 1, 2015
NY Health Insurance Costs Up

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