Capital New York
June 3, 2015
New York Insurers Request Rise in Rates
By Dan Goldberg
Health insurers are asking state regulators to approve rate hikes of more than 20 percent for some plans on New York State of Health, the insurance exchange created by the Affordable Care Act.
The state's Department of Financial Services on Tuesday posted proposed changes to insurance rates on the individual and small group markets, providing the first glimpse of what consumers can expect when they shop for health insurance next year.
The weighted average increase is 13.5 percent on the individual market and 14.3 percent for the small group market, according to D.F.S., but these are only requests. The rates can—and are likely to be—reduced by D.F.S. before they are approved.
“We will be scrutinizing the rate requests very closely and protecting consumers is a paramount objective in that process,” D.F.S. spokesman Matt Anderson said in an email.
In 2015, insurers requested a 12.5 percent increase on the individual market, which was later reduced to a 5.7 percent hike.
Insurers have criticized D.F.S. over what they have said is the "politicization" of the rate-setting process, and are backing a bill sponsored by Senate insurance committee chairman Jim Seward that would reform the prior approval process.
"The rate requests were really quite reasonable," said Leslie Moran, spokeswoman for the New York Health Plan Association, which represents insurers. "Last year D.F.S. reduced rates to below the increase in health care costs, which is not reasonable. Plans can’t continue to sustain cuts that keep them below the growth in their costs. Plans are just as concerned as the state is about 'protecting consumers' and that includes making sure there are viable plans available to them."
Even after D.F.S. has approved rates, an increase in premiums does not necessarily mean an increase in what consumers pay for their insurance because the vast majority of people who shop on the exchange receive subsidies based on their level of income, and the price of the second lowest silver plan in each area.
"So long as a subsidized enrollee is signed up for one of the two cheapest silver plans in an area, she should be protected from any premium increases, no matter how big," said Larry Levitt, an executive with the Kaiser Family Foundation. "That, of course, might mean that she has to switch plans if the plan she was enrolled in is no longer one of the cheapest."
(It's one reason advocates of the Affordable Care Act encourage consumers to shop around every year.)
An increase in the average premium means a greater subsidy from the federal government, not necessarily a greater burden on the individual consumer.
"The weighted average increase in an area may be totally unrelated to how fast the benchmark rises," Levitt said. "The experience in 2015 was that in much of the country insurers competed hard to be one of the lower cost plan, keeping the benchmark premiums down."
The state's health department has not released enrollment numbers since Feb. 4, but at last count there were 512,968 people enrolled in plans purchased through the exchange.
The new rates will take effect in January 2016.
Only two of the 17 insurers offering plans on the exchange, Independent Health and MetroPlus, are asking to have their rates reduced, while eight of the 17 are asking for double digit hikes.
UnitedHealthcare of New York is asking for the largest average increase, saying it needs rates across its plans to rise 22 percent. Their silver plan, often the most popular choice for consumers, would rise 28.5 percent.
Insurers are citing the increased costs of medical care, particularly drug expenses and hospital payments, as a driver of the proposed increases.
“While everyone is focused on the rates plans are requesting, there’s been little attention given to the underlying cost of care,” Moran said in an email. “Increased pharmacy costs—including high costs specialty drugs such as Sovaldi and Harvoni [the Hepatitis C drugs] —and hospital consolidations continue to drive up the costs of providing coverage, and these rising costs continue to go unchecked.”
Alan Murray, president and C.E.O. of CareConnect, the insurance company run by North Shore-LIJ, explained his 5.6 percent increase is mostly correlated to the high price of pharmaceuticals.
"It's multiple sclerosis, it's Hep-C, it's cancer, all of those very specific diseases," he said. "There's amazing treatments out there, but that treatment comes at a price."
Empire HealthChoice HMO justified its 14.5 percent request based on the increasing payments to hospitals.
“As hospitals see higher and higher costs, and payments from Medicaid and Medicare do not keep pace, hospitals have demanded disproportionately higher and higher reimbursement from private insurers,” the company wrote in its filing with the state.
Liz Martin, vice president for communications at Excellus BlueCross BlueShield, which is seeking a 12.8 percent increase, said "the cost of health care services, equipment and products continues to be the primary reason for rate increases."
Health Republic Insurance of New York is asking for a 14.3 percent increase because of the “cost of medical care, including reimbursements to doctors, hospitals and pharmaceutical companies are rising.”
Oscar Health Insurance, the startup venture that has 26,000 members in New York, is asking for a 5.6 percent increase. The company stated it is “raising its prices next year so we can keep paying for the healthcare of our members. That care is getting more expensive each year, so we need to charge more to cover our costs.”
--additional reporting by Katie Jennings