Rate hike seen likely for many

BLUE CROSS CFO Mike Hudson would like to see health care cost-containment efforts contained in the Affordable Care Act bear fruit soon, because despite efforts to date to rein in ever-growing medical care charges, all of the state's health insurers are asking for significant premium increases for the coming year. / COURTESY BLUE CROSS & BLUE SHIELD OF RHODE ISLAND
BLUE CROSS CFO Mike Hudson would like to see health care cost-containment efforts contained in the Affordable Care Act bear fruit soon, because despite efforts to date to rein in ever-growing medical care charges, all of the state's health insurers are asking for significant premium increases for the coming year. / COURTESY BLUE CROSS & BLUE SHIELD OF RHODE ISLAND

Despite efforts from government and industry to reduce health care spending, Rhode Island health insurers say the cost curve is bending in the wrong direction.
In their annual spring rate requests to state regulators for the coming year, two of the state’s three primary insurers – Blue Cross & Blue Shield of Rhode Island and Tufts Health Plan – asked for the largest increases in average rates in the past four years.
The third, UnitedHealthcare of New England, didn’t provide an average rate on which to compare their request.
In a warning to consumers about the rates they’re likely to pay next year, Blue Cross President and CEO Peter Andruszkiewicz wrote that “for many, it may come as a surprise that their rates will rise significantly.”
Specifically, Blue Cross, the state’s largest insurer, is asking for a 14.7 percent increase in the average small-group-insurance rate for 2014. For individuals, the insurer wants an 18.1 percent hike.
Tufts, which doesn’t offer insurance to individuals, requested a 13.1 percent hike in its small group rates for next year. Neighborhood Health Plan didn’t offer insurance in these markets last year, so didn’t list an average change.
The requests are now being reviewed by Health Insurance Commissioner Christopher F. Koller. Based on past practice the insurers are likely to get smaller rate hikes than they want.
For all the insurers, the average rates don’t reflect what any particular customer will actually pay, as specific rates for each policy vary widely. Blue Cross said individual employers could see a 20 percent rate decrease up to a 40 percent increase.
But after the soaring health-insurance increases of the past decade appeared to have slowed in the last two years, the size of the requested rate hikes show the problem of rising medical costs is as serious as ever.
And the major provisions of the federal Affordable Care Act going into effect in 2014, intended to rein in medical costs, may not have the immediate impact many would like.
“We would like it to go quicker,” said Michael Hudson, chief financial officer of Blue Cross, about the push to reverse the growth of medical expenses. “We have been working with some key partners and care providers to reduce costs like all the stakeholders here, but overall costs continue to increase.” According to Blue Cross, the biggest current driver of rising costs are soaring medical-service prices.
In some ways, the looming rate hikes appear to represent the resumption of a longer pattern of rising costs that was interrupted in recent years.
For 2010, Blue Cross & Blue Shield asked for a 13.9 percent hike in the small-group rate and for 2011 requested a 12.4 percent increase. In both years the health-insurance commissioner approved 9.8 percent increases.
Then the insurer’s request for last year dipped to a 10.5 percent increase (8 percent was approved) and for this year Blue Cross asked for a 5.1 percent hike (4.3 percent was approved.)
Next year, when enters the market, Blue Cross will no longer be the only firm in Rhode Island offering individual health plans.
Blue Cross said they have traditionally subsidized the individual rates from group premiums, but with competition on the way along with the state’s new health benefits exchange, the insurer has decided to request an individual rate more reflective of actual costs, Hudson said.
In the first year for many of its key provisions, the Affordable Care Act’s impacts appear as both positive and negative influences on Rhode Island rate requests.
To pay for many of its programs, such as the health-benefit exchanges, the federal law includes a number of new taxes and fees.
Blue Cross estimates that ACA-related taxes and fees will add 4 percentage points to the small-group rate increase.
For individual plans, the ACA should have a positive net effect on Rhode Island rates, Blue Cross estimates.
Without the ACA’s “risk stabilization” program, Blue Cross said it would have asked for a 30 percent hike in individual rates instead of 18 percent.
At the State Health Insurance Commissioner’s office, Principal Policy Associate Patrick Tigue declined to comment on what the rate requests showed about efforts to contain costs in Rhode Island.
But he did say that because of the changes in health insurance brought on by the ACA, the state is doing a much deeper, more detailed analysis of rate proposals than in prior years.
The health-insurance commissioner’s office expects to approve 2014 rates by the end of June. •

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