Measure still needs approval from DBRbr>
The state attorney general’s office and the Medical Malpractice Joint Underwriting Association of Rhode Island, the state’s insurer of last resort, have agreed on a 70-percent hike, effective Oct. 1, for the insurance rates applied to hospitals, nursing homes and other facilities.
The deal, which must still be approved by the R.I. Department of Business Regulation, is relatively good news for the 92 nursing homes and 38 other non-hospital facilities covered by the MMJUA, whose premiums the company wanted to raise by 99.8 percent.
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For the insurer’s four hospital clients, however, the news is less positive. Yes, the smaller base rate increase will benefit them as well, but the MMJUA last week also admitted that it had substantially underestimated the requested hike’s impact on the hospitals.
Earlier this year, the DBR approved a change in the MMJUA’s experience rating system that immediately boosted three hospitals’ premiums by 25 percent, and cost a fourth hospital an extra 19.8 percent as of July 1.
Due to that change, the MMJUA had predicted, the net impact of the 99.8-percent base rate hike on the hospitals would only be 9.3 to 13.25 percent. Since the hospitals now pay almost 85 percent of the total premiums – the average nursing home’s 2004 premium was $5,812, compared with $726,364 to $2,007,883 for each hospital – this assuaged some concerns.
On Monday, however, Kathleen G. Cutler, of the MMJUA, acknowledged to the DBR that the 9.3-to-13.25 percent estimate “was an error” that “didn’t come to light until last week.”
Hospitals’ premiums include not just a per-bed charge, but also separate charges for a blood lab, a rehab ward, or any other such units. When the MMJUA calculated the hospitals’ new premiums, Cutler said, it didn’t apply the hike to those “ancillary classifications,” so the premiums were artificially low.
A PBN calculation based on charts provided by the MMJUA shows the hospitals’ actual premium hikes would’ve ranged from 34.4 to 51.1 percent. If the DBR approves the company’s compromise with the attorney general, the hikes would range from 27.4 and 38.1 percent.
Elizabeth Kelleher Dwyer, one of two DBR officers hearing the case, wasn’t pleased.
“I’m concerned about the notice to the hospitals that the effect was going to be 9 to 13 percent, which apparently it was never going to be,” she told company representatives.
The rate filings don’t include the names of the affected hospitals, but they are known to be Women & Infants Hospital, St. Joseph Hospital, Roger Williams Medical Center and Memorial Hospital of Rhode Island.
All four are relatively new to the MMJUA, which had lost all its hospital business in the late 1990s, partly to lower-priced competitors, partly to self-insurance and captives. In the last few years, the hospitals have gone back to the MMJUA, forced by other carriers’ steep premium hikes and non-renewals. Similarly, nursing homes have only come onboard since 2001.
The MMJUA hasn’t updated its rates since 1995, which is why it sought such a dramatic jump all at once. In its original DBR filing, the company noted that its base or “manual” rate per acute-care bed, for example, is $2,208, but competitor ProSelect’s is $4,611. Nursing homes now pay $123 per bed, compared with the New Hampshire JUA’s $385 per bed.
Still, Assistant Attorney General Genevieve M. Martin, who acts as the consumer advocate in insurance matters and negotiated a reduction in the impact of the hospitals’ experience rating change earlier this year, argued that 99.8 percent was too much.
At last week’s DBR hearings, there was confusion over what Martin’s alternate proposed rate was, and whether it was comparable to the MMJUA’s. A reading of documents she filed with the DBR officers suggests her proposal was 37.8 percent, but Martin declined to comment on a “pending” case.
In any case, after meeting well into the night on the last day before the hearing, Martin and MMJUA representatives hashed out the 70-percent compromise.
Given that the company had estimated its profit margin would be zero with a 99.8-percent hike, and it already ended the last year with a $4-million deficit, is this an adequate solution?
“For the hospitals, it’ll be all right,” Cutler said. “It’s not what we wanted for nursing homes.”
