OHIC rejects UnitedHealth medical rate request

PROVIDENCE – UnitedHealthcare of New England, a division of the Minneapolis-based UnitedHealth Group (NYSE: UNH), has been ordered to reduce its requested increase in medical insurance rates for larger employers or face a hearing.
In a cost-trend factors filing submitted to the state Office of the Health Commissioner on June 12, the insurer requested a 12.5-percent increase in rates for large employers (those with more than 50 workers) renewing their policies Oct. 1 and later.
But the office determined that, “while the 12.5-percent prescription drug coverage trend factor was reasonable, the 12.5-percent medical trend factor [was] not in the interest of the public,” the OHIC said in a statement yesterday.
In a letter yesterday to the company, Health Insurance Commissioner Christopher F. Koller contested three factors in the insurer’s medical rate request.
Koller noted that UnitedHealth’s “medical trend factor” included a demographic adjustment of 1 percent per year, a 1-percent contingency margin and an assumption of a 3-percent annual increase in “the intensity mix of inpatient services,” none of which his office considered to be justified.
“Normal changes in demographic mix should be reflected in utilization increases,” the commissioner wrote. The contingency margin “is redundant with profit built into the company’s retention, and it should therefore not be included in the trend assumption.” And of the intensity-mix adjustment, he wrote: “the company has provided additional information to the effect that the intensity mix of inpatient services declined by 3 percent in 2006,” adding: “It is the finding of this office that this assumption [of a 3-percent-per-year increase] is not adequately supported.”
Koller concluded: “This office has determined that the medical trend factor, as filed, is not consistent with the proper conduct of United’s business and not in the interest of the public.”
UnitedHealth was given 10 days to either refile – with a revised “medical trend” of 9 percent, based on the OHIC’s calculations of the effect of removing the contested factors – or to request a hearing on its rating formula.
UnitedHealth Group (NYSE:UNH) is a diversified health and well-being company based in Minneapolis, Minn. It offers a broad spectrum of products and services through six operating businesses – UnitedHealthcare, Ovations, AmeriChoice, Uniprise, Specialized Care Services and Ingenix – serving about 70 million individuals nationwide. Additional information is available at www.unitedhealthgroup.com.
Additional information, including the full letter sent by R.I. Health Commissioner Christopher F. Koller to UnitedHealthcare of New England, can be found at www.dbr.state.ri.us.