Citing a rise in medical costs – particularly at hospitals – UnitedHealthcare of New England is seeking to raise small groups’ premiums by an average of 10.5 percent, effective July 1, and large groups’ premiums by an average of 9.9 percent.
United filed its request with Health Insurance Commissioner Christopher F. Koller on Jan. 14, days before Blue Cross & Blue Shield of Rhode Island requested hikes averaging 11.5 percent for small groups and 14.6 percent for large groups, effective May 1 and July 1, respectively.
Both filings involve what insurers call “rate factors,” which are adjustments to the base rates to reflect cost trends. Actual rates for small groups (of up to 50) are adjusted for the members’ age, gender, health status and family composition, the only factors allowed by law; groups of 51 or more are also subject to experience rating, based on their claims history.
Blue Cross issued a news release upon filing its rate factors and provided the documents to Providence Business News upon request; United did not make a public announcement, but did provide a statement from its CEO, Stephen J. Farrell, and some basic details.
“We understand that any increase in health insurance costs is difficult for employers, their employees and families during these challenging economic times,” Farrell said in the statement. “This is why on behalf of our members, we continue to work to keep health insurance increases as low as possible. We will continue to implement innovative cost containment strategies to address the issue of continually rising medical costs.”
All three commercial insurers in Rhode Island – Blue Cross, United and Tufts Health Plan – had submitted rate hike requests last spring, but they withdrew them at Koller’s request amid protests from government officials, business leaders and consumer advocates.
At the time, Blue Cross sought a small-group rate hike of 13.9 percent, and a large-group hike of 16.3 percent; United sought hikes of 13.2 percent and 11.6 percent, respectively; Tufts aimed for about 10 percent overall. Koller deemed them all unaffordable.
Later in the year, Tufts came back and got an 8.5 percent rate hike. But Blue Cross and United held back, giving some respite to businesses whose policies came up for renewal in the last six months. Now they are playing catch-up.
In its filing, Blue Cross said medical costs were rising fast, especially at hospitals, where inpatient costs are expected to rise by 8.2 percent from 2009 to 2010, and outpatient costs, by 12.5 percent. Prescription drug costs, Blue Cross projected, will also rise sharply this year, by 10 to 11 percent.
Charts provided by the company show a projected 15.1 percent rise in inpatient costs and a 12.6 percent rise in outpatient costs for large groups, and 14.3 percent and 11.8 percent, respectively, for small groups, with price increases alone accounting for about two-thirds of the jump. On the prescription drug side, United’s projections were slightly lower than Blue Cross’ – a 10.8 percent increase for large groups, and 9.9 percent for small groups.
In his statement, Farrell said United believes that “addressing the issue of rising medical costs is critical to lowering the medical trends that we’re all experiencing today.”
Koller’s review of the rate requests will include looking at whether they are actuarially justified as well as whether they are affordable, ensure the fair treatment of providers and keep the companies solvent. Koller has not yet taken a position on the filings, but he has indicated that he won’t base his decision on affordability alone.
Other government officials, however, have been quicker to dismiss the insurers’ arguments.
Citing the “tremendously challenging operating environment” that Rhode Island businesses are facing, Lt. Gov. Elizabeth H. Roberts has urged Koller to reject the Blue Cross hike (she has not commented on the United request) and instead “redouble our efforts to make controlling the costs of health care” through system reforms.
State Treasurer Frank Caprio, a Democratic gubernatorial candidate, has gone further, speaking out against Blue Cross on the Buddy Cianci Show on WPRO and starting a campaign on Facebook to “protect jobs” in the state by fighting against the hike request.
Unlike Roberts, Caprio is not getting into the subtleties of public policy and cost trends. The Facebook call to arms – again, targeted only at Blue Cross – calls the company a “health insurance giant” and says it’s “outrageous” that it has raised its premiums more than 80 percent in the past decade, “while enjoying profit margins at the expense of hard-working Rhode Islanders.” It concludes: “It’s time we all stand up and tell BCBSRI, ‘Enough is enough!’ ” •
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Health status factor was eliminated as a component of small group premiums in 2009.