Medical Procedure Costs Driving Insurance Rates Higher
(Updated 11:34 p.m.) There was public outrage the last time the state’s largest insurance company requested a nearly 20 percent increase for its individual health insurance plans. But a request to increase rates 13.8 percent for about 65,000 employees enrolled in its small group plan and a 14.6 percent increase for about 30,000 people enrolled in its individual plan has generated little, if any public uproar
Anthem, the state’s largest insurance company, submitted a request to the state Insurance Department to increase its small group rates this year by 13.8 percent on Aug. 15. A request to increase rates 14.6 percent for its individual policyholders was made on Aug. 31. The department’s actuaries will take a look at both proposed rate increases and the rationale behind them before making a final decision.
“Small group premium increases are driven primarily by the underlying growth in costs associated with medical services and increased utilization as well as new mandated benefits,” Sarah Yeager, a spokeswoman for Anthem, said in a statement.
The same increase in medical procedure costs is also impacting the individual plans. The rate of physician costs is not increasing.
“Individual rate increases are driven by many factors, but primarily by increasing healthcare costs,” Yeager said. “These factors are exacerbated by the downturn of the economy, as many healthy individuals are choosing to not purchase coverage, to drop coverage or to seek out less expensive coverage.reasoning applies to the most part to the individual plan.”
These double-digit rate increases are not unique to Anthem.
Aetna had requested a 14 percent increase for its small group plans in May, but the Insurance Department knocked it down to 12.6 percent this past July. Also Oxford Health Plans sought a 8.7 percent increase for about 13,335 policyholders in its small group plan, but the Insurance Department found the projected costs “were not in line with what the company is currently experiencing and disapproved the request as submitted.” Instead, it limited the rate to between 7.4 and 8.4 percent for that group of Oxford customers.
ConnectiCare is seeking a similar 13.5 percent increase for its 52,000 small group plan members. ConnectiCare did not respond to requests for comment.
“The rate increases in the small group market are not unique to Anthem, but rather represent an economic reality faced throughout the entire industry,” Yeager said. “A recent study by the Health Care Cost Institute examined health care costs between 2009 and 2010, finding that health care costs rose at double the rate of inflation. These rate adjustments reflect the fact that health care costs continue to escalate faster than the growth of premiums.”
While the increasing rates are a concern for insurance companies they’re also a concern for consumers and small business owners like Kevin Galvin.
Galvin, who owns a facility repair and maintenance business in Hartford, said he’s not surprised the increases the companies are requesting are coming in just below the 15 percent threshold which requires the Insurance Department to hold a public hearing.
“We warned them this would happen,” Galvin said Tuesday.
The legislature passed legislation in 2011 calling for the Insurance Department to hold a public hearing any time a rate request was more than 10 percent, but Gov. Dannel P. Malloy vetoed it claiming it would add to the cost of running the department. In an effort to accommodate consumer advocates’ requests the Insurance Commissioner voluntarily agreed to hold a public hearing for any rate increase over 15 percent.
State Healthcare Advocate Victoria Veltri said last year the rate increases remained around 9.8, 9.9 the 10 percent, what caught her eye was the requests for double digit rate increases.
She said she would like to know the insurance companies have done everything they can do to try and contain costs when they negotiate these contracts with doctors, hospitals, and other providers. She said she’s fairly confident the Insurance Department does a thorough review of the numbers they’re given, but how hard are the insurance companies pushing to lower the costs of medical procedures such as MRI’s?
That’s not something you can tell for a rate increase request, or at least it’s not obvious unless you’re a trained actuary.
Obviously a double digit rate increase is going to be difficult for any small business to swallow in this economy, Veltri said.
Buying an insurance plan is not like buying a car, Veltri said. When you buy a car you can do research and figure out if you’re paying any “excess costs” then you can negotiate those costs with the dealer.
But an insurance plan is not something that’s negotiable for consumers, Veltri stressed.
She said she would like to see more detail from the insurance companies about how they’re negotiating with the healthcare providers to lower the costs of certain medical procedures. She also wanted to remind consumers that they have an opportunity to weigh in on these proposed rate increases in writing through the Insurance Department’s website.