State regulators have approved premium increases for all three of Western New York’s health insurers for next year after trimming many of the rate requests that were originally proposed – sometimes significantly – because they were “unreasonable.”
The Department of Financial Services gave the go-ahead to planned rate increases by Buffalo-based HealthNow New York, Amherst-based Independent Health Association and Univera Healthcare of Amherst after reviewing them under the state’s prior-approval law. The proposed rates were submitted over the summer.
The review applies only to “community-rated” plans, typically for groups of fewer than 50 people each that are pooled together. That’s separate from rates based on one group’s claims experience from one year to the next or for employers that pay for their own employees’ medical costs.
The rates will take effect Jan. 1, with some being applied to later quarters during the year on a rolling basis. The insurers will now notify employers and individuals in preparation for enrollment periods.
For customers of HealthNow, parent of BlueCross BlueShield of Western New York, rates will go up by an average of 9.6 percent for all plans, including 6.8 percent for HMO plans and 11 percent for “indemnity” plans.
“The process is something we take very seriously,” HealthNow Chief Financial Officer Stephen T. Swift said, adding that the overall average increase on community-rated plans “really shakes out” to be 8 percent. “We do everything in our power to minimize the increase that is ultimately passed on to our members and customers.”
Those were all trimmed from the original requests by about 0.6 percentage points.
“The state did make very modest reductions to our submitted rates, … but it was very, very minor,” Swift said, calling that “gratifying and satisfying.”
Approved rate changes for Independent Health range from increases of 4.29 percent to 7.9 percent for groups and 12.5 percent for Healthy New York, and from zero percent to a rate cut for direct-pay plans. The group rates were approved as requested, but those for Healthy New York and direct-pay were slashed.
“The fact the department approved our rates a month ago with minimal or no changes is evidence of our consistent and accurate rating and underwriting approach. Our community rated premium adjustments for 2013 are among the lowest in several years,” IHA Chief Marketing Officer Nora K. McGuire said, citing an overall average of 5.25 percent.
Univera’s requested increase was cut to 10.4 percent, from 11.8 percent. Regulators concluded that the profit objective was too high and the medical spending too low. Univera is a subsidiary of Rochester-based Excellus Health Plan, which operates as BlueCross BlueShield in Rochester and Central New York, but does not have the Blues license for Western New York.
“We’re in the process now of preparing notifications to our members of how this will affect their rates,” said Univera spokesman Peter B. Kates.
This is only the second year that the state has used its renewed authority under the law, which was passed in early 2011, to control the rate increases that consumers and employers will face. Prior approval had existed previously in the 1990s, but was replaced by a “file and use” system that only allowed the state to take action retroactively.
Under prior approval, insurers must submit their planned premiums well in advance of the effective date, and regulators have the authority to approve, reject or modify them. The rate requests and justifications by the insurers are posted online on the department’s website, to enable consumers and others to comment on them, and those comments as well as the state’s rationale for its decisions are also available online.
With HealthNow, the state agreed with the projected increase in medical claims of 7.9 percent, as well as the profit margin of 1.75 percent. But it cut the insurer’s administrative cost ratio by half a percentage point, to 11.46 percent, or 11.46 cents of every premium dollar, and raised medical spending.
“Our objective is to consciously keep down rates,” Swift said. “That’s our commitment.”
IHA, the region’s No. 2 insurer, got off with no overall change to its commercial group rate requests. That includes a 4.67 percent increase for large group HMOs, 7.8 percent for small group HMOs, 7.90 percent for exclusive provider organization (EPO) and high-deductible plans and 4.29 percent for preferred provider organization and point-of-sale plans.
All of its assumptions were approved, including spending 87 cents of every dollar on members’ medical care for HMOs and 89 percent for others.
For the HMOs, it expects to spend 12.72 to 13.32 cents on administrative costs, with a profit margin of 0.28 percent on large groups and a loss of 0.32 on small groups. For the EPO and high-deductible plans, it expects to spend 16.85 cents on overhead, for a loss of 5.85 cents on every dollar. For the PPO and point-of-sale plans, it expects a loss of 0.69 cents of every dollar after spending 11.69 cents on overhead.
“Although we are seeing progress in lowering the medical cost trend, we are committed to maintaining a laser focus on initiatives that continue to improve quality and lower costs,” McGuire said.
For Univera, the state agreed with a projection of 8.2 percent growth in claims, and administrative costs of 13 cents on the dollar. But regulators cut the profit margin to 2 percent, from 3 percent, while increasing medical spending to 85 percent of every dollar, from 84 percent.
“Most of the new rates are close to what we submitted and are very competitive in our market,” Kates said. “We hope to increase our membership during this open-enrollment season.”