Vermont Business Magazine The Green Mountain Care Board (GMCB) today received proposed rates for 2018 Qualified Health Insurance Plans (QHPs) offered on Vermont Health Connect (VHC), Vermont’s online health insurance marketplace. For its VHC plans with coverage beginning January 1, 2018, Blue Cross and Blue Shield of Vermont (BCBSVT), which insures more than 70,000 Vermonters through VHC, requests a 12.7 percent average annual rate increase. MVP, which covers approximately 10,000 Vermonters in VHC plans, requests an average annual rate increase of 6.7 percent. The GMCB typically will issue a decision that lowers actual rates. One large caveat in all this is that Congress is working on a new health care plan that could replace the Affordable Care Act (Obamacare). The House already has passed a plan, which could be revised if not wholly undone by the US Senate.
The proposed rates are subject to a 90-day technical analysis and review by the GMCB. The review process includes two days of rate hearings open to the public, input from the Office of the Health Care Advocate, and public comment from Vermonters.
The insurers cite factors that include rising prescription drug and medical costs, federal taxes and fees, Vermont’s aging demographic, and the underfunding of Medicaid and Medicare and resulting “cost shift,” as drivers of the rate increases. Across the country, preliminary marketplace rate filings show a 20 percent average annual increase for 2018, with rate increases in some states exceeding 30 percent.
BCBSVT proposes an average annual increase of 12.7% over 2017 premiums offered on Vermont Health Connect. Proposed increases per plan range from 5.8%-14.6%.
There are 42,357 contracts (70,035 members) currently enrolled in a BCBSVT QHP.
BCBSVT is proposing an average rate increase of 12.7 percent across all QHPs. Increases for specific QHPs range from 11.1 percent to 14.6 percent, except for the Catastrophic plan, which is increasing by 5.8 percent.
A full 6 percent of the 12.7 percent is attributed to cost drivers unrelated to direct health care services. The Federal Insurer Tax—mandated by the ACA and not in place last year—accounts for about 3 percent of the increase. The tax helps to pay for the subsidies that many Vermonters receive. The Medicare and Medicaid cost shift adds about another 2 percent, while 1 percent of the increase is simply the result of Vermonters getting older. Approximately 6.5 percent of the increase is a result of health care service utilization and pharmacy costs, which have increased in recent months. BCBSVT’s administrative costs account for 0.3 percent of the increase.
In the absence of mandated changes associated with federal and state regulation, a 9.6 percent increase would have been requested. Various assumptions drive the increase:
- The starting point of any renewal rate analysis is an assessment of actual to expected claims cost experienced by the covered population. The basis for this rate filing is calendar year 2016 experience. That experience was higher than was expected in the 2017 rate filing, and the higher baseline leads to a 1.9 percent increase in 2018 rates.
- Amounts that providers are paid are expected to increase for the balance of 2017 and into 2018, generating a premium increase of 3.0 percent.
- Vermonters have been using more services and more expensive services in recent years. We are projecting this trend to continue through 2018, driving a further premium increase of 2.8 percent.
- Primarily driven by the aging of the population and an observed increase in average family size, BCBSVT assumes that members who have or will enroll in our QHPs in 2018 will have higher claims than members in the experience period of 2016, leading to a premium increase of 2.1 percent.
- BCBSVT continues to negotiate contract improvements with its pharmacy benefit manager. The combination of enhanced rebates through a change in formulary and previously negotiated discount improvements reduces the premium by 0.6 percent.
- An increase in administrative costs per member per month increased premium by 0.3 percent. BCBSVT administrative expenditures for members included in this filing amount to 6.5 percent of premium.
- Other adjustments to the assumptions used in the 2018 rate development cumulatively have the effect of reducing the required rate increase by 0.2 percent.
Mandated changes associated with the federal and state regulation combined for a net increase to premium of 2.8 percent:
- The Federal Insurer Fee was temporarily suspended for 2017, but returns in 2018. Our estimate of the Fee is 2.6 percent. Coupled with a modest decrease in our expected federal risk adjustment program transfer amount, increases directly attributable to federal programs result in a premium increase of 2.9 percent.
- Some deductibles, out-of-pocket maximums and co-pays in QHPs remain unchanged from 2017 to 2018. As overall costs increase and the amounts that members pay in cost-sharing contributions stay the same, more of the total cost is transferred to premiums. This impact of 0.8 percent on premium was offset by a 1.1 percent decrease due to plan changes implemented by BCBSVT and the State of Vermont, for a net premium decrease of 0.3 percent.
- Starting in 2018, BCBSVT will be required to pay a greater share of the total funding of the Green Mountain Care Board. This increase in state assessments has a rate impact of 0.3 percent.
BCBSVT started selling QHPs in January 2014. In its first three years, this line of business represented $998 million of earned premium. Due to higher-than-expected actual costs, the line of business has incurred a cumulative loss of 1.5 percent. BCBSVT has not included any additional contribution to member reserves to offset this loss.
BCBSVT understands the importance of adequately funding our health care system, to keep it strong and accessible. Since the factors driving this rate increase are almost entirely driven by the cost and utilization of health care in Vermont, we believe that there is no way to further reduce these rates without underfunding the health care coverage on which Vermonters rely.
“Our hospitals and providers have done admirable work controlling their costs; however, there are other forces impacting premiums, like the Federal Insurer Tax, the cost shift and the needs of our aging population,” said Don George, President and CEO of Blue Cross and Blue Shield of Vermont. “This is not welcome news for our members, but we take seriously our obligation to be upfront about the dynamics that are driving up health care premiums.”
“As a Vermont company and nonprofit, BCBSVT exists solely to serve Vermont and Vermonters. We will continue to work with elected officials, provider partners, and regulators at the state and federal levels to help forge policies that will lead to more affordable premiums,” said George.
It should be noted that the funding from the federal government of the Cost Share Reduction (CSR) program for calendar year 2018 is uncertain. Meanwhile, the US House of Representatives has passed the American Health Care Act, which would implement a great many changes on the 2018 QHP market, several of which would have an impact on pricing. This filing was prepared assuming full funding of the CSR program and no changes to current law.
The proposed rates reflect an average rate adjustment to prior rates of 6.7%, ranging from 2.3% to 10.5%. There are 4,889 policyholders, 6,847 subscribers and 10,305 members impacted by this rate filing.
The premium rates filed reflect MVP's current estimate of the cost to provide health insurance for that coverage period. The filed premium rates may be higher or lower than the previously filed premium rates, however, premium rates generally increase over time.
Increases in premium rates are driven by many factors, including:
- Increases in use of medical services and prescription drugs by the insured population
- Increases in hospital and physician required charges for medical care
- Increases in the price of prescription drugs
- Expanded covered services due to government mandates
- Fees and assessments charged by the government to insurers
- Exit of healthier individuals from the insurance market place as the cost of insurance increases.
The GMCB has begun its review of the rate filings which it must approve, modify or disapprove within 90 days of their receipt. During this period, the GMCB’s contracted actuaries will review the filings, the Vermont Department of Financial Regulation will evaluate the impact of the requested rate on the insurers’ solvency, and the GMCB will hold hearings on July 19 (MVP) and July 20 (BCBSVT) starting each day at 9 a.m. The hearings are open to the public and will be held in the GMCB’s 2nd Floor Board Room in the City Center, 89 Main Street in Montpelier. The Office of the Health Care Advocate will participate in the hearings representing the interests of Vermont consumers of health care.
Information about the rate filings and copies of all rate documents, including the written actuarial and solvency reports, will be posted to the GMCB’s rate review website at www.ratereview.vermont.gov. Members of the public are encouraged to submit written comments on the proposed rates through July 26, 2017 via the rate review website at www.ratereview.vermont.gov/public_comment/comment, by email at GMCB.Board@vermont.gov, by U.S. Mail at 89 Main Street, 3rd Floor Montpelier, VT 05062, or by phone, 802-828-2177. In addition, time will be reserved at the close of each hearing for Vermonters who wish to submit a comment in person. The Board will issue final decisions on the rates on August 10, 2017.
For more information about how the GMCB reviews health insurance rates and to read the BCBSVT and MVP Vermont Health Connect rate decisions, see the rate review website: http://ratereview.vermont.gov/.
Source: GMCB 5.12.2017