Requested health insurance premium increase in Md. unjustified

CareFirst is asking for an insurance rate increase that's out of line with reality.

Health insurance companies in Maryland are asking the state for premium increases that are way out of line with the actual cost of providing health care and it's the people who pay for that care whose wallets would be hit hardest.

Last week, Maryland regulators considered drastically steep and widely varying increases in health insurance premiums that are being proposed by the state's health insurers. The state's largest insurer, CareFirst, is asking for rate hikes that would raise by more than 30 percent the cost of a policy for people purchasing health plans at the state's health benefit exchange, Maryland Health Connection. This contrasts with much smaller increases — even decreases — proposed by other insurers. If CareFirst's rates are approved, a 40-year-old Baltimore-area non-smoker would pay $134 more each month for the lowest-cost preferred provider silver plan from CareFirst compared to Kaiser's comparable plan.

At a June 17 hearing before Maryland Insurance Administration (MIA) Commissioner Al Redmer Jr., we raised serious questions about many of the assumptions used by the insurance companies to justify their rate requests and asked for a critical and thorough review. At a time when our state is making clear progress in keeping health care costs down and making care more accessible, these dramatic increases would leave consumers strapped with higher insurance costs for no apparent reason.

Nearly 80 percent of individuals purchasing coverage on Maryland Health Connection buy a CareFirst plan. CareFirst's proposed rate increases in the individual market seem out of touch with reality, and they would have a dramatic impact not only on consumers, but also on the state's economy. For Marylanders who already face difficulties affording health care, the steep jump in rates would pose a serious, undue financial burden.

In our testimony to MIA, we questioned the medical spending trends assumed in the rate request, highlighting in particular how very different CareFirst's hospital spending trend assumptions are from the separately reported trends published by Maryland's hospital rate regulator, the Health Services Cost Review Commission (HSCRC). In approving 2.6 percent growth in spending on hospital services for next year, the HSCRC noted that, over the 30-month period ending June 30, 2016, total growth in hospital spending, including inpatient and outpatient hospital care, will be an astonishingly low 5.2 percent – far below the assumptions of most of the insurers for just the next year alone. Maryland's revised all-payer hospital rate setting system, under which the HSCRC provides hospitals a set amount each year to provide care, is benefiting the state by lowering costs and improving health. It is now time for these benefits to be realized by Marylanders through health insurance premiums that mirror those decreases in costs.

An independent analysis we filed with the MIA also demonstrates that CareFirst's proposed rates do not meet the state's "required reasonableness" standard, which ensures that reasonable statistical analyses and assumptions are being used. CareFirst wrongly assumes that people purchasing health plans in 2016 will be sicker and thus require higher costs than those doing signing up in 2014. However, research shows that a significant portion of higher-cost individuals have already signed up and now have health care. This means that we can reasonably assume their health will improve, costs will decrease and more enrollees in 2016 will be healthier, with less pressing and costly health needs. Those expected to enroll in 2016 also include a greater proportion of the younger and generally healthier population who will face higher tax penalties if they don't sign up next year, thus providing a strong incentive for them to enroll. We know these are reasonable assumptions because a study of similar measures in Massachusetts found that, when the law requiring health coverage was fully implemented, there was "an enormous increase in the number of healthy enrollees and a far smaller bump in the enrollment of those with chronic illness," according to the New England Journal of Medicine.

By ignoring these and other factors, we believe that CareFirst's proposed rate increase in particular is unjustified. We encourage the Maryland insurance commissioner to carefully examine the underlying methodology behind the rate requests of CareFirst and other insurers, to consider the evidence we have cited and to set health insurance rates that are fair for all Marylanders.

Leni Preston is chair of the Maryland Women's Coalition for Health Care Reform; her email is leni@mdchcr.org. Carmela Coyle is president and CEO of the Maryland Hospital Association; her email is ccoyle@mhaonline.org.

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