CareFirst BlueCross BlueShield, the state's largest insurer, is raising rates up to 26 percent on average after absorbing more than $100 million in losses incurred as more older and sicker patients received coverage under federal health care reform.
The Maryland Insurance Administration announced Friday that it approved new premium rates for CareFirst and four other insurance companies that sell plans to individuals and small businesses on the state's online exchange created through the Affordable Care Act.
Under the CareFirst rate increase, a 40-year-old who lives in the Baltimore area will pay an additional $275 a year on average for the HMO silver plan, which pays 70 percent of medical costs. The rates do not take into account subsidies that defray costs.
"We wish we didn't have to ask for an increase at all," said CareFirst CEO Chet Burrell. "From the subscriber point of view, the best thing would be to try to stabilize the rates."
Health care advocates criticized CareFirst, which dominates the market, because its rate increases far exceeded those of other insurers. CareFirst holds 94 percent of the individual market and 66 percent of the small-business market.
The Maryland Women's Coalition for Health Care Reform, an umbrella advocacy group, called the rate hikes "indefensible" and said they would cause "undue financial strain for tens of thousands of Marylanders."
"In practice, these rate hikes will reverse the progress Maryland has made to make health care more affordable and more accessible for consumers," the group said in a statement. The regulatory decision "does not represent what is best for Marylanders."
About 8 percent of Marylanders pay the new rates in the small-group and individual markets. Most of the state's residents have other forms of insurance, either through their employer, self-insurance or a government program such as Medicare.
CareFirst officials said the insurer lost more than $100 million this year in the individual market because premiums did not cover the cost to provide services to patients. Under health care reform, many previously uninsured people were found to have untreated chronic conditions, and people enrolled in plans for the first time with ailments that were costly to treat, company officials said.
Past rate increases were not enough to "adequately cover the costs," Burrell said. "We are just simply seeking to cover the costs."
CareFirst received approval to increase premium rates next year by 26 percent in its PPO plan and another plan it only offers in the Washington suburbs. Rates for its HMO plan, which has the most subscribers, will rise 19.8 percent. Those increases are significantly higher than rate hikes imposed last year.
CareFirst had sought even larger increases for 2016, which regulators deemed excessive.
"We are glad the insurance commissioner cut it some," said Vincent DeMarco, president of the advocacy group Maryland Citizens' Health Initiative.
He added: "We would have preferred a bigger cut."
The Maryland Hospital Association also criticized CareFirst's rate request but credited the insurance administration for rolling back those proposals.
Rate changes are based on predictions of who will buy insurance. In the first years of health care reform, state officials said CareFirst received low rate increases because it was unclear who would enroll.
But the Maryland Women's Coalition argued that a large portion of the state's sicker population has already enrolled in health plans and that any newer subscribers are likely to be healthier. Patients who are healthy visit the doctor and land in the hospital less often — and are less expensive to insure. The coalition also argued that insurers overestimate growing health care costs.
Maryland Insurance Commissioner Al Redmer, appointed in January by Republican Gov. Larry Hogan, said that the state granted CareFirst much higher rates for this coming year in part because regulators now have a better picture of CareFirst's patient pool.
BlueCross companies in other states also have asked for significant rate increases as they adjust to a changed pool of people to insure, said Edmund Haislmaier, a senior research fellow at the Heritage Foundation, a conservative think tank.
"The problem with the law is that you were changing a whole lot of things all at once," Haislmaier said. "If you are changing one or two things, it is easier to predict."
By law, rates can't be excessive, but they also can't be so low that insurers can't afford to pay claims, Redmer said. The insurance administration makes its decision based on currents costs to insurers as well as future cost projections based on inflation, pharmaceutical costs and other factors.
"The financial solvency of carriers is of utmost importance," Redmer said.
Under health care reform, large insurance companies must spend 85 percent of premium dollars on medical care — not on administrative costs such as executive salaries, overhead and marketing. Without rate increases, it becomes harder for CareFirst to recoup the $100 million, Redmer said.
"I don't mean to suggest CareFirst is in financial trouble, but we cannot allow them to lose $100 million on an ongoing basis," Redmer said.
CareFirst also was hit by an unexpected drop in its small-business pool, officials said. About 5 percent to 7 percent of those subscribers dropped out of plans and sent their employees to buy insurance on the individual market, where it was cheaper.
Traditionally, rates in the small-group market have been higher because all employees in the plan are covered. And before health care reform, individual plans could exclude people with existing conditions that might drive health care costs up.
The gap between the costs of small-business and individual plans is starting to close under the latest rate structure. The insurance commission granted significant premium decreases for small-business plans.
Rate decreases also were approved for some individual plans. Two plans offered by United HealthCare on the individual market will see rate declines of 0.5 percent and 3.2 percent. The administration granted a 3.3 percent rate decrease to a Cigna plan.
A plan offered by Kaiser Foundation Health Plan of the Mid-Atlantic States was granted a 10 percent increase even though it had requested 4.8 percent. The insurance administration said the company did not consider certain risk adjustments. Evergreen Health, a health co-op, was granted a 9.5 percent rate increase.
Health care advocates said federal subsidies help offset consumer costs — and rise along with premiums.
Nine out of 10 people who enrolled in plans in 2015 received subsidies or Medicaid assistance, said Carolyn Quattrocki, executive director of the Maryland Health Benefit Exchange, the entity that administers the online marketplace where people buy plans. Enrollment for 2016 through the exchange begins Nov. 1.
Consumers should comparison shop, Redmer said.
"Nobody likes to get a price increase, and certainly this is a noticeable increase," Redmer said. "But it is a reminder that as consumers, we all have decisions to make. It is an opportunity to go back out and look at the marketplace. We have other carriers selling the exact product as CareFirst at lower rates. So it is a choice that consumers get to make."
Peter Beilenson, the head of Evergreen, hopes the co-op will attract more members because its plans are competitively priced. The company has worked to reduce "financial barriers" that make it hard for people to stay healthy, he said.
There are no co-pays for generic medications to treat seven chronic conditions including hypertension, for example. A diabetes program offers visits to the eye and foot doctor at no cost.
"We have very robust plans that we think make a difference in people's lives," Beilenson said.