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By Richard Asinof
(Updated, Dec. 8, 12:45 p.m.)
PROVIDENCE – Citing higher medical cost trends, Blue Cross & Blue Shield of Rhode Island filed for new rate factors for 2013 with the R.I. Office of the Health Insurance Commissioner, which had ruled on the initial rate requests from the insurer in September.
The state’s largest health insurer is seeking an average 5.1 percent rate increase for small group employers in 2013. In September, R.I. Health Insurer Commissioner Christopher F. Koller had previously set the 2013 average rate increase at 1.65 percent, cutting Blue Cross’s initial requested average rate increase from 4.15 percent.
For large group employers, Blue Cross is seeking a 9.1 percent average rate increase for 2013, an increase of 5.12 percentage points from the 3.98 percent average rate increase granted by Koller in September. It is also significantly higher than Blue Cross’s initial average rate increase requested of 5.88 percent.
Blue Cross said that its new filings reflect the company’s recent medical trends for 2012, which have steadily increased from historically low 2011 trends.
“When Blue Cross filed its initial requests for 2013 rates, it was based on data from 2011, a very low health-care-cost year,” Blue Cross CFO Mike Hudson told the Providence Business News. “We have seen large increases [in medical costs and utilization] in 2012.”
Now, with the benefit of being able to have data trends for the whole year of 2012, Hudson continued, Blue Cross recognized that without increasing rates, “our commercial insurance division would produce losses next year. When we looked at the situation, and how our commercial group health insurance had performed over the last four years, losing $195 million, we filed for higher rates,” Hudson said.
Even if Koller grants the requested average rate increases, Hudson said, “Blue Cross will earn a profit margin of less than 1 percent for the next year. We’re looking to get our heads above water on this one.”
Among the specific factors driving the higher medical costs were a 3.9 percent increase in inpatient admissions, inpatient costs that have risen by as much as 22 percent over the past year due to the complexity and cost of medical services being provided, and a 4.1 percent increase in the cost of outpatient medical services, reflecting the wider range of complex treatments now available in an outpatient setting, such as chemotherapy, according to Blue Cross.
Blue Cross said that it was committed to continuing its efforts to reduce medical costs by challenging providers and hospitals to agree to contracts in which a greater portion of their payments are based on patient outcomes and the quality of care provided – not on volume of services.
Lt. Gov. Elizabeth H. Roberts responded to Blue Cross’s request for a rate increase by saying that Rhode Island’s small businesses and families needed to be protected from continuously rising insurance rates.
“Blue Cross cites their innovation and approaches to lowering costs while maintaining quality, but says those efforts may not yield significant positive impacts for several years,” said Roberts, the chair of the R.I. Healthcare Reform Commission. “Rhode Island’s small businesses and families cannot wait. We need hospitals, doctors, insurers - and all of us who trust and rely on affordable, high quality health care - to commit to immediate and positive change.”