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By Richard Asinof
PROVIDENCE – On April 15, Blue Cross & Blue Shield of Rhode Island filed its proposed rates for health insurance products for coverage beginning on Jan. 1, 2014, with an overall average increase of 18.1 percent for individuals and an overall average increase of 14.7 percent for small groups, according to documents provided by Blue Cross justifying the rate requests.
These segments are the two target audiences for health insurance products to be sold on the R.I. Health Benefits Exchange. R.I. Health Insurance Commissioner Christopher F. Koller and his office are now reviewing the proposed rates. Koller told the Providence Business News on April 5 that he anticipates publishing the rates with OHIC’s analysis by mid-May and making a ruling on the proposed rates by mid-June.
Currently, Blue Cross is the only insurer that offers a product for individuals in Rhode Island, known as the “Direct Pay” plan, with approximately 16,192 members enrolled. The actual increases will vary widely, ranging from a potential 50 percent reduction to a more than a 50 percent increase, depending on whether the individual is eligible for federal subsidies, according to Blue Cross.
Blue Cross attributes the rate increases for 2014 to the “continued escalation in the total cost of health care in Rhode Island and the new taxes and fees” associated with the new health care reform law.
Medical expenses make up more than 85 percent of each premium dollar collected in the individual market, with rising pharmacy costs driving the higher prices – a 21 percent increase in outpatient prescription injections and chemotherapy, and an increase of 17 percent in specialty pharmacy drug costs, according to Blue Cross. In addition, there was a 9 percent increase in outpatient surgery costs from 2011 to 2012.
In addition, Blue Cross said that it had an operating loss of more than $10 million between 2010 and 2012 in its Direct Pay market, with a projected loss of $8 million projected for 2013. As a result, its reserve level is at 18.1 percent of premium on March 31, 2013, significantly lower than the recommended reserve level of 23 percent.
To remedy this shortfall, Blue Cross is asking for 2.34 percent increase to replenish its reserve in the current filing, 2 percent above prior filings.
Similar medical expenses statistics were cited for the small group market, which Blue Cross said make up more than 80 percent of each premium dollar collected.
Blue Cross also said that new taxes and fees under the Affordable Care Act were responsible for driving up requested premiums, which they calculated as $22 per member per month, or almost 4 percent of the total premium for small groups.
Once again, in the small group market, Blue Cross is asking for an increased contribution to replenish its reserves to 3.34 percent, consistent with the contribution approved in prior filings.