Koller trims insurance rate hike requests for 2011 by Blue Cross, United and Tufts

By PBN Staff

(Updated, 5:45 p.m.)

PROVIDENCE – R.I. Health Insurance Commissioner Christopher F. Koller has ruled on the rate increase requests made by all three of the state’s health insurers, and his actions are unlikely to please the parties involved.

After taking nearly two months to study the requests for rate increases by Blue Cross & Blue Shield of Rhode Island, UnitedHealthcare of New England and Tufts Health Plan, Koller on Wednesday granted increases for employer group rates in 2011 ranging from 8.4 percent for United’s large group (51 or more employees) rates to 12.3 percent for United’s small group (50 and fewer workers) rates.

“The rate factors represent a balance between solvent insurers, adequately compensate providers and rates of increase that risk making health insurance even less affordable,” Koller said in the release that published the rate increases.

Lt. Gov. Elizabeth H. Roberts, long active in trying to make health care more affordable in Rhode Island, said that “this is unaffordable for Rhode Island businesses and families … [and] is the kind of thing that discourages hiring, when health care costs go even higher.”

When making the rate hike request in May, Blue Cross’s Vice President and Chief Medical Officer Dr. Gus Manocchia told Providence Business News that “premium costs directly reflect the increasing cost of health care. … We realize that these cost increases cannot – and should not – continue.”

Koller reiterated that point in granting the increases. “Health insurance is expensive because medical care is expensive. … Affordable rates of increase will not occur until we change the way our medical care is organized and delivered,” he said.

Edward J. Quinlan, president of the Hospital Association of Rhode Island, responded to the granting of the price increases by noting that uncompensated care provided by hospitals in Rhode Island “has risen nearly 18 percent during the past year and will account for $150 million in unreimbursed costs by the end of the year.”

As a result of the increasing cost of medical care, Koller attached six conditions (summarized below) that the new health care plans must meet:

• Enact incentive-based payment methods for both inpatient and hospital outpatient service.

• Limit average annual effective rate increases for inpatient and outpatient services to a weighted average equal or less than for the Centers for Medicare and Medicaid Services Hospital Input Price Index.

• Enact performance-based incentives for hospitals.

• Identify, define and commit insurers’ and service providers’ to being more efficient.

• Promote increased lines of communication between hospitals and primary care physicians.

• Require that the parties involved release the information and actions generated by the preceding five condition.

Roberts praised Koller’s attachment of conditions, saying “that’s something I’ve been trying to put at the forefront … I just wish this could have preceded these significant rate hikes.”

The conditions received praise from insurers as well. Laura Calenda, assistant vice president, corporate communications for Blue Cross, said that while the insurer did not believe the rate increases covered the costs of its members’ claims, it “appreciates the new requirements adopted by the OHIC’s decision related to hospital contracts, which are designed to drive hospital reimbursement reform.”

For small group plans, Koller allowed increases for 2011 plans of 9.8 percent for Blue Cross (12.4 percent was requested); 12.3 percent for United (15.5 percent was requested); and 11 percent for Tufts (12.4 percent was requested).

Large group plan increases were 9.8 percent for Blue Cross (13.2 percent was requested); 8.4 percent for United (11.7 percent was requested); and 10.2 percent for Tufts (11.6 percent was requested).

Quinlan added that while commercial payers pay hospitals “slightly above [the cost of providing care], this slight margin is not sustainable and does not provide hospitals with the resources necessary to make appropriate investments in infrastructure and technology for Rhode Island.”

For more information from the office of the health insurance commissioner, go to www.ohic.ri.gov.