Largest contributors of health insurance premium increases expected to be outpatient services

PROVIDENCE – An analysis of proposed health insurance companies’ rate filings indicates that outpatient spending is expected to be the largest driver of health insurance premiums next year, according to Avalere Health, a Washington-based consulting firm focusing on health care companies and related nonprofit entities. Avalere Health used data from Rhode Island and eight other states – Connecticut, Maryland, Maine, Ohio, Oregon, Vermont, Virginia and Washington – for its analysis.

“Preliminary data indicate that drugs are not likely to have a disproportionate impact on premiums in 2017,” Caroline Pearson, a senior vice president at Avalere Health, said in the statement. “Instead, outpatient spending continues to drive premium increases.”

Avalere Health reported that outpatient spending, which accounts for nearly 30 percent of 2017 rate increases, represents 27.4 percent of spending in these plans, according to 2015 allowed claims data. This outcome, Avalere Health found, is similar to 2016 premium trends.

However, there seems to be good news on the inpatient cost side. Inpatient care costs seem to be stabilizing, reported Avalere Health; they are expected to contribute 15.4 percent of premium increases next year, while representing 19.6 percent of spending in 2015.

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Through its nine-state analysis, Avalere Health determined that prescription drugs are responsible for 14.3 percent of 2017 premium increases. The 2015 claims experience showed that insurance plans spent 17.7 percent of total medical spending on drugs. In five states, drugs account for a higher portion of premium increases than their share of spending. When Providence Business News contacted Avalere Health about Rhode Island-specific data, Elizabeth Carpenter, a senior vice president with the company, said that the company is not disclosing state-specific data as part of its analysis.

“The data underscore the need to look across services and settings of care when considering premium drivers,” Carpenter said in the statement. “In addition, experiences vary dramatically by state, underscoring the local nature of health care markets.”

Avalere Health evaluated health care utilization factors affecting the proposed health insurance premium increases in the individual and small group market in 2017 and were comparison tested against the distribution of health care spending in that same market. The company compared the portion of proposed 2017 premium increases that could be attributed to each of the six unique benefit categories (defined by the U.S. Department of Health and Human Services – prescription drugs, inpatient hospital, outpatient hospital, professional services, “other” medical and capitation) to the actual spending reported by the same market for 2015.

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