Smart Benefits: BCBSRI Wants Higher Rate Hikes--Will it Get Them?

Smart Benefits: BCBSRI Wants Higher Rate Hikes--Will it Get Them?

It was only September when the Office of the Health Insurance Commissioner (OHIC) approved the state’s health insurance carriers’ average premium increases for 2013. But, last month, BCBSRI refiled with OHIC and requested even higher increases.

The insurer is now asking that the average small group rates increase to 5.1% and the average large group rates increase to 9%. Why?

Higher Costs of Services Drive Higher Costs

Despite the insurer saving on operating costs and pharmacy claims expenses, BCBSRI claims that higher than anticipated outpatient and inpatient costs will necessitate charging higher premiums.

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Outpatient Care.  BCBSRI cites the steady increase in the cost of outpatient medical services that are more complex and expensive – and points specifically to the rapid increase in the cost and volume of specialty chemotherapy treatments over the last year as a primary driver.

Inpatient Care. For inpatient care in a hospital, BCBSRI maintains that the cost of patient admissions has risen as much as 22% and, at the same time, hospital admission rates are way up in the state.

The upward surge in these costs weren’t fully apparent until after BCBSRI was required to report to OHIC for approval of 2013 rates. According to a recent document BCBSRI circulated to employers, the December rate increase requests are necessary to ensure rates remain adequate to address the rapid increase in medical expense trends, reducing the likelihood of sharp increases for employers in years ahead.

A Call for Transparency

Rhode Island Business Group on Health (RIBGH), a business advocacy group that represents several larger employers in Rhode Island, is concerned about the impact of latest rate hike request from BCBSRI – and is pushing for answers. That’s because those most affected by any cost increases – employers and employees – can’t be expected to understand higher costs if they don’t know the reasons behind them.

Don Nokes, President of RIBGH, says, “We have taken several steps to better understand BCBSRI’s request and how the rate filing process works with OHIC. We are disappointed with the refiling, but have organized a committee who meets with BCBSRI regularly to have better insight into the rating process. We are demanding more transparency and BCBSRI is so far meeting us on that end.”

“We now understand there is quite a gap between the time period where actual utilization rate data is available and when it is used to determine future utilization. When BCBSRI saw utilization spike, they quickly realized that their projections would be inadequate based on the older data,” he adds.

Can Employers Bear Any More?

Only OHIC can determine whether higher rates will be approved. But either way, employers will pay. That’s because, if BCBSRI gets its way, employers renewing coverage in months on or after April will start seeing higher increases as soon as April 1, 2013. And, if OHIC doesn’t approve the new rates? There’s a chance current rates will be inadequate and renewal increases will be even steeper next year.

The September rate filings saw the lowest average rate increases in five years, so many employers had a false hope that healthcare costs were finally slowing. This last request by BCBSRI is a reality check.

Are you an employer affected by this? Please let me know how you feel about additional healthcare premium increases.

Amy Gallagher has over 19 years of healthcare industry experience. As Vice President at Cornerstone Group, she advises large employers on long-term cost-containment strategies, consumer-driven solutions and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, is a member of local organizations like the Rhode Island Business Group on Health, HRM-RI, SHRM, WELCOA, and the Rhode Island Business Healthcare Advisory Council, and participates in the Lieutenant Governor’s Health Benefits Exchange work group of the Health Care Reform Commission.