Should Vermonters Pay $50 Million More In Health Insurance Premiums? Regulators To Decide

State regulators will have to weigh conflicting testimony as they decide whether to approve a proposal that would increase Vermonters’ health insurance premiums by more than $50 million next year.   

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Blue Cross and Blue Shield of Vermont, the state’s largest private health insurance company, is seeking asking the Green Mountain Care Board to approve a 12.6 percent increase in health insurance premiums.

Whether or not that rate increase is warranted depends on who you talk to.

According to Mike Fisher, chief of the Office of the Health Care Advocate, the request well overshoots the amount of money Blue Cross will need in 2018 to cover its policyholders health care expenses.

“Our expert witness evaluated the entire filing from Blue Cross and found four areas where we thought their predictions were too high,” Fisher says.

Fisher’s state-funded office was created to protect consumer interests in Vermont’s nearly $6 billion medical industry, and it hired an independent actuary to vet Blue Cross’ proposed rate.

“When … people drop [insurance], that has a real impact on not only the cost of insurance for everybody who stays on, but it also has a real impact on the solvency of Blue Cross.” — Chief Health Care Advocate Mike Fisher

Fisher says Blue Cross assumes higher utilization trends in 2016 will continue unabated, a conclusion his office now challenges. Fisher also says Blue Cross has overestimated the impact of Vermont’s aging population on overall health care expenditures that will be incurred by Blue Cross’ policyholders.

“And ultimately, [we] recommended to the Green Mountain Care Board that Blue Cross’ proposal was about 4 percent too high,” Fisher says.

That 4 percent translates into real money.

Blue Cross’ proposal would increase Vermonters’ premiums by more than $50 million next year. If the Green Mountain Care Board sides with Fisher’s office, then than number would drop by about $15 million.

But that’s only if they side with the Office of the Health Care Advocate. And Sara Teachout, director of public relations at Blue Cross, says the weight of the evidence lies in favor of Blue Cross.

The Green Mountain Care Board hired its own actuarial consultant to vet Blue Cross’ proposed rate increase.

“L & E, who was the actuary hired by the Green Mountain Care Board, agreed with our analysis and our rate,” Teachout says. “I think they were a tenth of a percent difference in almost every area.”

“L & E, who was the actuary hired by the Green Mountain Care Board, agreed with our analysis and our rate.” — Sara Teachout, Blue Cross Blue Shield

L & E Actuaries and Consultants filed that report earlier this month. And Teachout is correct: The Dallas-based firm concluded that Blue Cross’ request, “does not produce rates that are excessive, inadequate, or unfairly discriminatory.”

Teachout says L & E has far more experience in this field than the actuary retained by the Office of the Health Care Advocate.

“They have done this work for 12 states’ exchanges and over 500 filings, so this is really what they know best,” Teachout says.

Teachout says Blue Cross appreciates the gravity of a 12.6 percent rate increase for the more than 47,000 policyholders that could be affected. And she says the company wouldn’t be asking for it if it wasn’t needed to keep the company on sound financial footing.

Mike Pieciak is the commissioner of the Department of Financial Regulation, which is required by law to make sure Blue Cross remains solvent. Pieciak formally weighed in on the Blue Cross proposal earlier this month.

“[T]his rate request, as filed, would maintain what we call their risk-based capital, or basically their percentage of solvency that is needed to cover their expected membership claims,” Pieciak says.

Asked if Blue Cross could remain financially healthy if the rate increase was lowered, Pieciak says it’s tough to predict. But he says the insurer has suffered from hits to some key financial indicators in recent years, and he says that’s due at least in part to state regulators denying Blue Cross the rate increases they’d requested.

Fisher says regulators need to contemplate the financial position not only of Blue Cross, but of the policyholders that will be affected by the proposed increase. He says the state could run into much more severe financial trouble if younger, healthier consumers — the ones Blue Cross relies on to balance its risk pool — decide they can’t afford insurance anymore.

“When those people drop off, that has a real impact on not only the cost of insurance for everybody who stays on, but it also has a real impact on the solvency of Blue Cross,” Fisher says.

The Green Mountain Care Board will issue a final decision on Aug. 10.

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