Health Care

Public advocates take aim at Blue Cross rate hike request

health insurance
Peter Horman, from Horman Mathematical and Actuarial Solutions, speaks as an expert witness for Vermont Legal Aid’s Office of the Health Care Advocate during a hearing Thursday. Photo by Erin Mansfield/VTDigger
A public advocate told regulators Thursday that the state’s largest health insurance company does not need to increase premiums 12.7 percent on Vermont Health Connect in 2018.

The advocate from Vermont Legal Aid’s Office of the Health Care Advocate brought in an actuary who said the company could afford to reduce its premium request by about a third — to an 8.7 percent increase.

The actuary testified in front of the Green Mountain Care Board, which regulates hospital budgets and health insurance premiums. The case being considered Thursday affects about 70,000 people who get Vermont Health Connect insurance from Blue Cross Blue Shield of Vermont either on the exchange or through an employer.

Blue Cross is seeking the highest increase it has requested since the company started offering plans on Vermont Health Connect in 2014.

The company originally sought to increase premiums an average of 12.7 percent. The company updated that request to 12.9 percent based on new data. Actuaries for the Green Mountain Care Board said the number should be 12.6 percent, and the company agreed with that analysis.

Blue Cross has cited several reasons for the premium increase, including Vermont’s aging population.

Kaili Kuiper, a lawyer for Vermont Legal Aid’s Office of the Health Care Advocate, said that if the insurer is allowed to raise its premiums that much, customers’ premiums would have increased a cumulative 38 percent since 2014.

She said that while “many factors” in the increase are outside the company’s control, the company’s actuaries have not “applied sound actuarial methodology” and could shrink that premium increase “by increasing the scientific rigor” of their analysis.

Blue Cross Blue Shield of Vermont
Jacqueline Hughes​, center, the lawyer​ for Blue Cross Blue Shield of Vermont, questions the expert hired by Vermont Legal Aid’s Office of the Health Care Advocate during a hearing Thursday. Photo by Erin Mansfield/VTDigger
Peter Horman, an actuary and the expert witness for the Office of the Health Care Advocate, described several ways that he did the math differently from Blue Cross and arrived at the conclusion the company could cut the increase by 4 percentage points.

Horman said that’s because the company showed “conservatism” in calculating rates. He described the issue like this: “It seems that if they have a concern of something increasing, they’ll reflect it in the rates, but if they have a concern with decreasing, they’ll hold it steady.”

Horman also questioned the company’s methodology to estimate Vermont’s aging population, which he said should be an entire “demographic modeling exercise.” To model the issue accurately, said Blue Cross would need to account for the fact that most people use Medicare when they get to age 65.

Horman said the company’s decision to account for the aging population is simply a concern, not justification for raising premiums.

Additionally, Horman said a premium increase as high as Blue Cross has requested would lead to an “adverse selection spiral,” in which young, healthy customers choose to go without insurance, in turn driving up insurance prices further when older, sicker people remain in the market.

Board members did not ask Horman any questions.

During a tense cross-examination, Jacqueline Hughes, the lawyer for Blue Cross, asked Horman how much money the Office of the Health Care Advocate was paying him for his services.

Horman said he had made $20,000 through June and will bill at least $12,000 more for his services since then. He said he charges about $300 an hour for his time.

Hughes also questioned the financial stability of a company he worked for previously, the Neighborhood Health Plan in Boston. She also asked him about whether the company took losses big enough to require them to raise premiums by large amounts.

Horman said he was working for a financially challenged company at the time. “I’m not sitting here saying I’ve never given a high rate increase,” he said, but “given the high increase, Blue Cross is not incredibly financially challenged.”

Paul Schultz, the chief actuary for Blue Cross, said during his testimony that he did not agree with any of Horman’s results and that the board should not impose the lower premium increase.

“I don’t think Blue Cross is in any danger of an adverse selection spiral,” Schultz said.

The board will hold a special public comment period July 27 and continues to accept public comment through its website, before making a decision at the end of the summer.


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Erin Mansfield

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  • walter carpenter

    “Additionally, Horman said a premium increase as high as Blue Cross has requested would lead to an “adverse selection spiral,”

    Do we need any other proof that the markets, as we like to call them, do not work in health care when we even have a “selection” process.

  • Elizabeth Chang

    Everyone has $300 an hour lawyers at the meeting, people are fighting over massive increases, everyone on the GMC board is making $100k a year, the hospital head makes $2m a year, etc etc. get it? It’s all about money. This is why health care is so messed up.

  • ShayTotten

    If BCBS is concerned about how much $$ the Office of Health Care Advocates is spending to defend the public, maybe they’d be willing to offer how much they spent to defend their ridiculous rate increase? I can’t imagine CEO Don George’s time is cheap, nor any of the battery of lawyers & senior staff they bring to pack the room. A universal system as envisioned by Act 48 is looking better and better every day.

  • Peter Youngbaer

    The key to cost containment is universal access. Adverse selection is a concern, although I can’t agree or disagree with the specifics of Mr. Horman. Even today, the highest percentage of uninsured in Vermont is the age cohort 26-35. These younger adults have aged off their parents’ policies, yet generally enjoy collective good health and have a harder time meeting the premiums required to enroll. Vermont’s household health insurance survey confirms this data. If Washington goes through with not enforcing the ACA mandate for coverage, then the actuarial pool gets even further out of balance.

  • Dominic Cotignola

    Why do we just default to “that’s the price of things” instead of looking down the supply chain to see who is gouging who out of money? To many people with the pot of gold in their lap that don’t want to give it up for the sake of saving lives or keeping the general public healthy. Yup, you’re on your own, don’t get sick.

    They are creating a large pot of gold for their wall street friends because they know that Baby Boomer seniors get sick for real and justifying raising prices now, will hedge the coming crisis. Regardless of the quote above that says different.

  • Jamie Carter

    I don’t even understand the thinking in all of this… why does anyone think that we can simply absorb another rate hike let alone a 12% hike? The “public advocate” is arguing for 8+% which is just ridiculous on it’s own. How much longer do they think we can continue to afford increases? 10 years from now monthly premiums for the lowest VHC plan will be nearly $1100/month. 20 years from now it will be close to $2700 / month. At that point it will be more then some peoples annual earnings. In 10 years it will become more than 50% of some peoples earnings making it unaffordable and unrealistic. The system is doomed and it’s like no one that’s a part of it has the slightest clue. No one is looking forward… We have all of eggs in the ACO basket…