Health care regulators will let Blue Cross Blue Shield of Vermont raise insurance premiums on Vermont Health Connect by 9.2 percent.
The allowed increase is nearly a third less than the 12.7 percent the company originally requested in May. That was the most the company had asked to increase prices since Vermont Health Connect started offering plans in 2014.
The board said the company withheld important information during the regulatory process about the “financial stability” of the company. Once the board got a fuller picture, it said, there was room to cut back the increase for calendar year 2018.
The approved rate increase represents a balancing act, according to the board. “In issuing this decision and order, we first acknowledge the tension between two of our standards for review,” the board wrote in its unanimous decision issued Thursday.
“On the one hand, there is an undeniable need for health insurance coverage that is affordable for all Vermonters. On the other, we cannot reasonably expect our insurers to continue to voluntarily participate in the health benefit exchange if it imperils their financial stability.”
“If health insurance is not affordable, access to it will be restricted; if it is no longer financially viable for an insurer to remain in the marketplace, however, access will also be restricted,” the board wrote. “Our decision today seeks to strike a balance and achieve the leanest rates feasible, while protecting the insurer’s financial health.”
The board’s actuaries had said, upon review as part of the regulatory process, that the premiums should go up 12.6 percent — slightly less than the original request. Blue Cross then agreed with the board’s actuaries and reduced its request to 12.6 percent.
The Office of the Health Care Advocate brought in an actuary who argued that the company was using “conservatism” in its math, and that the increase should be just 8.7 percent.
In the end, the board largely went with the calculations by Blue Cross and its own actuaries. However, the board told the company to decrease the amount of premiums that go into its reserve funds to 0.5 percent, from 2 percent, because it has requested $10.3 million from the state to cover unpaid premiums in calendar year 2016.
The board wrote that it found out about the $10.3 million in a Vermont Press Bureau article — which came out after the July 20 hearing — and not through the regulatory process. The board requested more information from Blue Cross after reading the article.
The company responded that it might not receive the whole $10.3 million, according to the board. The company also said the sum “is not included in its financial information, and is not reflected in its 2018 rates other than having a minor impact on” some data from 2016.
The board said that knowing earlier about the potential $10.3 million recovery this year would have changed the analysis by its members and actuaries.
The ability to recoup millions of dollars means the insurer’s financial situation is “less precarious” than the company claimed during the case, the board also said.
Sara Teachout, the spokesperson for Blue Cross, said there’s “no relationship” between the 2018 premium request and the reconciliation for 2016, and that the company has sought similar reconciliations since the exchange started offering plans in 2014.
“This shouldn’t have been a surprise to the board, and we’ve never had to include it in the past,” she said.
Teachout said the company seeks to contribute 2 percent of its premiums to reserves each year in order to prevent premiums from being volatile. She said a cut from 2 percent to 0.5 percent is “significant” and the company is concerned that the reduced amount “might not be sufficient to fund the health care needs for our members.”
The company currently holds about $640 in reserves for each customer, Teachout said. She said that amount is the rough equivalent of an emergency room visit and would be used in the event that premiums were not enough to cover all of the roughly 70,000 members’ health care costs for the year.
“We believe 2 percent is the right amount to fund our reserves and to remain stable over time, and that’s exactly what (our actuary) said,” Teachout said. “We’re not looking to have sharp adjustments year to year.”
Mike Fisher, the chief health care advocate for Vermont Legal Aid, said he supports the reduction in how much Blue Cross can send to reserve funds. “I think that Blue Cross has a number of levers that they can use in the course of a year to manage expenditures,” he said.
The Office of the Health Care Advocate at Vermont Legal Aid had argued that Blue Cross should put 0.8 percent of premiums into reserves — which is slightly higher than what the board ordered.
Fisher said the board’s decision “definitely moved in the right direction, but, “at the same time, I can’t celebrate a 9.2 percent rate increase when I’m so aware that average-income Vermonters with real health care challenges have a real crisis in their ability to afford the care they need.”
Keith Brunner, a volunteer with the Vermont Workers’ Center, which advocated for Act 48, the single-payer health care law that created the Green Mountain Care Board, said the group is disappointed.
Brunner said the 9.2 percent increase is “certainly lower than 12.7 percent, but if your baseline is that you’re already struggling to meet your needs, then a 9 percent rate hike is a really big deal.”
He said the group wants to see Gov. Phil Scott and the Legislature finish the work of Act 48, which passed in 2011, and start “shifting from a market-based system to a public good system.”
The workers center submitted at least 50 public comments to the board, according to Brunner. The board [said Wednesday] it received more than 500 public comments total on both the Blue Cross and the MVP Health Care premium cases.
Kevin Mullin, the chair of the Green Mountain Care Board, said Thursday that the 9.2 percent increase is still high enough in comparison to MVP’s 3.5 percent increase that customers might start switching insurance plans from Blue Cross to MVP.
“Given that most consumers shop for price, I would have to believe there could be a significant shift, but it’s all going to depend” on what plan customers choose, Mullin said. “This is a group that is definitely looking at the affordability of the whole issue, and I would think that there would be some movement.”
Teachout said the company still stacks up well, despite the premium increase. “We believe that Blue Cross Blue Shield is still very competitive, and I think it’s because of what we bring to our customers and to our members beyond just the rates,” she said.
While the company has the option of seeking reconsideration of the case, Teachout said it’s too soon for Blue Cross to say whether it will challenge the decision.