Obama Administration Urges States to Cut Health Insurers' Requests for Big Rate Increases
WASHINGTON â€” Hoping to avoid another political uproar over the Affordable Care Act, the Obama administration is trying to persuade states to cut back big rate increases requested by many health insurance companies for 2016.
In calling for aggressive regulation of rates, federal officials are setting up a potential clash with insurers. Some carriers said they paid out more in claims than they collected in premiums last year, so they lost money on policies sold in the new public marketplaces. After finding that new customers were sicker than expected, some health plans have sought increases of 10 percent to 40 percent or more.
Administration officials have political and financial reasons for wanting to hold down premiums. Big rate increases could undermine public support for the health care law, provide ammunition to Republican critics of the measure and increase costs for some consumers and the federal government.
Kevin J. Counihan, the chief executive of the federal insurance marketplace, is urging states to consider a range of factors before making their decisions.
â€œRecent claims data show healthier consumers,â€? Mr. Counihan said in a letter to state insurance commissioners. The federal tax penalty for going without insurance will increase in 2016, he said, and this â€œshould motivate a new segment of uninsured who may not have a high need for health care to enroll for coverage.â€?
In addition, federal officials said, much of the pent-up demand for health care has been met because consumers who enrolled last year have received treatments they could not obtain when they were uninsured.
Federal officials have also told state regulators that medical inflation will be less than what many insurers assumed in calculating their rates for 2016.
But Scott Keefer, a vice president of Blue Cross and Blue Shield of Minnesota, which requested rate increases averaging about 50 percent for 2016, said his company had not seen an improvement in the health status of new customers.
â€œOur claims experience has not slowed at all,â€? Mr. Keefer said. â€œThe trend has gotten a little worse than we expected.â€?
Like other insurers, Blue Cross and Blue Shield of Minnesota reported a surge in prescription drug expenses. Two high-cost specialty drugs for rheumatoid arthritis, Enbrel and Humira, account for one-fourth of prescription drug costs in the company's individual health plans, Mr. Keefer said. Other insurers reported high costs for hepatitis C medications.
State officials said their agencies had been reviewing insurance rates for decades and generally knew local market conditions better than federal officials.
Monica J. Lindeen, a Democrat who is the Montana insurance commissioner and the president of the National Association of Insurance Commissioners, said the letter from Mr. Counihan was interesting, but â€œdid not point to any new information that would impact how state insurance departments regulate their health insurance markets.â€?
State officials said they had to worry about the solvency of some insurers as well as the affordability of insurance for consumers. In February, the Iowa insurance commissioner moved to shut down a nonprofit co-op insurer, and a state court found the company insolvent because of â€œadverse claims experience.â€? Another carrier, the Louisiana Health Cooperative, said it would voluntarily halt operations at the end of this year because it was â€œnot growing enough.â€?
Moreover, consumers can avoid large rate increases by switching to lower-cost health plans next year, administration officials said. In any event, they said, the federal government pays most of the premium for most people who buy insurance on the exchanges, so consumers will be largely shielded from higher premiums.
California, one of the few states that actively negotiate prices, said health insurance rates would rise next year by an average of just 4 percent.
In New York, on average, insurers requested a 10.4 percent rate increase in the individual market, and state officials said they had reduced the average increase to 7.1 percent. â€œWe closely analyzed each insurer's request and cut rates that were excessive or unreasonable,â€? said Anthony J. Albanese, the acting superintendent of financial services in New York.
But the New York Health Plan Association, a trade group for insurers, criticized the state's actions.
â€œThe approved rates do not, in many cases, accurately reflect the financial status of plans as indicated in their rate submissions,â€? said Paul F. Macielak, president of the New York association. â€œHealth plans have suffered financial losses the last two years when the state significantly reduced premium requests. Plans cannot be expected to continue losing money year after year and remain viable.â€?
The Affordable Care Act established a rate review process that requires insurers to disclose and justify large proposed increases. State officials have the primary responsibility for reviewing rates, except in five states that the Obama administration says do not have â€œeffective rate review programs.â€?
In those states â€” Alabama, Missouri, Oklahoma, Texas and Wyoming â€” federal officials review rates. Several insurers said they had been flooded with questions from officials asking for more data on their claims experience and challenging their forecasts for 2016.
The federal government has urged states to hold public hearings on rate requests, and a consumer group in Missouri is urging the Obama administration to hold a hearing on increases requested by Coventry Health Care, a unit of Aetna. Coventry is seeking increases that average 19 percent in Missouri.
Rohan Hutchings, a spokesman for Aetna, said the proposed rates reflected the cost of care. â€œFor 2016,â€? he said, â€œwe expect that medical costs will grow by 8 percent to 10 percent in the individual market.â€? In addition, he said, the federal government is scaling back a transitional program that helps insurers pay certain very large claims.
Jay Angoff, a lawyer for the consumer group, the Consumers Council of Missouri, who is a former director of the state's Insurance Department, said, â€œThe federal government does not have authority to disapprove rates, but does have authority to deem them unreasonable,â€? and should do so. Coventry, he said, ignored the fact that â€œthe least healthy people signed up first, in 2014, leaving a healthier group of people to sign up in 2016.â€?