Pa. health insurers defend requests for higher premiums

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Insurance companies say they are losing money on individual health plan options they sell through the ACA’s insurance marketplace, known as the exchange.

But the Pennsylvania Insurance Department worried that people won’t be able to afford these safety-net health plans next year if insurers get their way.

At the department’s hearing today in Harrisburg, insurers from across the state, including Highmark Inc., Capital BlueCross and Geisinger, explained why they need to increase premiums they charge for individual health plans, a step they say will make the ACA market sustainable.

Pennsylvania insurers are not alone in suffering losses on the ACA and asking for higher premiums.

Across the nation, insurers are asking for an average premium hike of about 22.5 percent, according to Arthur Lucker, an actuary at Philadelphia-based INS Consultants, who testified at the hearing.

Insurance commissioner Teresa Miller said, “We must find a balance to have a competitive and sustainable marketplace.”

Regulators have final say

The insurance department wants insurers to show that their requested premiums will cover their expected costs for the upcoming year, not to make up losses from previous years, the department explained.

The expected costs include medical prices and operating expenses but also factor in each insurer’s need to earn profit. The department also considers the company’s financial condition, among other factors, before approving or denying a rate increase.

The department only reviews rate requests for individual and small-group health plans.

In Pennsylvania, about 5 percent of the insured population is covered through an individual or small group health plan, both of which are available through the ACA exchange, according to the department.

About 49 percent of the insured population is covered by large group or self-funded health plans. The department does not have the authority to review those insurance rates. The remaining insured population is covered by government programs such as Medicaid and Medicare.

Yet the relatively small share of people covered under individual health plans are costing insurers millions of dollars.

Highmark, for example, says it lost $223 million in 2014 and is predicting a loss of $500 million in 2015 on health plans offered under the ACA, according to a recent lawsuit it filed against the federal government.

Highmark filed the lawsuit to collect money the federal government promised to pay insurers for the calendar years 2014-2016 through what is known as the risk corridor program.

The government created the program to make funds available temporarily to insurers that were offering health plans through the ACA as they adjusted to a new market.

The goal was to provide insurers with back-up funding to help stabilize their ACA costs, since people insured under the ACA might have higher medical expenses.

The government never paid up, according to Highmark’s filing in the U.S. Court of Federal Claims.

Prescription drug costs are on the rise

Highmark is asking for an increase of 48 percent for individual ACA members and 1.85 percent for small group plans, above the state average of 23.6 percent and 7.9 percent, respectively.

Capital BlueCross is asking for a 20 percent hike on individual plans and about 8 percent for all group plans. Capital files its requests under Capital Advantage Assurance Co., Capital Advantage Insurance Co., Keystone Health Plan Central.

Insurers said in the hearing that the main reason they are asking for such high rate increases is because when they originally put in rate requests at the start of the ACA, they were essentially guessing.

Insurers entering the ACA market for the first time had trouble setting prices for enrollees, and had to file rate requests before they had any experience with the market.

“They faced a difficult task,” Lucker said.

What insurers have learned in the past three years is that people enrolling in individual health plans were either previously uninsured or under-insured, and their utilization of health insurance was much higher than expected.

Combine that with increasing prescription drug costs – the average cost for a specialty drug is about $5,500 per prescription – and the fact that people are enrolling in health plans when they’re sick and dropping coverage once they’re healed, premium rates need to go up.

This is the first time that the department has held a public hearing on individual and small group health plans, and the public was invited to speak after insurers presented.

Representatives of consumer advocacy group Put People First! PA attended the event, promoting health care as a human right and speaking against the proposed rate increases. 

“It’s time to make the invisible visible,” said Karim Sariahmed, a member of the organization.