Arkansas Insurance Department cuts health insurers’ rate requests

The Arkansas Insurance Department has required insurers to lower their original rate requests for individual plans, affecting individual buyers and those benefitting from the state’s private option.

Eight days after the Arkansas Insurance Department denied its original 14.7% request, Arkansas Blue Cross Blue Shield submitted an average 9.7% rate increase request on both its multi-state and local plans Friday.

Other insurers also are being required to submit smaller requests, according to Ryan James, Arkansas Insurance Department spokesman. QualChoice Life and Health had requested a 23.69% increase, while QCA Health Plan has requested a 23.78% increase. James said one will be allowed to increase by 13.6% while the other can increase by 13.5%; he wasn’t sure which was which.

Celtic Insurance, otherwise known as Ambetter, has requested an increase of 8.1% and was approved for 4%. Another carrier providing insurance in 2016, UnitedHealthcare, is exiting the market in 2017.

“The approved insurance rates not only protect consumers and hardworking taxpayers, but show how our cost containment efforts have been able to keep rates down while other states see increases of 40, 50, and even 60 percent,” said James in a statement. “The Department took into consideration reports from independent actuaries, company surpluses, and the insurance code to arrive at our determination that does right by Arkansans.”

In a letter dated Aug. 19, Lee Douglass, Blue Cross’ senior vice president, law and government relations and chief legal officer, wrote to Insurance Commissioner Allen Kerr that the company had no choice but to agree to the 9.7% request. Refusing to do so could result in Arkansas Blue Cross being left out of the federal government’s insurance marketplace, where individuals purchase insurance, for the next five years.

The commissioner must certify to the Centers for Medicare and Medicaid Services (CMS) that he has approved the rates. The plans must be submitted to the federal government by Aug. 23.

According to Douglass’ letter to Kerr, Blue Cross was informed of the decision in a letter dated Aug. 11 in which Kerr asked the company to “refile with a rate consistent with the 9.7% recommendation that AID will make to CMS.” The insurer’s original rate increase request was submitted May 10. In his letter to Kerr, Douglass objected to “what we believe to be the arbitrary nature” of the denial. He referred to a worksheet provided by AID to the company saying the request “appears actuarially reasonable.” It found the company had a loss ratio above 100% in 2015 and that the outlook for 2016 “continues to be poor.” Expense drivers include high-cost specialty drugs, that report said.

Douglass wrote that the Insurance Department had erroneously noted that Arkansas Blue Cross had received an influx of $30.8 million. It was actually a dividend issued by Health Advantage, a subsidiary of Arkansas Blue Cross, which was already reflected in the company’s financial statements, he wrote. Douglass wrote that the difference between 9.7% and 14.7% is $60 million and wrote that the company’s reserves decreased for the past three years. At the end of 2015, the fund had fallen to $1,265 per insured member, which he noted would not pay for a day of inpatient hospital care.

The company covered 213,955 individuals at the time of the filing. That includes 130,000 people on the private option, 75,000 who purchased insurance on the federal marketplace with incomes up to 400% of the federal poverty level and who received federal subsidies, and individual insurance purchasers whose salaries are too large to qualify for subsidies.

The private option is the state program using federal Medicaid dollars to purchase private insurance for Arkansans with incomes up to 138% of the federal poverty level. The state is in the process of obtaining a waiver to alter the program. Under those new conditions, it will be known as Arkansas Works.

Douglass objected to Kerr issuing a press release May 24 saying, “At this time, with the information we have on hand, including historical patterns, Governor Hutchinson and I do not believe there is substantive justification for these rate increases. For that reason, we expect to take action to deny the requested rate increases until there is sufficient justification to properly consider any rate increase.” Douglass wrote that the statement had been made only two weeks after the rate request was made, which was too soon for a meaningful review to have occurred. Douglass said Blue Cross would work to save costs.

“We also believe it is important to increase our efforts and resources so all members of the General Assembly are informed of the costs and issues associated with our state’s health care needs as well as any deficiencies in the filing process,” he wrote.

Blue Cross spokesperson Max Greenwood said the Affordable Care Act, otherwise known as Obamacare, did little to lower costs. Meanwhile, greater utilization and new specialty drugs have driven cost increases.

“More folks have insurance. More folks have coverage that is a lot greater than prior to the ACA, and there are only so many levers,” she said. “You can’t change benefit structure because those are prescribed by law. You can’t really have an impact on pharmaceutical costs because you really have no control over that. You really don’t have much flexibility with any kind of network design.”

Major insurers Aetna, UnitedHeath Group and Humana have announced they are exiting Affordable Care Act markets this year. Greenwood said Blue Cross isn’t doing that this year.

However, she said, “In the future, I think that that is something that we will have to assess each year just as part of ongoing business decisions. … It’s possible that anything can happen with regard to decisions involving which marketplaces you participate in because it’s a fluid environment.”