Actuaries back health insurer on 14.7% premium rise

A proposed 14.7 percent increase in premiums for Arkansas Blue Cross and Blue Shield health insurance plans appears to be reasonable based on the cost of enrollees' medical and drug expenses, actuaries hired by the Arkansas Insurance Department found.

The plans cover more than 200,000 people, including about 130,000 participants in the private option, the state's expanded Medicaid program.

A report to the Insurance Department from Dallas-based Lewis & Ellis Inc. noted that Blue Cross did not earn a profit on the plans in 2015 and that the outlook for this year "continues to be poor."

Higher-than-expected expenses, including those resulting from "high cost specialty drugs," appear to be the "primary driver" of the insurer's requested increase, the actuaries wrote.

If approved, the increase, which would start Jan. 1, would affect the cost to the state and federal government to provide insurance for low-income Arkansans through the private option.

It also would affect premiums paid by about 71,000 consumers who buy coverage on their own rather than through employers, a Blue Cross spokesman has said.

That includes those who buy insurance on the state's federally run health insurance exchange through the healthcare.gov website.

Coverage through the exchange is subsidized by federal tax credits for many people who don't qualify for Medicaid but have incomes below 400 percent of the federal poverty level: $47,520 for an individual, for instance, or $97,200 for a family of four.

Insurance Commissioner Allen Kerr will rule on the requested increase by Aug. 23, when the rates must be submitted to the federal government, Insurance Department spokesman Ryan James said.

Kerr said in a May 24 news release that he and Gov. Asa Hutchinson "do not believe there is substantive justification" for the rate increases proposed by Arkansas Blue Cross and Blue Shield and Little Rock-based QualChoice Health Insurance, which has proposed an increase of about 24 percent for its plans.

Hutchinson spokesman J.R. Davis said Wednesday that the governor still doesn't think the requests are justified.

"The actuarial component is just one part of the process," Davis said.

Blue Cross spokesman Max Greenwood said the company received the Lewis & Ellis report Friday and notified the Insurance Department on Wednesday that it has no plans to modify its requested rate increase.

"We believe that our rates are actuarially justified," Greenwood said.

The Insurance Department's "independent actuaries have found the same thing," she added.

Under the private option, the state buys coverage through the health insurance exchange for Arkansans who became eligible for Medicaid under an expansion approved by the Legislature and then-Gov. Mike Beebe in 2013.

The expansion extended eligibility to adults with incomes of up to 138 percent of the poverty level: $16,394 for an individual, for example, or $33,534 for a family of four.

More than 238,000 people were covered by private option plans as of March 15.

The federal government has paid the full cost of the program since the coverage began in 2014, but Arkansas will be responsible for 5 percent of the cost next year.

In its request for an extension of the federal waiver authorizing the program, state officials estimated that per-enrollee payments to insurance companies next year, including premiums and other subsidies, will increase 6.5 percent, to an average of $534.51 per month.

The total cost for the program is expected to be about $1.6 billion, with the state paying about $79 million, according to the extension request.

The waiver-extension request also seeks federal approval to charge enrollees up to $19 per month to defray premium costs and asks to make other changes that Hutchinson has said will encourage participants to stay employed and take responsibility for their health care.

The revamped program would be known as Arkansas Works.

In addition to higher expenses, a "key driver" of Blue Cross' requested increase is the scheduled end next year of a federal program that reimburses insurance companies for the cost of insuring enrollees with large medical bills, Lewis & Ellis' actuaries wrote in the report.

The requested increase, the actuaries concluded, does not appear to meet the criteria under a part of Arkansas Code Annotated 23-79-110 allowing the state's insurance commissioner to deny requests that are "excessive, inadequate or unfairly discriminatory."

The actuaries' report was obtained by the Arkansas Democrat-Gazette through a National Association of Insurance Commissioners website allowing public access to Insurance Department filings.

James said the report was publicly accessible on the site because of a "technical glitch that has been corrected."

QualChoice chief executive Michael Stock said he has not yet received a report from the Insurance Department's actuaries on whether they consider his company's proposed increase to be justified.

The company's requested 24 percent rate increase would apply to plans covering about 41,000 Arkansans, most of whom are private-option participants.

Stock said Kerr gave QualChoice information Friday indicating that if the increase were approved, the company's plans could be too expensive to be offered under the private option.

Under a state policy, private-option enrollment is limited to each company's cheapest plan that meets the program's requirements. The plan also must be one of the two cheapest in the region or have a premium within 10 percent of the premium for the second-cheapest plan.

QualChoice's actuaries are studying whether the company's request can be modified to allow it to continue participating in the private option, Stock said.

"We are very supportive of the whole program and want to stay involved," he said.

St. Louis-based Centene Corp., which also offers private option plans, has requested an increase of less than 10 percent, state officials have said.

Minnetonka, Minn.-based UnitedHealth Group is offering private option plans this year but has said it will discontinue them next year.

A Section on 08/04/2016

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