The three companies offering plans on the state's health insurance exchange have lowered their proposed rate increases for next year, an Arkansas Insurance Department spokesman said Friday.
A letter from the chief legal officer of the state's largest health insurer, Arkansas Blue Cross and Blue Shield, indicates that the company lowered its requested increase from 14.7 percent to 9.7 percent after Insurance Commissioner Allen Kerr said he would recommend the lower rate to the federal Centers for Medicare and Medicaid Services, which must approve the rates.
In his letter Friday to the commissioner, Lee Douglass called Kerr's rejection of the company's 14.7 percent rate increase "arbitrary," noting that actuaries hired by the Insurance Department had found the request to be justified.
Blue Cross and Blue Shield plans cover about 207,000 Arkansans, including about 130,000 whose premiums are paid by Medicaid under the so-called private option, Insurance Department spokesman Ryan James said.
Little Rock-based QualChoice Insurance reduced its requested increase for plans covering about 41,000 people, most of them private-option participants, from more than 23 percent to about 13.5 percent.
Centene Corp. of St. Louis, which had plans covering about 42,000 Arkansans at the end of last year, will increase rates by 4 percent, instead of the 8.1 percent it initially proposed, James said.
"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," James said in an emailed statement.
In addition to private-option enrollees, the rates affect plans covering people who don't qualify for Medicaid and who buy insurance on their own rather than through an employer.
That includes those who buy insurance on the state's federally run health insurance exchange through the healthcare.gov website.
Gov. Asa Hutchinson said in a statement that the proposed increases are among the lowest in the country and strike "a reasonable balance between insurance risk and -- most importantly -- cost to the consumer."
"However, it's also a reminder that we should remain diligent," Hutchinson said. "The rise in healthcare costs have impacted state governments across the country, which is why our state has continued to push for cost containment under my administration."
When the Insurance Department announced the rate increases requested by Blue Cross and QualChoice in May, the companies cited customers' increasing costs for medical care and prescription drugs as well as the scheduled end next year of a federal program that has helped pay the claims of customers with high medical costs.
In the letter to Kerr Friday, Blue Cross' Douglass said the commissioner's rejection of the 14.7 percent rate increase appeared to be based on an "erroneous belief that we have recently received an 'influx' of $30.8 million into our surplus."
The money was a dividend issued by HMO Partners, a company partly owned by Blue Cross, and amounted to "moving money from one account to a different one," Douglass said.
Also, at the end of 2015, the company had $1,265 in reserve per insured member, "an amount that would not fully pay for a single day of inpatient hospital care," the company executive said.
According to the letter, Kerr told the company on Aug. 11 that he would recommend the 9.7 percent rate increase and asked the company to submit a new request that was consistent with that recommendation.
If Blue Cross had declined Kerr's request, it would have had to withdraw from the individual market and would have been barred under state law from re-entering the market for five years, company spokesman Max Greenwood said.
"While we strongly object to the way in which our rate review was conducted and strongly disagree with your legal and factual analysis of our filed rates, out commitment to serving Arkansans takes precedence over resolving those disputes at this time," Douglass said in the letter.
Under the approved rates for 2017, Blue Cross expects to lose $60 million next year on private-option plans and other individual market plans, on top of several million it expects to lose this year, Greenwood said.
"Something's going to have to change for this program to be viable" Greenwood said, referring to health insurance exchanges set up in Arkansas and across the country.
She noted that several nonprofit insurance cooperatives, set up in other states under the Patient Protection and Affordable Care Act, have shut down, and participation in exchanges by carriers nationwide has been declining.
Earlier this week, Aetna, the nation's third-largest health insurer, said it was withdrawing from 11 of the 15 states in which it currently offers plans. Aetna doesn't offer plans in Arkansas.
The Arkansas Legislature created the private option in 2013 as a primary way of extending Medicaid eligibility, as authorized under the 2010 health law, 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.
Federal tax-credit subsidies are available for coverage through the exchange for many people who don't qualify for Medicaid and have incomes below 400 percent of the poverty level: $47,520 for an individual, for instance, or $97,200 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.
UnitedHealth Group offered plans on Arkansas exchange for the first time this year but will discontinue them next year as part of a nationwide retrenchment. Aetna and Humana, which have not offered plans on Arkansas' exchange, also have announced that they will withdraw from exchanges in several states next year.
James, the Insurance Department spokesman, said the department "took into consideration reports from independent actuaries, company surpluses, and the Insurance Code" in ruling on the increase requests.
Arkansas has applied to the Centers for Medicare and Medicaid Services for approval to implement some changes to the private option, including charging enrolleees premiums of about $13 a month under a new program that will be known as Arkansas Works.
Sen. Jim Hendren, R-Sulphur Springs, said the reduced rate increase request from Blue Cross is "good news for the taxpayers" but also indicates a need to make more changes to the private option to control costs.
Hendren, who is a chairman of a legislative task force that has been studying the state's Medicaid program, said federal officials won't allow certain changes, such as adding a deductible to private-option plans or requiring enrollees to make a copayment when they visit the emergency room.
"This is a warning shot, to me, that we'd better figure out how to manage this, and the federal government needs to let states do their job," Hendren said.
A Section on 08/20/2016