Arkansas' largest health insurer has proposed a 14.7 percent average increase in the cost of plans that cover more than 200,000 people, including about 130,000 whose premiums are paid by Medicaid under the so-called private option, the state Insurance Department announced Tuesday.
Arkansas Blue Cross and Blue Shield spokesman Max Greenwood said the increase, which would take effect Jan. 1 if approved, is needed because of its customers' rising health care costs that include a 30 percent increase in the company's payments for prescription drugs in 2015.
QualChoice Health Insurance and St. Louis-based Centene Corp. also have requested premium increases: an average of more than 23 percent for QualChoice and less than 10 percent for Centene, the Insurance Department announced.
The proposed increases would affect those who buy coverage on their own, rather than through employers, as well as people who receive coverage in such plans under the private option, the state's expanded Medicaid program.
An increase in rates would affect the premiums the Medicaid program pays for private-option enrollees next year, when Arkansas will be responsible for 5 percent of the cost.
Federal regulations require states and insurance companies to publicly disclose information about pending health insurance rate requests of 10 percent or more.
QualChoice's plans cover about 41,000 Arkansans, most of them private-option participants.
The exact amount of Centene's requested increase wasn't released.
Arkansas Insurance Commissioner Allen Kerr said in a news release that he and Gov. Asa Hutchinson "do not believe there is substantive justification" for the increases and that they "expect to take action to deny the requested rate increases until there is sufficient justification to properly consider any rate increase."
"We're a bit surprised by that statement," Greenwood responded, because actuaries hired by the Insurance Department are still reviewing the proposed increase and asking for more information from the company.
"We anticipate receiving a more detailed explanation of the commissioner's position, including their actuarial analysis and interpretation of the data we submitted so that we can provide them more information to show them that our rate filings are actuarially sound," Greenwood said.
Rates for the plans must be approved by the Insurance Department by Aug. 23, Insurance Department spokesman Ryan James said.
Under the private option, the state uses Medicaid funds to buy coverage in plans offered through the health insurance exchange for low-income Arkansans.
The state created the program in 2013 as a primary way of extending Medicaid coverage to adults with incomes of up to 138 percent of the poverty level: $16,394 for an individual, for instance, or $33,534 for a family of four.
Federal tax credit subsidies for coverage through the health insurance exchange are available to many people who don't qualify for Medicaid and have incomes below 400 percent of the poverty level: $47,520 for an individual, for example, or $97,200 for a family of four.
In addition to private-option enrollees, the Blue Cross customers who would be affected by the proposed increase include about 61,000 Arkansans enrolled in non-Medicaid coverage through the exchange and about 16,000 enrolled in unsubsidized coverage outside of the exchange, Greenwood said.
The customers include those enrolled in Arkansas Blue Cross and Blue Shield plans, as well as plans the company offers on behalf of the national Blue Cross and Blue Shield Association.
In a filing posted on the Insurance Department website, the Arkansas company said it collected $861 million in premiums last year and paid $821 million in claims.
One reason medical costs have been increasing, Greenwood said, is that many of the first Arkansans who enrolled in the private option waited about 18 months before using their plans for the first time. That was especially true of people who successfully applied for coverage and were randomly assigned to a plan because they didn't choose one on their own, she said.
"They were maybe not aware of coverage or how to use coverage, how to access the care they now had," she said.
She also cited an effort by the state that began last year to review the eligibility of private-option participants who had been enrolled in the program for at least a year.
That effort resulted in coverage being terminated for about 25,000 private-option enrollees who were in Blue Cross plans, Greenwood said.
Many of those enrollees had coverage from other sources and filed few or no claims with the company, she said.
Removing them from the rolls "sort of destabilized the market and the assumptions that we had used in setting the rates we had set," she said.
In their rate increase requests, both Arkansas Blue Cross and Blue Shield and QualChoice also cited the scheduled end of a federal program established under the 2010 Patient Protection and Affordable Care Act that helped pay the claims of insurance customers with high medical costs. The federal law calls for the program, which has been funded with fees collected on insurance policies, to end next year.
QualChoice Chief Executive Officer Michael Stock said his company's requested increase was based on its costs for medical care. Compared with those covered in unsubsidized plans, private-option enrollees tend to use more services, including the emergency room, he said.
The terms of the federal waiver that allowed the creation of the private option required spending to be at or below a cap representing what an expansion of the traditional, fee-for-service Medicaid program would have cost.
If the state's costs exceed the cap, it will be responsible for paying the difference.
In a request for an extension of the federal waiver, the state estimated that the average monthly per-enrollee payment to insurance companies next year will be $525.48, a 4.7 percent increase from this year's average payment of $501.89.
Including other services provided to private-option enrollees, the state estimated the total per-enrollee cost to be $528.97 per month.
The cost of traditional Medicaid expansion would be $548.19 per enrollee, per month, the state estimated.
The state said it expected the payments to insurance companies to total about $1.6 billion during the year.
As part of the request for the waiver extension, the state is seeking federal approval for changes that Hutchinson has said would encourage private-option enrollees to stay employed and take responsibility for their health care.
The revamped program would be known as Arkansas Works.
Human Services Department spokesman Amy Webb said in an email that it's too early to say how any increases would affect the cost of Arkansas Works.
This year, private-option participants can enroll only in a company's cheapest plan that meets the program's requirements. The premium for the plan must be within 10 percent of the cost of the second-cheapest plan in the coverage region.
Webb didn't respond when asked whether the same requirement will be in place next year.
The Insurance Department has often granted increases that were less than what insurance companies initially proposed.
In 2014, Blue Cross and Blue Shield requested an average increase of 8.5 percent for its individual market plans, starting in 2015, but was approved for a 2 percent increase.
The premiums for the plans rose an average of 7 percent -- the full amount the company had requested.
The Affordable Care Act requires insurance companies to spend 80 percent of the premiums on medical care, rather than administrative costs and profits, and requires those that spend a lower percentage on medical care to refund the difference to consumers.
Jonathan Gold, a spokesman for the federal Health and Human Services Department, said in a statement that Arkansans "will continue to have affordable coverage options in 2017."
According to the federal agency, about 87 percent of Arkansans enrolled in non-Medicaid plans on the exchange receive tax credit subsides.
The subsidy amounts are tied to premium costs, so any increase in premiums could be offset by an increase in the subsidies, according to the department.
A Section on 05/25/2016