State approves largest insurance rate increase since start of Obamacare
The Cuomo administration on Friday announced that health insurance rates on the individual market would increase by a weighted average of 16.6 percent, the largest individual market hike since the Affordable Care Act began in 2014.
The new rates take effect in January; open enrollment on the state's exchange begins Nov. 1.
Rates in the small group market will increase by a weighted average of 8.3 percent.
Health insurance reaction was relatively muted as insurance companies digested the news that they would collect higher premiums - though still not as high as they might have liked - and compared themselves to their competitors.
"We believe this year's process, which provided an opportunity for plans and DFS staff to have constructive discussions about the impact of these factors, was an improvement on previous years," said Leslie Moran, a spokeswoman for the New York Health Plan Association, which represents insurers. "We look forward to working with DFS to ensure the rate setting process continues to offer greater transparency."For years, insurers have accused the state's Department of Financial Services of playing politics with the rates, keeping them artificially low at the expense of insurers' bottom lines, an accusation the Cuomo administration has repeatedly denied.
This year, there was certainly more of a mind meld between the administration and the majority of insurers.
The Cuomo administration acknowledged that medical costs increased, citing a 7-percent average increase on the individual market and an 8.5-percent increase on the small group market. The administration also acknowledged drug prices have impacted insurers, pointing specifically to blockbuster drugs for Hepatitis C.
Another 5.5 percent of the rate increase was attributed to the elimination of the federal reinsurance program, a part of the Affordable Care Act that expires this year.
The risk adjustment program, which has been criticized by some insurers and DFS superintendent Maria Vullo, also helps explain why insurers such as UnitedHealth saw their rate requests slashed while others such as MetroPlus will actually be forced to increase their premiums more than they would have liked.
UnitedHealth, which is scaling back its Obamacare public exchange offerings to just three markets and has lost hundreds of millions of dollars on its exchange plans, asked for a 45.6 percent rate increase on the individual exchange. It was awarded a 28-percent increase. In the small group market, UnitedHealth asked for a 12.8-percent increase. It was granted a 5.3-percent hike.
The company did not immediately respond to a request for comment.
Despite the double-digit hike on the individual exchange, the Cuomo administration touted its vigilance, saying the department reduced insurers' requested 2017 rate increases by more than 28 percent overall, which will save policyholders more than $302 million. That combines the individual and small group market.
While that is true, the brunt of those savings come from reductions in rates requested by UnitedHealthcare of New York, UnitedHealthcare Insurance Company of New York and Aetna Life.
Most other insurers on the individual market received rates comparable to what they had requested.
That means the roughly 350 customers of Crystal Run Health Plans will see an 80-percent increase in their premiums beginning in January, less than the 89 percent the company requested. Their small group rates are going up approximately 55 percent.
"Crystal Run Health Plans continues to be committed to providing access to high quality healthcare and the triple aim - improving patient care, improving health and reducing cost for to the people and business of the Hudson Valley," Steve Zeng, executive director of Crystal Run, said in an email. "Our 2017 rates were developed to help Crystal Run accomplish those very commitments. We believe our rates as approved by the New York State Department of Financial Services will remain among the most competitive in the region."
CareConnect, the insurance company run by Northwell Health, will see its average individual premium jump by 29 percent, in line with what the company asked for after an admission it had mispriced its plans during its first three years in business. Its small group offering will increase 23 percent, more than what the company had requested.
The company said in a statement that a large portion of the current rate increase for small group plans can be attributed to the risk adjustment program, "which includes flawed methodology that is adversely affecting nearly all insurers on New York State's health exchange. Without risk adjustment fees, CareConnect's proposed increase would have been significantly lower."
MetroPlus, the insurance arm of the city's public hospital system, will also see its rates increase 29 percent, even though it only sought a 20-percent hike. That's in part because of the risk adjustment program, which requires insurers with healthier populations to pay insurers with sicker populations. Earlier this year, the Centers for Medicare and Medicaid Services announced MetroPlus owed $30 million in risk adjustment payments, and that is expected to increase next year.
"We are pleased that in 2017 our health plan, MetroPlus, will continue to be one of the most affordable plans in the health care exchange" said Ana Marengo, a spokeswoman for Health + Hospitals. "While the increase directed by the state of New York was above what was requested, many individuals remain eligible for subsidies that greatly reduce the cost of their insurance."
Fidelis, one of the largest insurers on the individual market, owes $56 million in risk adjustment payments. Its premiums are slated to increase 11.6 percent, slightly less had what it had requested.
Oscar Health, the insurance startup and Silicon Valley darling, and Independent Health Benefits Corporation, will have individual rates increase by about 20 percent, also in line with what they had requested.
Oscar, which is losing hundreds of millions of dollars, recently announced it was drastically narrowing its network.
The company did not immediately respond to a request for comment.
Rate increases generate headlines but they do not necessarily mean consumers pay more for their insurance plans. That's because the majority of people shopping on New York's individual health exchange receive federal subsidies in the form of tax credits, which are based on level of income and the price of the second lowest silver plan. That insulates most consumers from price increases even as it requires the federal government to pay more in subsidies.
"Consumers should shop around for the best value," Donna Frescatore, executive director of the New York State of Health, said in a statement.
--additional reporting by Addy Baird