Press Releases - September 2, 2016
For 2017 Health Insurance Rate Requests
Insurance Commissioner Katharine L. Wade today announced that the Department has released its rulings on health insurance companies’ rate requests for the 2017 coverage year. The rulings were made on 17 rate filings from 12 companies selling individual and small group plans that cover approximately 300,000 people in Connecticut.
In addition to rising medical costs, the rates reflect the impact of the elimination of federal payments to insurers as part of a program to stabilize premiums in the first three years of the Affordable Care Act (ACA). Insurers received funds to off-set costs from the expected high-cost claims of the newly insured.
Two of the three carriers whose individual rates were subject to public hearings in August – Anthem Health Plans and ConnectiCare Insurance Company – have had their rate requests denied and were ordered to recalculate. The Commissioner deemed the rates excessive and ordered the companies to resubmit their calculations no later than September 7. Additionally, Anthem also was ordered to resubmit its calculation for its small group rates, which were not part of the hearing process.
“The Department conducted thorough actuarial reviews on each rate request and, as in years past, was able to reduce some of the proposed increases. However, the Connecticut market is experiencing what other states have seen this year - rising health care costs, increased demand for services and significantly higher prescription drug costs. Therefore, in some cases higher rates were actuarially justified,” Commissioner Wade said. “Under the ACA more people are covered and more are using their insurance. That increased demand for services, sunset of the federal reinsurance program and volatility in the ACA’s risk adjustment program have had a major impact on rates for next year.”
While today’s rate approvals are higher on average than what the Department has allowed in the past few years, the average increase the Department has permitted over the last three years has been 8.77 percent for the individual market and 4.91 percent for the small group market.
The Department has identified the following factors as the key cost drivers for the 2017 rates:
- Annual trend (medical inflation): This relates to the cost of services, demand for services, severity of services and high prescription drug prices. In the last three years the impact of trend has been in the single digits. This year, it has risen to 10 percent or more.
- Experience adjustment: Some insurers revised upward the “starting point” they use to build their prices for the next coverage year. As the 2016 coverage year continued carriers were seeing higher claims costs and more expensive types of services than they had anticipated and previously priced for.
- Sunset of the Federal Reinsurance Program: From 2014 to 2016, the federal government has provided funds to insurers to offset costs from the expected high-cost claims of the newly insured under the ACA. It was established to help stabilize premiums in the first three coverage years of the ACA. Under the ACA, the program ends in 2016.
- Federal Risk Adjustment Formula: Under the ACA, health insurers annually pay or receive funding depending on the assessed riskiness or health of their insured populations. There has been volatility in this program with shifting populations and concerns from state insurance regulators over the formula for who qualifies for payments or who is required to pay. The Department has raised concerns both directly with the federal Center for Medicare and Medicaid Services (CMS), and through the National Association of Insurance Commissioners, and offer solutions that would help achieve a workable, equitable formula and foster a more robust marketplace, both on and off of the exchange.
“We understand that these rates will have an impact on consumers and their household budgets and we need to continue to look for ways to address costs while focusing on quality and access. We view this as an opportunity to examine benefit design and encourage the use of networks that will achieve cost savings. Consumers need choices – abundant choices – of plans that are ACA compliant,” Commissioner Wade said. “The Department will continue to work with the Governor’s office, our federal partners, Access Health CT, carriers, advocates and others to ensure that consumers have access to quality health care and more choice of plans.”
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