This article first appeared in the St. Louis Beacon, Aug 2, 2011 - Bernadette Gronborg of Festus bemoans the fact that she is cannot get detailed explanations about increases in her health insurance. Aged 64 and retired, she's a year short of qualifying for Medicare. In the meantime, she says, she pays $300 a month for a high deductible policy "that hardly covers anything, but it's something."
Like a growing number of Missourians, she's pleading with state lawmakers to force insurers to bring more transparency to rate making.
"In the last six months, my insurance company has raised my premiums. The reason they gave me this time was aging. In other words, I didn't die, so my premiums went up. That's a reason I think the state insurance department needs the authority to review rates so we can keep the cost under control."
She is pleased to know her view is shared by the Department of Health and Human Services. Beginning on Sept. 1, the Affordable Care Act will require insurers to disclose and justify rate increases of 10 percent or more. That requirement put Missouri and a handful of other states in a bind because their insurance departments lack authority to collect rate data or review proposed rate hikes. The other states include Arizona, Idaho, Montana and Wyoming.
The federal agency has put these other states on notice that it will conduct its own reviews of any proposed rate increases exceeding 10 percent. An HHS spokesperson says the agency will bypass states and go directly to the affected insurers to collect the data.
He says the insurer "will have to explain what's the justification for the increase. Is it for higher administrative cost? Is it for more profit? Are there underlying medical trends necessitating a rate hike? Actuaries will go over the reasons, give it a good scrubbing."
Though the agency lacks authority to order an insurer to roll back rates, the spokesperson says the Affordable Care Act has given HHS clout to call more attention to rate hikes deemed excessive. For the first time, the spokesperson says, consumers will see what rate hikes are being proposed and why.
"We've come up with an understandable form explaining why the rate is being proposed. If the insurer decides to go through with a rate that we in fact deem to be unreasonable," consumers will have access to information about why the federal government thinks the rate is too high.
Scrutiny Prompts Rate Cuts
"We know we can't reject rate increases, but with this transparency, we expect (companies) will moderate rate increases and add a lot of value to consumers," the spokesperson said.
HHS points to states where it says rate reviews have been beneficial to consumers:
- The insurance commissioner in Rhode Island used the state's authority to reduce a proposed increase by one insurer to 1.9 percent from 7.9 percent.
- Consumers in California were spared rate hikes totaling as much as 87 percent after an insurer withdrew a proposed increase following a review by the California Insurance Commissioner's office.
- About 30,000 residents of North Dakota saw their rates cut to 14 percent from 23.7 percent following a public outcry.
- The Insurance Department in Connecticut rejected a proposed rate hike of 20 percent by one of the state's major insurers.
Limitations On Missouri's Authority
It was unclear which or how many insurers in Missouri were proposing to raise rates by more than 10 percent. In any case, state insurance officials readily acknowledge their limitations in doing anything about such rate hikes, whether justified or not. One agency spokesperson noted that under state law, insurance carriers "are not even required to file such rates with the department."
State Rep. Margo McNeil, D-Hazelwood, introduced a bill during the last legislative session to give the Missouri Department of Insurance the authority to conduct premium rate reviews. Lawmakers did not pass the bill.
Members of the Insurance Committee said the inaction had nothing to do with lobbying by the health insurance industry, even though it wasn't happy with the legislation.
"Missouri is a red state, and it pretty much rejects anything that's seen as the federal government intruding or interfering with their lives," says state Rep. Tishaura Jones, of St. Louis, ranking Democrat on the Insurance Committee and assistant minority floor leader.
The Insurance Department testified on the legislation for informational purposes only, but the agency director, John M. Huff, didn't seem to imply any tension between the state and HHS over the review of premiums.
"Missouri law does not require health insurers to submit rates to DIFP, which was the basis for the determination by Health and Human Services," Huff says. "The rate review process is intended to bring more transparency to the health-insurance marketplace."
He says the process "should give consumers a better opportunity to understand exactly what they're paying for, allowing them to make more informed choices. At the end of the day, that encourages a more competitive marketplace for individuals and small business to shop for health insurance."
Rural Missourians Particularly Vulnerable
Groups now feeling the sting of inexplicable rate hikes include rural Missourians, says Tim Gibbons of the Missouri Rural Crisis Center in Columbia.
"Because of high premiums and with rural people far more dependent on the private individual marketplace, they end up paying a lot for health care," he says. "We believe that if premiums are going to go up a substantial amount, there should be some sort of transparency so consumers will know why their rates are going up."
The most recent study that looked at health care costs in rural Missouri, "Health Care in the Heartland," was done in 2007. The study said, "If we look only at the privately insured (rural) families who secured insurance through an agent or company in the individual market, the average amount spent on health care was $8,979."
The cost is likely to be much higher three years later.
Concerns About Unintended Consequences
Another controversial federal directive, which is part of the heatlh-reform law, is the issue of medical loss ratios. It requires insurers to spend at least 80 percent of premium dollars on direct medical care or to improve the quality of care rather than use it for overhead, advertising and executive salaries and bonuses.
Some insurers appealing for at least temporary relief from the new rule say the issue is not as simple as consumers claim.
Among those warning of fallout over the medical loss ratio issue was United Healthcare of Maryland Heights, which employs about 2,400 people in Missouri. The group's CEO, Steve C. Walli, didn't object to the federal government collecting data on the new medical loss ratio standards, but he warns of several unintended consequences:
- Some carriers might stop selling to new customers.
- Carriers might leave a market rather than operate at a loss.
- Customers could lose important information about insurance if brokers are "forced out of the marketplace."
- Young healthy consumers could have fewer choices.
Walli says, "At lower commissions required to meet the new medical loss ratio rules, brokers may be unable to offer these products to consumers and, therefore, leave young, healthier consumes with fewer health-insurance alternatives."
He urged the state insurance department to phase in the new medical loss ratio rules over time "to give carriers time to adjust internal cost structures to meet these new requirements."
On the other hand, groups as diverse as Sisters of St. Joseph of Carondelet to Missouri Jobs with Justice say changes in the medical loss ratio are overdue.
"Missouri stands out for what it isn't doing," says Dr. Rea Beck, who testified for the new medical loss rule at a state hearing in December.
"Medicare has 3 percent administrative costs. A lot of us in medical care wanted a single-payer Medicare for all. Congress wanted the new health-care bill to use private health-care insurance companies. The latter are the second highest profitable businesses in our country. Therefore, it doesn't seem too much that we are asking for a medical loss ratio of 80 percent to 85 percent."
Ruth Ehresman, director of health and budget policy for the Missouri Budget Project, says at least 34 states have established minimum medical loss ratios or other reporting requirements.
"While these vary widely, they do provide some consumer protection. By standardizing the definition of medical loss ratios, the Affordable Care Act and HHS regulations will improve consumer protection."
She adds that three of the five insurers with higher market share in Missouri report a medical loss ratio of near or above 80 percent.
"These five represent almost 86 percent of the market share," she says.
But insurers tend to argue that whether they easily meet the target 80 percent medical loss ratio depends on the market served. A Missouri Insurance Department report of adjusted medical loss ratio estimates for 2010 show that the top three insurers serving large employers in Missouri would have adjusted medical loss ratios above 80 percent. The top three, based on the number insured, are Healthy Alliance Life Insurance Co., United Healthcare Insurance Co., and Blue Cross and Blue Shield of Kansas City. The estimated medical loss ratios ranged from 85 percent to 91.4 percent.
Adjusted medical loss ratio estimates for the top three insurers serving small employers were below the 80 percent threshold, according to state data. The top three in that category are Healthy Alliance, United Healthcare, and Coventry Health and Life Insurance Co. The estimated ratios ranged from 75.8 percent and 77.6 percent
For the individual market, adjusted medical loss ratios generally fell far below the 80 percent mark for the top three insurers. The top three are Healthy Alliance, Golden Rule Insurance Co., and Blue Cross and Blue Shield of Kansas City. Their estimated ratios ranged from 63.8 percent to 77.2 percent.
The different estimated ratios by markets are the reason some insurers have appealed to the state to seek a three-year federal adjustment or waiver at least for the individual market and give insurers until 2014 to meet the 80 percent medical loss ratio requirement.
Consumer groups have been just as insistent that insurers could meet the standard. They base their arguments on issues ranging from the billions of dollars in profit earned by the top insurers in the state and the possibility that the industry as a whole could save millions more through more accuracy in processing claims.
Some states where the dominant insurance carrier or carriers already have medical loss ratios of at least 80 percent are still requesting that HHS make adjustments to make higher ratios for all insurers take effect gradually. North Dakota, for example, has asked permission to set for medical loss ratios at 65 percent this year, 70 percent next year and 75 percent in 2013. Iowa wants a medical loss ratio of 60 percent this year and 75 percent in 2013. Kentucky is seeking an adjustment to set the medical loss ratio for all insurers in the state to 65 this year and 75 percent by 2013.
A spokesperson for the Department of Insurance says Missouri has filed no waiver to seek a delay in implementing the new medical loss rule. But he says the agency is "continuing to evaluate the insurance market as well as how the required medical loss ratio will affect the insurance carriers that operate in this state."
Funding for the Beacon's health reporting is provided in part by the Missouri Foundation for Health, a philanthropic organization that aims to improve the health of the people in the communities it serves.