By Matthew Valeta

Health insurance companies have proposed their rates for 2015 in Colorado and the average rate changes mostly range from 10% decreases to 10% increases. Outliers include a 35% increase from Time Insurance Company and a 22% decrease from Access Health Colorado. Before these proposed rates can go into effect they go through Colorado’s rate review process to ensure that they are not excessive, inadequate or unfairly discriminatory. The Division of Insurance has used rate review to save Coloradans over $100 million on their premiums since 2008.

The Colorado Consumer Health Initiative (CCHI) has given close scrutiny to nine health insurance plan filings that will impact approximately 98,628 policyholders in Colorado. Far too often, insurance companies try to pass premium increases onto consumer without justifying why these higher costs exist.

Failure to Account for the Reduction in Uncompensated Care

Throughout these filings insurance companies failed to indicate whether they adjusted their projections to reflect the reduction in uncompensated care and charity care already occurring in Colorado due to the expansion of health insurance under the Affordable Care Act. Earlier this summer, the Colorado Hospital Association released a report stating that the average charity care provided per hospital for Colorado was down 36.2%. Already in the first quarter of 2014, Colorado hospitals are seeing more Medicaid patients and fewer self-pay patients.

Colorado’s reduction in uncompensated care will lead to significant savings for hospitals and a reduction in the costs shifted onto insured consumers. While insurance companies will be able to use this information when negotiating contracts, they have not indicated how these savings will be reflected in premiums. If insurance companies are not including the impact of Colorado’s expansion of insurance in their premiums, Coloradans could unnecessarily be paying extra in their premiums.

The Health of New Enrollees in 2015

Several insurance companies stated that they expect new enrollees in 2015 to have higher health risks than consumers in 2014. However, experts like the American Academy of Actuaries have projected lower-cost individuals are more likely to enroll in 2015. Enrollees in 2014 included the higher cost consumers who had previously been denied insurance because of their health. Additionally, 2015’s enrollees will include a mix of new consumers taking advantage of tax credits and younger, healthier consumers motivated by the increasing mandate tax penalty.

We have asked that insurance companies be required to submit more justification before rates are increased based on potential 2015 enrollees.

Overestimating Pharmaceutical Costs

Several insurance companies filed extremely high projections for the cost of pharmaceuticals, sometimes just for one drug. For example, Humana proposed a 19.1% increase in their projected pharmaceutical costs almost entirely based off of one new drug that cures Hepatitis C. This change in pharmaceutical costs is dramatically higher than the national growth rate in pharmaceutical costs of 3.6% from May 2013 to May 2014.

We have asked Division of Insurance to give these double-digit pharmaceutical increases careful scrutiny since they are so much higher than national trends. Additionally, CCHI has asked for insurance companies to submit justification on whether these companies have a disproportionate number of enrollees with Hepatitis C and if using these drugs to cure hepatitis C may provide future savings from avoiding hospitalization costs.

Too Many Secrets

Finally, insurance companies asked for number of factors to be confidential from the public including:

• Projections of health of their enrollees
• Geographic experience
• Membership distribution
• Rate development methodology
• Benefit and network pricing

Inadequate transparency and inconsistency in insurers’ rate filings impedes the ability of Colorado policymakers and outside stakeholders to evaluate how proposed rates were developed. This is especially true when the rate development methodology itself is marked as confidential! Greater transparency in the rate review process would help ensure consumers are not being taken advantage of and help drive competition in the health insurance market.

The Colorado Division of Insurance will continue to examine these insurance rates through the rest of the summer until they are finalized in September. It is important that 2015 rates are closely scrutinized so that consumers are not taken advantage of in this mass filing process. Affordable health insurance premiums are critical to ensuring that consumers have access to the care they need when they need it.

Matthew Valeta is a health policy analyst at the Colorado Consumer Health Initiative. One of his areas of expertise is rate review. To see more on CCHI’s rate review analysis, click here.