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| HEALTH INSURANCE RATES and the RATE REVIEW PROCESS |
Carrier: An insurer, Health Maintenance Organizations (HMO), dental plan organization, or nonprofit health service plan.
Health Benefit Plan (HBP): A contract stipulating benefits for medical care offered by a carrier to an individual, group, or Association. This does not include excepted benefits such as accident-only, disability income, worker’s compensation, automobile medical payment insurance, credit-only insurance, long term care (LTC), specified disease, hospital indemnity, fixed indemnity, Medicare Supplement, liability supplement insurance, on-site medical clinics, and limited scope dental or vision.
Claims Costs: The amount a carrier pays for health care services and goods, such as physician services, hospital fees, durable medical equipment (DME), dental, vision, and prescription drugs, on behalf of policyholders. This amount does not include any deductible or copayment paid by the policyholders.
Operating Costs: The non-claims costs incurred by a carrier such as administrative expenses, taxes, fees and assessments (federal and state), and payments to brokers. The costs of administering a health plan can include overhead (e.g., rent, salaries), computer systems, provider network maintenance, and fraud detection.
Profit/Contribution to Reserve: The remaining money after all claims and operating costs have been paid in a given year, before investment income. These funds go into surplus to protect against future volatility in business operations, and for purposes such as investing in infrastructure to improve customer service, or marketing. Surplus sufficiency is measured by a statistic called a “Risk-Based Capital” (RBC) ratio. (“Contribution to Reserve” is the term used for nonprofits.)
Risk Adjustment (RA): Federal program under the Affordable Care Act (ACA) to compensate carriers who enroll relatively sicker members and vice versa. It seeks to “equalize/level the field” by transferring money from insurers with healthy members and low claims costs to those with relatively unhealthy members and high claims costs.
Morbidity: A measure of the relative health of a population.
Claims Trend: Annual increase in “cost per service” (intensity) and “utilization/services per member” (frequency).
Reinsurance (RI): A financial program whereby someone other than the carrier pays a portion of the claims costs in a given year.
Insured Cost-Sharing: The portion of the claims cost paid by the member before the carrier starts to pay. It includes deductibles, copayments, and coinsurance amounts up to the out-of-pocket maximum.
Medical Loss Ratio (MLR): The percentage of the premiums that go toward claims cost (e.g., 80.0%).
Cost-Sharing Reductions (CSR): Reduced insured cost-sharing plans offered under the ACA in the “Individual Non-Medigap” (INM) market for Silver plans On-Exchange only, which are available to those earning between 100% and 250% of the Federal Poverty Level (FPL) in three tranches of “actuarial value” (AV) of 73%, 87%, and 94%.
Billed Charges: The cost of a medical service from a hospital or physician without discounts negotiated by carriers.
Allowed Amount: The cost of a medical service from a hospital or physician with discounts negotiated by carriers. (Discounts can be substantial (e.g., as much as -50%)).
Paid Amount: The portion of the allowed amount paid by the carrier after insured cost-sharing.
Actuarial Value (AV): The ratio of the paid amount to the allowed amount. Said another way, this is a measure of the richness of the benefit plan. It is the portion or percentage of the health care bill paid by the carrier after insured cost-sharing.
Metal Level: An ACA categorization of benefit plans based on AV or benefit richness. The least rich is Bronze (central AV = 0.60), the most rich is Platinum (central AV = 0.90), and in between are Silver (central AV = 0.70), and Gold (central AV = 0.80).
Individual Mandate: A federal requirement that individuals obtain qualifying health insurance coverage or pay a penalty.
Health Insurer Fee (HIF): A charge to health insurers (including HMOs) based on each insurer’s share of the taxable health insurance premium base (among all health insurers of U.S. Health Risks) to fund the ACA. Carriers estimate that this fee will amount to about 3% of premium in 2020.
RX Manufacturer Rebates: Dollars given back to insurers or pharmacy benefit managers (PBMs) from pharmaceutical companies in return for prescribing certain drugs.
First-Dollar Coverage: Benefits such that a member does not pay a deductible. However, copays or coinsurances may apply.
The MIA reviews rates for:
•Individual Medicare Supplement (a.k.a., Medigap),
•Individual Non-Medigap health benefit plans (grandfathered and ACA),
•Small Group health benefit plans (50 or fewer employees (grandfathered and ACA)),
•Large Group health benefit plans (51 or more employees) that are not self-insured,
•Long Term Care (LTC),
•And other types of health insurance, including Stop Loss, Accident, Disability Income, Specified Disease or Illness (e.g., cancer, critical illness, organ transplant, complications of cosmetic surgery), Hospital Indemnity, Fixed Indemnity, dental (non-ACA and ACA), vision, Student (ACA), and Short-Term Limited Duration Health Insurance (STLDHI).
The MIA can serve in a consultative capacity to the “Maryland Department of Health” (MDH) for Medicaid rate-setting.
The MIA does not review rates for:
•Employer plans that are self-insured (including “Third Party Administrators” (TPA)),
•Federal plans such as Medicare (e.g., Medicare Advantage, Medicare Part D),
TRICARE (formerly “Civilian Health and Medical Program of the Uniformed Services” (CHAMPUS)),
•Programs for federal employees (e.g., Federal Employee Health Benefit Program (FEHBP) and Federal Employee Dental and Vision Insurance Program (FEDVIP)),
•Federal LTC, and
•Some plans issued in other states.
(“Property and Casualty” coverages are handled in a separate department of the MIA.)
Carriers use data to predict how much they need to charge to pay claims and operating costs, including profit. Carriers project future claims and operating costs, both in the aggregate and for stratifications rooted in past actual experience. Stratifications may mean benefit plan, age band, or region. Some of the key assumptions include claims trend, risk adjustment, whether the pool of insureds is getting older or sicker overall, legal changes such as the end of the individual mandate), profit need, how much insureds pay in cost-sharing (deductibles, coinsurance), state and federally-based programs (such as reinsurance) and drug manufacturer rebates.
Carriers analyze past actual experience by types of services, and which services are being used more or less often. Some categorizations of services include inpatient hospital, outpatient hospital, professional, other medical (e.g., home health, prosthetics), capitations, and prescription drug. The “Health Service Cost Review Commission” (HSCRC) sets hospital budget constraints in June, and carriers use this in their estimates. Carriers develop models of member behavior (for example, do wellness programs or cost sharing affect how many health care services members receive). Changes in mix of services and/or places of services (e.g., hospital setting versus ambulatory surgical center (ASC), doctor’s office or emergency room) can be examined. Different settings have different costs, so more services in an expensive setting can drive up costs. New technologies or drugs (e.g., biologics) are considered, as are changes in the insureds’ cost-sharing.
Rates are determined in large part by medical spending. Medical costs can change for many reasons, including increases in charges by providers per service, more use of health care services, new technologies, prescription drugs, an aging population, and unhealthy lifestyles. A health insurance company also may change its rates because it needs to increase its reserves to pay future claims. Premiums must be high enough to cover the company’s projected claims and operating costs. Changes to laws, subsidies, and risk profiles can also be factors.
Your premium will not go up solely because you have claims, just as it will not go down solely because you do not have claims. People buy insurance to protect themselves from the full financial risk of future events. Insurance is a pooling of risks. The goal is to set premiums so that there will not be big swings from year to year due to one or two very large claims. If you have an individual or small group policy, your premium is based on the claims of everyone with your type of policy. If you have coverage under a large employer health plan, your premium will be based in part on the claims of everyone in your group. Insurers can predict the type of claims they are likely to pay, and set premiums so that the costs are spread out across the pool.
If you buy your own health insurance your specific change can be unique due to your 1) age (aging one year has differing impacts), 2) selected benefit plan, 3) family composition change, or 4) location/residence change. Your insurance producer can help to find out the exact cause. You are more likely to file claims as you get older. If you pay less in deductibles and copayments, you will probably pay more in premium. Some areas of the State have higher costs than other areas.
If you have coverage through your employer, your premium includes both the amount you pay and the amount your employer pays. If your employer pays less, it may seem like a premium increase even if the actual premium is the same. You may also pay a different amount if you select a new benefit plan, add or remove family members, or move. (Rates for the whole group may change dramatically for groups if the average age changes significantly.) Your human resources benefits office should be able to assist.
Generally, not more than once every 12 months. However, carriers are permitted to raise or lower premiums more frequently than once every 12 months if the change is only because you added or removed family members from the policy. For non-ACA products and excepted benefits, premiums may also change during the plan year if benefits change or optional riders are added or removed. Also, in the “Individual non-Medigap” (INM) ACA market, rates change every January 1st. Therefore, if someone purchases a policy after January 1st in a given year their rate can change on the next January 1st in less than 12 months just for the first renewal.
In most cases, carriers only need to submit a rate filing if they are requesting a change in rates. However, companies must submit rate filings for Medicare Supplement plans annually even if they are not requesting a change in rates. In addition, carriers must submit a certification each year for small group policies, confirming that the rates charged during the past year complied with the law.
Yes. MD law requires carriers to file rates and have them approved by the MIA before implementation.
The “Office of the Chief Actuary” (OCA) scrutinizes all filings under their purview prior to implementation. Actuaries are insurance professionals trained to analyze risks and develop premium rates. Credentials are earned from the “Society of Actuaries” (SOA) and “American Academy of Actuaries” (AAA) through extensive study, testing, practical experience, and training. Continuing education requirements must be fulfilled annually for credentialed actuaries.
Carriers must demonstrate that requested rates comply with MD law. Specifically, per § 11-603(c)(2) of the Insurance Article, Annotated Code of Maryland, rates must be reasonable in relation to benefits, not excessive, not inadequate, and not unfairly discriminatory. An excessive rate reduces access and affordability. An inadequate rate means the company may not be able to pay claims in the long run. A rate is unfairly discriminatory if, for example, it is not applied consistently to members of the same demographic or benefit rating profile.
Federal and state minimum loss ratios must be projected to be met. Under the ACA, if the actual loss ratio falls below 80.0% for the INM, Small Group (SG), or Student ACA markets and 85.0% for Large Groups (fully insured), rebate checks must be issued by the carrier to the contract holder or employer. All of the assumptions outlined in #s 2 and 3 above are tested and examined in detail by the OCA. “Net income” and “gains/losses from operations” from financial statements provide context.
Models/standards put forward by the “National Association of Insurance Commissioners” (NAIC) are reviewed and sometime adopted by the MIA for rate review. If the carrier delayed in correcting rating missteps, that may reduce a requested rate increase. If a carrier is partly to blame for incorrect assumptions, that can also reduce a requested rate increase. Oftentimes carriers take the prior two actions on their own. The MIA considers the history of rate changes, the carriers’ financial strength, the absolute level of the rate versus competitors in the market, and the comparison of renewal rates to new business rates,. If rates need to go up, the MIA considers how quickly the rates can rise. Sometime the rise is gradual and spread over multiple years. Mathematical computations are checked for accuracy. Each year new market dynamics lead to new information being requested by the MIA (e.g., for 2019 rates the “Tax Cuts and Jobs Act” (TCJA)). For small sample sizes, the credibility of the data is measured.
No. A rate request will be modified if it is not proven to be fully justified and/or sufficiently supported. A rate request will be withdrawn if the carrier does not respond. A rate request will be denied if it is not proven to be needed. In some cases a carrier is asked to withdraw a filing if it affects a small number of Marylanders (e.g., < 10) where a rate approval would have little impact to the carrier but a big impact to the member.
Yes. The MIA reviews the rates for each health insurance product. If the rates for some products are not supported the requested rates for those products are not approved.
The carrier has the right to request a hearing.
Yes. MD law requires carriers to provide an annual notice to their policyholders, and to post a notice on their websites, explaining that policyholders may find proposed ACA rate changes on the MIA’s website. Depending on the market, notice of a rate increase must be received 30 to 60 days prior to the effective date. LTC carriers are also required to provide the form number annually to enable identification of rate filings and hearings that pertain specifically to each LTC member.
Yes, public comments are an important part of the process. In the past excerpts have been shared at MIA hearings, with the press, with carriers, and with legislators in Annapolis. ACA INM and SG rate filings are open to public comment. When a carrier submits a rate change request consumers can read the company’s justification for the request and submit comments on the MIA’s website for at least 30 days from the date the request is posted on its website.
A rate hearing is required prior to approval of any LTC filing. LTC hearings have been held quarterly since 2015. ACA filings have had 1-2 hearings per year since inception for rates effective since 2014.
The MIA has 60 days to reply to a filing. Carriers are given approximately 10 business days to respond to each data request but they can request extensions. From submission to approval the range is 10 days to multiple months. ACA filings usually take ~four months. LTC filings can take more than four months.
The Federal government can waive certain requirements when a State asks for a waiver. In 2018, Maryland applied for a waiver to ask for a reinsurance program that could help lower premium rates.
On 08/22/18, the “Centers for Medicare & Medicaid Services” (CMS) approved Maryland’s request to deviate from federally-prescribed rating practices for the ACA and to allow a state-based reinsurance program (SBRP) to be effective for 2019. MD became the 7th state to implement a SBRP. The 2020 rates submitted by the carriers for the INM market include the estimated impacts from the SBRP. As was done last year, when rates are approved an illustrative mirror filing will also be provided by the insurers without the SBRP as required by CMS. This will isolate and quantify the rate impact of the SBRP. For 2019 the overall rate impact of the SBRP was -30% ranging from 45% to -27% by legal entity.
On 03/01/19, insurers submitted benefit plan portfolios. Twenty benefit plans have been filed On-Exchange versus last year’s seventeen. An area of close examination has been the impact on the benchmark “second lowest cost Silver plan” (SLCSP). The difference between the SLCSP premium and the IRS-defined maximum amount that those earning under 400% of the Federal Poverty Limit (or $49,960 for an individual in 2019) will pay is the “Advance Premium Tax Credit” (APTC) or subsidy. Based on what’s been filed, despite the average rate decrease, preliminary estimates indicate that subsidies could still increase in both rural regions where only CareFirst(CF) is available and regions where both CF and Kaiser (KP) are available by +10% and +4%, respectively, for those earning 150% of FPL ($18,735 for an individual).
“Value” plans have been added with more first-dollar coverages, preventive services, and less insured cost-sharing. Detail is available at the link below.
Tax credits are based on the premiums for On-Exchange Silver Plans. The federal government stopped funding “cost-sharing reductions” (CSRs) effective in 2018. Carriers raised their premium to replace the federal payments. MD chose to have carriers apply this new cost only to Silver-On Exchange rates resulting in a maximization of subsidies. For Silver plans, similar to last year, On-Exchange rates are 9%-19% higher than Off-Exchange rates.
The On and Off-Exchange Silver plans cover the exact same Essential Health Benefits (EHBs) with identical cost-sharing on those EHBs. EHBs represent more than 99% of claims. The Off-Exchange plans lack coverage for certain non-EHBs, but may cost less and be a good value for people who do not qualify for subsidies. To reiterate, subsidies are only available On-Exchange. Those subsidies may still enable a lower final premium for a Silver plan. The subsidy could make a Bronze plan available for free or a richer Gold plan at a good overall value.
When the federal government announced another moratorium for 2019 of the ACA “health insurer fee” (HIF), MD enacted legislation to redirect it to fund a RI program since it was already in rates. This generated ~$365M. For 2019 claims will be reinsured above $20,000 up to $250,000 with 80% coinsurance in between; the richest RI program in the country. By using the $365M to reduce rates the federal government’s MD subsidy payments go down. The Feds “pass through” this savings to MD, estimated over three years at $779M so that the total program size becomes $1.144B, leveraging the $365M. The ACA INM premium impact for the years 2019, 2020, and 2021 has been estimated at -30%, 30%, and -14%, respectively. However, during the 2019 Annapolis Session, SB 239 and HB 258 passed both chambers to add 1.0% annually through 2023 to augment the $365M.
The actuarial support for INM and SG ACA rate filings submitted by carriers can be found at the first link below. Public access is available shortly after submission and public comments may be entered and viewed. At this site you will find “frequently asked questions” (FAQs), filed rates, the actuarial memorandum(a.k.a., Part III), a written description of the filing (a.k.a., Part II), the“Unified Rate Review Template” (URRT), the press release, and notices about up coming hearings. The national system that houses rate filings is called the“System for Electronic Rate and Form Filing” (SERFF). Upon approval, the final support can be viewed along with correspondence between the MIA and the carriers along with a “decision document” outlining key reasons for the approval rendered for filings for all markets. An archive of past approvals is here. Carriers can redact certain portions of the actuarial support. If they do, the public can still submit a “Public Information Act” (PIA) request to seethe unredacted version for the Commissioner’s consideration. Rate guides for Medigap are also available. Below are some links outlining available resources.
OCA web-site for data and public comments…
http://167.102.241.84/
SERFF…
https://filingaccess.serff.com/sfa/home/MD
PIA…
https://insurance.maryland.gov/Pages/public-information-act-requests.aspx
Rate review process…
https://insurance.maryland.gov/Consumer/Pages/HealthInsuranceRateReviewProcess.aspx
LTC for data and public comments…
https://insurance.maryland.gov/Consumer/pages/LongTermCare.aspx
Medigap rate guide…
https://insurance.maryland.gov/Consumer/Documents/publications/Medicare-Supplement-Rate-Guide.pdf
Consumer Education and Advocacy rates FAQs brochure...
https://insurance.maryland.gov/Consumer/Documents/publicnew/faqs-health-insurance-rate-review.pdf
"Maryland Health Benefit Exchange" (MHBE) information on "Value Plans," page 15...
https://www.maryland.com/wp-content/uploads/2019/02/Fianl-2020-Letter-to-Issuers-Seeking-to-Participate-in-Maryland-Health-Connection.pdf
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