Courtesy of CT-N
Eric Galvin, ConnectiCare’s Chief Financial Officer (Courtesy of CT-N)

A day before a public hearing on its requested off-exchange rate increase, ConnectiCare nearly doubled its original request for a rate hike from 24.3 percent to 42.7 percent.

ConnectiCare’s off-exchange plans cover 37,142 individuals. The insurer also revised its proposed 14.3 percent rate increase for on-exchange plans to an average increase of 17 percent on June 15. Those plans cover 47,597 people.

Lynne Ide, director of program and policy at the Universal Health Care Foundation of Connecticut, said the last-minute rate revision came as a total surprise to those who attended the public hearing Thursday.

Submitting a revised rate request of 42.7 percent a day before a public hearing “does not build trust in consumers,” Ide said.

Ide said the conversation between ConnectiCare executives and insurance regulators following the public portion of the hearing was “highly technical in nature,” but it was obvious from body language that regulators were very concerned about the reason for the steep increase. She said they repeatedly asked for information about how ConnectiCare arrived at its numbers.

ConnectiCare executives told insurance regulators Thursday that the demand for medical services hasn’t slowed in the third year of the Affordable Care Act. It was initially thought that the pent-up demand for services by individuals unable to obtain insurance before the ACA would subside by 2017, but both ConnectiCare and Anthem executives told the Insurance Department that it’s not been their experience.

The population is sicker than it was before, Eric Galvin, chief financial officer for ConnectiCare, said.

In the first quarter of 2016, inpatient admissions for cancer doubled when compared with the same time period in 2015, Galvin said.

Services for acute kidney failure and progression to end state renal disease are also increasing and primary care and specialist visits have increased by over 17 percent with the frequency of radiology and imaging services increasing by 40 percent. Also the number of newborn ICU cases has doubled this year and the severity of cases measured by the length of stay in the NICU has doubled as well, Galvin said. It’s gone from eight days in 2015 to 25 days in 2016.

There’s also the expiration of the federal reinsurance program that they said will impact rates.

Since the inception of the ACA, the federal government provided funds to insurers from 2014 to 2016 to offset costs from the expected high-cost claims for the newly insured — the individuals who did not have health insurance before the ACA and were expected to need more medical services. The federal reinsurance program was established to help stabilize premiums in the first three coverage years of the ACA.

Then there’s the federal government’s risk adjustment program, which requires health insurers to pay other health insurers in the same market place for insuring individuals with higher health care costs.

Galvin said it’s off-exchange plan, which it calls Solo, has been “battered in recent years by healthcare utilization and a federal risk adjustment program under the Affordable Care Act, which has caused us to pay tens of millions of dollars to our biggest competitors.”

The federal risk adjustment program has further exacerbated the problems for the insurer, according to Galvin.

He said the program is flawed and works to the detriment of companies like ConnectiCare, which is a Connecticut-based insurance company.

Galvin isn’t the first to criticize the federal risk adjustment program. It’s a hot topic of debate nationally. The program rates a carrier’s population and requires companies in the same market with a healthier population to pay those with a sicker population. Galvin said the program doesn’t account for changes to a carrier’s population.

Under the risk adjustment program, Galvin said ConnectiCare paid its competitors $11 million in 2014, $26 million in 2015 and an estimated $35 million to $40 million in 2016. 

As far as the need to nearly double its requested rate increase for off-exchange plans, he said their off-exchange members are utilizing their health insurance in a rate “far in excess of anything we could have predicted or which we have seen in our careers in healthcare.”

Galvin said medical studies predicted that utilization would spike in the early years of the ACA, but “rather than stabilize, that cost has continued to skyrocket and we see no end to that higher level of spending.”

Galvin said the company’s ability to accurately set rates has also been hindered by an ever-increasing deadline to submit rates for the following year. He said they are required to submit rates in May for plans that will be offered on the market the following year.

He said the sharp increase in utilization in 2015 could not be predicted when ConnectiCare applied in May 2014 and the same thing happened the following year. He said the rates for 2015 and for 2016 for the off-exchange product were “inadequate to cover the costs of the healthcare services obtained by our members.”

Galvin said the situation cannot continue.

“We simply cannot sustain a situation where we have premium rates that do not adequately reflect the rising costs of caring for our members,” Galvin said.

The Insurance Department regulators will have the final say in September when they determine whether the rate requests submitted by the insurance companies are adequate and not excessive or discriminatory.

Regulators are not able to consider the affordability of the plans as part of their calculation.