Ellen Andrews, Ph.D.

Connecticut’s health insurers are asking state regulators to let them increase premiums an average of 20.4%, far more than last year’s 8.6% request. Insurers in other states are asking for less than half as much. Connecticut insurers are blaming increased demand for services due to COVID backlogs, that deductibles aren’t keeping up with rising costs, and a persistent myth that Medicare’s fair prices are driving up their costs. But the evidence doesn’t support their reasons.

At the beginning of the pandemic, there were concerns that healthcare costs would skyrocket, which they did, and insurers would not be able to cover the costs. But that didn’t happen. In fact, their profits have increased steadily over the years.

Health insurer profit chart
Credit: Contributed / US Health Insurance Industry Analysis Report, NAIC

Insurers did very well during the pandemic. They were so profitable that they were required, under the ACA, to return money to consumers and employers. Because of the lockdown, many Americans went without or delayed non-emergency medical care, which lowered insurer’s costs. The federal government also poured money into the healthcare system that also lowered insurers’ costs. In 2021, Connecticut individual insurance was the 15th most profitable among states, well above the US average. And their profits are growing again this year.

The deductible excuse isn’t persuasive either. Deductibles are medical costs that patients must pay from the beginning of the year before health insurance starts paying bills. In 2020, deductibles for Connecticut individual and family plans were $1,976 and $3,520, respectively. Nationally, deductibles have grown much faster than premiums.

One insurer, Oxford, is citing a persistent myth to explain its rate request. The insurer is blaming the reasonable rates that Medicare pays providers for the higher rates they pay. Oxford’s summary claims, “Reimbursements from the Center for Medicare and Medicaid Services (CMS) to hospitals do not generally cover all the cost of care. The cost difference is being shifted to private health plans. Hospitals typically make up this reimbursement shortfall by charging private health plans more.”

Medicare rates are set by an army of independent auditors to cover the reasonable costs of providing medical care. They are high enough that 84% of Connecticut physicians accept new Medicare patients. Oxford is right that Connecticut insurers pay hospitals more than double Medicare’s rates, but multiple studies have found no evidence that this raises commercial prices. The truth is that big health systems, like most businesses, charge whatever they can, regardless of what others are paying them. When Medicare or Medicaid rates rise, hospitals don’t lower prices for private insurers – they just spend the money. In fact, two studies found that when Medicare hospital rates decreased, prices for private insurers also decreased. Hospitals became more efficient, and the benefits were shared across the market.

There is a consensus among experts that private insurers’ hospital prices are high because of consolidation. As they grow into monopolies, large health systems can demand higher prices for their services, without any improvement in the quality of care. Two lawsuits have been filed against Hartford Healthcare for anti-competitive conduct, which drives up healthcare costs across the state. Last session, the legislature considered a bill to counter the impact of consolidations on prices. The bill passed the Insurance Committee unanimously and the Senate by a 29 to 4 vote. But it died on the House calendar.

Connecticut insurers can’t keep passing on higher costs to consumers and employers – we can’t afford any more. Insurers must negotiate better prices for medical services, based on the cost of care. Payers in other states are using Medicare prices as a benchmark for negotiations rather than starting with extreme list prices hospitals choose. And it’s working. Those plans are reportedly saving 20 to 30% for consumers and employers. There is a better way. The state should reject extreme rate requests from insurers.

More from Ellen Andrews

Ellen Andrews, Ph.D., is the executive director of the CT Health Policy Project. Follow her on Twitter@CTHealthNotes.

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