Recently, Connecticut health insurers submitted their 2023 small-group and individual premium rates to the Connecticut Department of Insurance (DOI) for review and approval. DOI has scheduled a public hearing on the rates to allow policymakers and policyholders to weigh-in.
Unlike many states across the country which don’t require rate approval, the Connecticut DOI is responsible for assuring that rates accurately reflect the associated costs of providing coverage. As an added measure of protection, the Affordable Care Act specifies strict standards on the amount of premium that must be spent on medical care. If carriers don’t meet those thresholds, they are required by law to rebate the associated dollars to their consumers.
Cost of care is a major challenge for individuals, families, employers, employees, taxpayers, and insurers alike. Health care costs in Connecticut are among the highest in the country. When hospital, provider, and pharmaceutical prices rise so too do premiums. In 2019, CT insurers processed over eight million claims totaling over $4.8b in payments to hospitals, doctors, pharmacies, clinics, urgent care centers, labs, radiology, and ambulance companies among others.
As state regulators exercise their due diligence, it is important to understand the factors that contribute to premium growth including the push-pull between the cost of coverage and the increased demand for new and existing products and services as well as the pressure to increase provider reimbursement rates – the two latter points having a direct and corresponding impact on the former. For example:
Prescription drug costs: Drug companies started the year by increasing the prices on nearly 800 brand-name drugs by an average of 5%, with some raising their prices by double digits for critical therapies that treat cancer, multiple sclerosis, hypertension and attention deficit hyperactivity disorder.
National studies project that drug prices will rise considerably in 2023 and 2024. State laws recently enacted restricting the ability of health plans to contain pharmaceutical prices by encouraging consumers to use the most appropriate drug at the lowest cost will undoubtedly exacerbate the challenge bearing out in trend experience even if not immediately identifiable as a factor.
Provider costs: National data forecasts spending on hospital, physician and clinical services will accelerate, contributing to higher costs. Further consolidations among hospitals and physician practices that enable providers to leverage increased reimbursements contribute to the higher prices for consumers and employers. Studies have shown that consolidation does little to improve the quality of care for patients or restrain the growth in prices for provider services, but it does add appreciably to premium rates.
Covid-19: Care deferred in the first half of 2020 has largely resumed, resulting in more complex and more costly treatment. At the same time, services related to Covid-19 treatment, testing and vaccination are expected to continue.
Mandated benefits: Connecticut requires coverage for more than sixty-four specific treatments or services, including some that go beyond evidence-based guidelines recommended by major national health organizations. While the cost of some mandated benefits in isolation may be relatively small, their collective impact drives up the cost of insurance coverage for every person in CT.
Taxes and Assessments: Assessments and taxes continue to be a major driver in the overall cost of insurance. 2021 data acquired from the health carriers shows that fully-insured plans incur $359.6m in assessments, taxes, and fees annually; self-insured plans incur $74m annually resulting in a per member cost in the fully-insured market of $591 annually, and per-member cost in the self-insured market of $54 annually. Assessments are used to pay for many important initiatives in Connecticut like operations for the Health Insurance Exchange ($32m); programs under the Department of Public Health ($11.8m); and the purchase of vaccines ($71m). The question is whether it would be more appropriate to fund these programs via the general fund versus a surcharge on policies.
Loss of Federal Funding/Premium Tax Credit for Exchange members: The American Rescue Plan Act included temporary federal subsidies to assist low and moderate-income individuals with their premiums. Without an extension of the program by Congress, funding will expire this year.
Every person in Connecticut deserves access to high-quality, affordable care and coverage, but health insurance is expensive because health care is expensive. Affordability is the most pressing health care issue for employers and consumers, and policymakers should take steps to address Connecticut’s high health care costs. These steps should include addressing exorbitant drug prices, ensuring provider consolidations benefit employers and consumers, and reducing taxes on health insurance.
Rate review is not a silver-bullet, and nor does it solve for many of the underlying issues driving health care costs. It is a critical regulatory function and one which is intended to ensure that the premium rates the state approves for 2023 fully reflect the factors contributing to the growth in health care costs.
Public Option advocates often put up the Comptroller’s state-run “Partnership Plan” as an alternative approach to coverage. But, the Partnership Plan increased rates this year by 10% even after a $40m taxpayer bail-out of federal COVID funds. Some believe the Plan is still underfunded and will require another deficiency payment in 2023 just to remain solvent. Time will tell.
Solving the problem of rising health insurance premiums requires a willingness to address the underlying cost drivers. The Office of Health Strategy (OHS) is doing just that in response to legislation passed by the General Assembly initiated under a former executive order by the Governor. Policymakers need to give that process, which has been in motion for some time, a chance to succeed. Systemic problems require systemic solutions and not a singular focus on only one entity in the pipeline. In the meantime, we trust that the Department of Insurance will undertake its rate responsibilities with judiciousness and prudence.