Maryland officials have set next year’s premium rates for individual and small-group market health insurance plans, but 2016 will also bring rate changes for hundreds of large employers, officials said.
That’s because the threshold for small-group coverage will change from having 50 or fewer employees to having 100 or fewer employees due to a provision of the Affordable Care Act.
A business with 75 employees, for example, will still be considered a large group in December but will become a small group – governed by a different price structure – on Jan. 1, said Maryland Insurance Commissioner Al Redmer Jr.
The change will impact 1,556 employers, some of whom could end up paying more for their coverage when they move to the small-group market and some of whom could pay less, according to the Maryland Insurance Administration.
While the administration sets a baseline rate for large-group insurance plans, the employers and carriers then negotiate the actual cost of each plan, based in part on the overall health of the group. A business with generally healthy employees who require little medical care will enjoy favorable pricing. But a business of the same size with a less healthy pool of employees that has incurred higher costs will face steeper premiums, Redmer said.
But moving these businesses to the small-group market will effectively level the playing field; there won’t be any difference in cost based on the health of the group.
This means a healthy group could end up paying more when it moves to the small-group market, but a less healthy group that has incurred higher premiums in the past could end up paying less, Redmer said.
The 2016 small-group and individual premium rate changes are an attempt to reduce an imbalance between the individual and small-group markets, officials said. The new rates, announced Friday, include substantial average increases for individual plans offered by CareFirst, the state’s largest insurer, but reductions for small-group plans offered by the carrier.
For decades, plans purchased on the small-group market have guaranteed coverage to consumers regardless of their current health or preexisting conditions, driving up premiums relative to individual market plans, which could deny coverage based on pre-existing conditions.
Once the Affordable Care Act guaranteed coverage on the individual market, identical plans could be purchased on the individual market at a lower price, prompting many employers to drop their small-group plans and send employees to the individual market.
CareFirst CEO Chet Burrell told reporters Friday morning that the company had a shortfall of more than $100 million in the individual market last year, and the approved increase will go a long way toward making the rates adequate, Burrell said. If the increased premiums don’t end up covering the cost of care, the company will seek another increase next year, he said.
Burrell said the company wished it didn’t need to ask for an increase at all.
“The rates in the past, up until now, have not adequately covered the costs,” Burrell said. “The challenge is simply to cover the cost. We’re not looking to make a profit on it.”
Eleven carriers will be selling insurance on the small-group market in 2016, while eight will sell on the individual market.
The approved average rate changes for the individual market are:
- a 19.8 increase for CareFirst’s HMO plans and a 26 percent increase for its PPO plans; the company requested increases of 26.7 percent and 30.4 percent, respectively
- a 3.2 percent reduction for All Savers Insurance, the same as was requested by the company
- a 3.3 percent reduction for Cigna Health and Life Insurance; the company requested a 2.9 percent reduction
- a 9.5 percent increase for Evergreen Health Care; the company requested a 9.7 percent increase
- a 10 percent increase for Kaiser Foundation Health Plan of the Mid-Atlantic States; the company requested a 4.8 percent increase.
- a 0.5 percent increase for UnitedHealthCare of the Mid-Atlantic Inc., the same as was requested by the company.
The approved average rate changes for the small-group insurance market are:
- a 3.2 percent reduction for CareFirst HMO plans and a 16.9 percent reduction for CareFirst PPO plans; the company requested reductions of 3.1 percent and 16.6 percent, respectively
- a 5.3 percent increase for Aetna Health Inc; the company requested a 6.4 percent increase
- a 7.5 percent increase for Aetna Life Insurance Co.; the company requested an 8.5 percent increase
- an 8.9 percent increase for Evergreen Health Cooperative; the company requested a 14.8 percent increase
- a 5.5 percent increase for Kaiser Foundation Health Plan of the Mid-Atlantic Inc., the same as was requested by the company
- a 2.9 percent reduction for Optimum Choice; the company requested a 0.4 percent reduction
- a 1.7 percent increase for three United HealthCare providers: MAMSI Life and Health Insurance Co., UnitedHealthCare of the Mid-Atlantic and UnitedHealthcare Insurance Co.; the companies requested a 4.3 percent increase.