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Md. insurers make case for premium increases before reinsurance

A healthcare practitioner conducts a blood pressure examination. Health care jobs were the largest growing sub-sector in Maryland in 2015, adding 10,800 jobs. (Centers for Disease Control photo)

CareFirst believes its members could pay less this year than they did last year if reinsurance goes into effect. (Centers for Disease Control photo)

Maryland’s insurance regulator Monday heard health insurance companies’ cases for raising premiums on the individual market by an average of 30 percent, but those requests could fall if a reinsurance program is approved.

Rate increases considered Monday would continue a trend over the past several years of higher insurance premiums, driving more people away from Maryland’s individual market. The reinsurance proposal aims to stabilize the market and encourage more people to stay in the market, if not entice more people to sign up for insurance.

“The estimated rate impact is minus 30 percent,” said Todd Switzer, the Maryland Insurance Administration chief actuary. “It will vary by entity.”

CareFirst BlueCross BlueShield filed to raise rates an average of 18.5 percent on its HMO products and an average 91.4 percent on its PPO products, which tend to cover a smaller, sicker population. Kaiser Permanente asked to raise its rates an average of 37.4 percent.

Under these increases, the average male 45-year-old nonsmoker would pay about $546 a month for the CareFirst HMO product, $1,344 a month for the CareFirst PPO product and $518 a month for the Kaiser product.

Switzer, using a family of four making $100,000, estimated that if that family hit their out-of-pocket maximums, its insurance expenses would be about half of their after-tax income.

But insurers, regulators and lawmakers hope the reinsurance program leads to consumers paying less in premiums.

The state has completed its reinsurance application to the federal government and is undergoing a federal hearing process. Officials hope to have approval for the program by the end of August or beginning of September.

At the moment, the insurance administration anticipates having a second hearing on Sept. 17 to account for the reinsurance program.

CareFirst believes its members could pay less this year than they did last year if reinsurance goes into effect.

“It’s not the end of the war, but it’s a good first step,” said Peter Berry, the insurer’s chief actuary.

Even before the reinsurance is implemented, CareFirst’s 18.5 percent increase request on its HMO product indicates that the market has begun to stabilize, Berry said. That is the smallest increase CareFirst has requested under the Affordable Care Act.

Beth Sammis, president of Consumer Health First, welcomed the apparent stabilization of that HMO product but pointed out that there is a ways to go toward full stabilization.

She pointed to significant increases again on the CareFirst’s PPO product, which continues to see losses. The continued increases mean that the PPO plans typically have the sickest members who cannot afford to leave the pool.

“You can have 3 percent of those members account for 50 percent of the costs,” Berry said. “You can have a lot of people leave and still have much of the costs.”

David Liebert, actuarial manager for Kaiser, said continuing increased premiums had driven people out of the market. Since those people are mostly younger and healthier, that leaves a sicker pool behind with a higher ratio of medical claims to money taken in through premiums.

The state will once again this year turn to an independent third party to participate in the rate review process. Actuarial firm Lewis & Ellis will help review the rate requests.

While the individual market was a focus of the review hearing, rate requests for the more stable small group market were also heard.

There, premium increases averaging 7 percent were requested, across four insurers. The rate increase requests across products range from 4.8 percent to 13 percent.


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