Tennessee's biggest health insurer proposes hefty rate increase

Tennessee's biggest health insurer proposes hefty rate increase

May 31st, 2015 by Dave Flessner in Local Regional News

Aerial photo of BlueCross BlueShield of Tennessee headquarters in Chattanooga.

Aerial photo of BlueCross BlueShield of Tennessee headquarters...

Photo by Dan Henry /Times Free Press.

After losing $141 million in the first year of offering individual health plans through the federal Affordable Care Act, Tennessee's biggest health insurer wants to raise premiums next year by an average of more than 36 percent.

BlueCross BlueShield of Tennessee, which enrolled nearly two-thirds of the 231,00 Tennesseans who signed up for health insurance exchange plans last year, said it initially underestimated the number and cost of the medical claims filed by new enrollees.

When the plans debuted last year, BCBS' popular Silver option was among the cheapest plans anywhere in the country.

BlueCross Vice President Roy Vaughn said the nonprofit insurer's mission was to serve the entire state as affordably as possible under the ACA, or Obamacare.

Tax penalties if you aren't insured

If you can afford health insurance but choose not to buy it, you must have a health coverage exemption or pay a fee.

* In 2014, the fee was $95 per person (maximum $285 per family) or 1 percent of household income, whichever is greater

* In 2015, the fee is $325 per person (maximum $975 per family) or 2 percent of household income, whichever is greater

* In 2016, the fee will be $695 per person, or 2.5 percent of household income, whichever is greater

Source: U.S. Department of Health and Human Services, www.healthcare.gov. In future years, fee will increase with inflation.

2016 requested rate increases

For individual health insurance plans offered in Tennessee:

* BlueCross BlueShield of Tennessee: 36.3 percent average increase, ranging from 19.5 percent to 59.5 percent for different plans

* Community Health Alliance: 32.6 percent average increase, ranging from 16.2 percent to 65.2 percent for different plans

* Humana: 15.8 percent average increase, ranging from 4.3 percent to 21.2 percent for different plans

* Cigna: 0.4 percent average increase, ranging from a 14.5 percent rate cut to an increase of 30 percent for different plans

Source: Tennessee Department of Commerce and Insurance. Assurant Health, which operates as Time Insurance Co. in Tennessee, is closing its individual health insurance business while United Healthcare, the country's biggest health insurer, plans to offer health exchange plans in Tennessee next year.

"It was a new market, and as we filed our initial rates for 2014 we had no data on the population that we would cover. We did not foresee the kind of medical costs that we've experienced with this group of members," Vaughn said.

Under Obamacare, insurers may no longer deny coverage or charge people more if they have pre-existing medical conditions. In the first couple of years of the health exchange plans, BlueCross said 3 percent of its individual plan members accounted for 50 percent of its medical costs -- a far bigger share than what had been forecast.

If state regulators approve the proposed rate hikes, average individual rates would rise to more than 60 percent above their 2014 levels. Last year, BlueCross raised its individual plan rates by an average of nearly 19 percent.

Most of the other insurers offering individual plans in Tennessee also are asking for double-digit rate increases in 2016, even though trends in medical costs and employer plan premiums are not rising as fast as in previous years. Tennessee's health insurance co-op plan, the Knoxville-based Community Health Alliance, is seeking a nearly 33 percent rate increase, while Humana is asking for a 16 percent increase.

Some insurers in other states are asking for similar or even bigger premium increases for individual plans next year: 51.6 percent for Health Care Service Corp. in New Mexico and 30.4 percent for CareFirst BlueCross BlueShield in Maryland.

Walter Davis, executive director of the Tennessee Health Care Campaign, which supports Obamacare, urged state regulators to take a hard look at the proposed rate increases to make sure they are justified.

"The number of Tennesseans who are uninsured is going down and more people are getting preventive care, rather than going to more expensive emergency rooms when they get sick," he said. "That should help hold down costs and ultimately benefit everyone. But it may take some time since some of those getting coverage for the first time may be catching up for a lack of care in the past."

Many low- and moderate-income workers receive federal subsidies to help them pay for their plans. BlueCross said 80 percent of the members who signed up for its marketplace plans received some federal premium assistance, based on income and family size.

The U.S. Supreme Court is expected to rule in June on the validity of subsidies in states that don't operate their own marketplace exchanges. The filings from insurers for next year's premium increases assume those subsidies remain in place.

The marketplace sells five levels of insurance: bronze, silver, gold, platinum and catastrophic. The insurers' proposed rate increases vary, but nearly all are increasing far faster than inflation or the increases that employer plans are seeing.

Kevin Walters, communications director for the Tennessee Department of Commerce and Insurance, said state regulators "will examine everything these health insurers give to us" before making a decision by the Aug. 25 deadline.

"This is something we take very seriously for the consumers of Tennessee and we plan on scrutinizing each of these proposals," he said.

Tennessee Insurance Commissioner Julie Mix McPeak told The Wall Street Journal she would be "surprised if we settled on 36.3 percent" being sought by BlueCross, although she said a significant increase may be allowed.

The initial insurance exchange rates in Tennessee averaged less than the U.S. average. BlueCross' Silver plan costs $203 a month in Tennessee. That's the fourth-lowest rate for such plans in the nation, according to the Kaiser Health Foundation.

But Tennessee's population is less healthy and more prone to drug abuse than most of the country. Tennessee ranks among the worst states for rates of diabetes, obesity, physical inactivity and smoking, and is among the highest for prescription drug use.

Still, premium increases for employer group plans, whose rates are not subject to state regulation, have been far more restrained, said Rob Huffaker, senior director of employee benefits at BB&T Huffaker Insurance.

"I also think as the penalties for not signing up for insurance get bigger over time, you're going to see a bigger share of employees sign up for employer plans, and that could help spread the costs and risks in many group plans to further restrain the growth in premiums," Huffaker said.

But so far, Obamacare's plan to reduce premiums for employers or private-paying individuals by broadening the number of insured Americans hasn't been as effective as hoped.

Russ Blakely, one of Chattanooga's biggest health insurance brokers, said higher taxes on insurance companies and the entry of many more unhealthy persons into insurance plans have pushed up overall costs since the Affordable Care Act was adopted.

"It's definitely not working as many had hoped to reduce costs, at least so far," he said.

State Sen. Bo Watson, R-Hixson, Senate speaker pro tem and vice chairman of the Senate Health and Welfare Committee, said that lack of effectiveness "means consumers must pay more money because insurance companies aren't going to continue to lose money."

"The Affordable Care Act, for all that it does, doesn't really do anything to curb insurance costs -- it just moves money around," Watson said. "And now you have a distorted marketplace where consumers have to buy the product, so there are no real market controls."

But Tennessee customers buying through the health exchanges could benefit next year when the nation's biggest health insurer, UnitedHealthcare, comes into the Volunteer State.

"UnitedHealthcare took a wait-and-see approach to Tennessee before coming into this exchange market, but their addition will be huge," said Bobby Huffaker, CEO of American Exchange, a Chattanooga-based insurance broker that sells a variety of health exchange plans offered through Obamacare.

"They will provide some real competition that we needed in Tennessee. It looks like we're going to have many more plans that are priced competitively with each other as the market shakes out."

Contact Dave Flessner at dflessner@timesfree press.com or at 757-6340.


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