Attorney General Demands Insurance Department Reject Rate Increases

HARTFORD — In a letter to Connecticut Insurance Commissioner Andrew N. Mais, Attorney General William Tong argued that double-digit rate increases sought by Anthem, Cigna and ConnectiCare are unjustified, unsupported by evidence, and must be rejected.

The proposed average individual rate request for the plan year starting January 1, 2024 is a 12.4 percent increase, compared to 20.4 percent in plan year 2023. Increases requested range from 9.8 percent to 17.5 percent. The proposed average small group rate request is a 14.8 percent increase, compared to 14.8 percent in 2023 and ranges from 7.5 percent to 23.0 percent.

While the Connecticut Insurance Department does not approve large and self-insured plans covering the majority of Connecticut residents, Tong notes in his letter that the Department’s actions in this proceeding impact the incentive structure and negotiation dynamics broadly between insurers and health care providers.

“Simply put, the decisions made here will impact the cost of health care in Connecticut for us all,” Tong states.

Pursuant to Connecticut law, in order for these rates to be approved, the Connecticut Insurance Department must determine that these requested rates are not “excessive, inadequate, or unfairly discriminatory.”

“The burden of proof falls on the insurers to justify their rates — to provide transparent, factually-supported actuarial analysis. In at least the case of Cigna’s 14.9 percent increase in the small group market, Anthem’s 9.8 percent increase in the individual group and 14.9 percent increase in the small group market, and ConnectiCare’s 17.5 percent increase in the individual market, the insurers have failed to meet that burden and their requests must be rejected. Should any increase or modification be granted, the burden is on these companies to immediately amend their submissions with factually-supported evidence before the Department takes any further action,” Tong states in his letter.

Tong goes on to provide detailed analysis and questions probing each of the four rate hike requests, identifying numerous areas where the insurers rely on unsupported assumptions, circular reasoning, and projections far in excess of national trends.

“Between 2016 and 2022, rates sought by insurers and approved by the Connecticut Insurance Department far outstripped consumer inflationary trends …These inflated costs are excessive and unjustified and unaffordable for too many Connecticut families, individuals, and businesses. When viewed though a historic lens, it seems equally clear that these rate increases are unsustainable and are a likely cause of the flight that is occurring from the fully insured market,” Tong states.

Tong’s letter shows that Cigna, Anthem, and ConnectiCare all submit rate requests based on trends well in excess of nationally-supported data, including the Milliman Medical Index used by insurers, Connecticut’s Cost Growth Benchmark, the Consumer Price Index, and even projections for Connecticut’s Employee Health Plan managed by Anthem.

Approval of high trend is a self-fulfilling prophecy: such approval reflects an expectation that providers will increase their charges in excess of inflation (even medical inflation) and providers do increase their charges because they expect the Insurance Department to approve rates that reflect such increases. If instead, the Department were to consistently approve rates that do not reflect higher reimbursement rates being charged by providers, insurers and providers would be incentivized to negotiate lower reimbursement rates.

Insurers have a great deal of leverage in negotiating with hospitals and other providers, but rather than use that leverage to aggressively drive down healthcare costs, they act as little more than pass-through mechanisms for ever-increasing provider fees.

This makes economic sense for the insurers — higher health care spending (unit cost) justifies higher premiums and thus higher revenue to insurers, even when percentage-based profit margins remain static year over year. While the Insurance Commissioner does not oversee the negotiations of these contracts, the Commissioner’s approval of rates which incorporate higher unit costs dis-incentivize effective negotiations designed to reduce the cost of care.

Tong notes that his office is exploring potential legislative reforms that would impose heightened scrutiny to any insurer applying trend data in excess of industry accepted or government-developed benchmarks. His letter addresses further issues of double-counting, high administrative costs, inappropriate use of COVID-19 as a baseline year, among other points.

“There appears to be a widespread lack of specific justifications for conclusions stated in actuarial memoranda in each of the filings. The carriers make sweeping statements about their annual trend but do not provide the data to justify their assumptions. The Insurance Department can and must thoroughly scrutinize these applications and be a voice for consumers in a system that is making health insurance less accessible every year,” Tong’s letter concludes.