Health Plan Hearings Show A Double-Threat To Connecticut Exchange

Aug. 05--HARTFORD -- Two days of hearings on Obamacare individual health plans Wednesday and Thursday illustrated a double-threat to the Obamacare exchange in Connecticut.

The exchange could face a crisis if the Connecticut Insurance Department rejects significant rate increases this year, leading companies to exit. And it could face a crisis if the state regulators do approve the increases, if healthier customers drop their coverage.

Anthem, the largest player on the exchange with about 56,700 customers, is asking for a nearly 27 percent increase on average. Last year, it requested increases averaging 4.7 percent and was allowed 2.4 percent.

With the collapse of the nonprofit insurer HealthyCT, ConnectiCare and Anthem are the only two options for individual plans on the exchange, and customers must buy on the exchange to qualify for federal premium subsidies. About 78 percent of exchange customers receive some subsidy.

Matt McDermott, a community organizer with churches and synagogues on health care, said that such large increases as Anthem and ConnectiCare are asking for "will drive many employers, and many individuals to drop coverage altogether, and we worry that that heads us toward market failure here in Connecticut."

Alison Bliss, a real estate agent who had a Solo plan -- off the exchange -- with ConnectiCare, said she canceled her insurance in June when she heard about its 30 percent request. (It has since revised the request to 42.7 percent.) "I'd rather go without insurance and get fined by the government than get price gouged," she told the Insurance Department.

When healthier people decide to go without insurance because it's too expensive -- despite the Obamacare mandate -- the premiums must go up, driving more to drop coverage.

But if the rates don't go up substantially, companies may decide to stop selling policies. Anthem CEO Joseph Swedish said last week that if states don't grant its rate requests, the company will consider exiting Obamacare.

He said it would take these large increases -- 20 percent on average across all the 14 states where it sells plans -- to make even a 2 percent profit. Anthem expects to lose $300 million on Obamacare plans this year.

Separately, Aetna, which does not sell plans on the Connecticut exchange, said this week it will not expand its Obamacare participation nationwide in 2017, as the company had planned. It's also losing money in the exchanges.

Eric Galvin, the ConnectiCare chief financial officer, said his company "simply cannot afford" to keep individual premiums at the levels they've been, because the amount of medical care its customers consume continues to grow.

Off-exchange plans also cover tens of thousands of Connecticut residents, and some of those were the subject of the hearings. ConnectiCare covers 47,597 people on the exchange, and is asking for an average 17 percent increase for those plans. The company covers 37,142 in its off-exchange "Solo" product.

On Wednesday, ConnectiCare revised its request for that group of plans to a 42.7 percent average increase.

Galvin testified Thursday that ConnectiCare lost $7 million on Solo plans in 2014, $30.8 million in 2015 and projects it will lose $60.2 million this year. He said the losses are partially caused by massive payments into the risk adjustment program, which he thinks are unjustified.

The insurance Department does not consider affordability to consumers in rate requests, but it does closely examine the actuarial assumptions insurers made in arriving at their requests in deciding if the requests are excessive.

James Auger, regional vice president of sales for Anthem, said its increase is needed to correct too-low 2016 premiums, as customers are using more health care particularly on high-cost prescription drugs; and because the reinsurance program that was designed to deal with pent-up demand for health care at the beginning of Obamacare is ending.

Mitigating those increased costs is the fact that HealthyCT members will end up with Anthem and ConnectiCare, and they are generally healthier than Anthem's current clients. HealthyCT was ordered closed as of 2017 by the state earlier this year because it was not financially strong enough to survive.

"Anthem understands how the rising cost of health care affects working families," Auger said, but the increase is needed to "allow Anthem to maintain its commitment to the individual market."

Tu Nguyen, director of actuarial services at Anthem, testified that year-to-date, Anthem Obamacare customers have spent 13.8 percent more on health care than it did in 2016. It's projecting health care spending will increase by another 9.6 percent next year.

The department also held a hearing for Aetna's rate request, which covers 6,346 individuals not on the Obamacare exchange. Aetna is seeking an average increase of 27.9 percent.

Ken Schaefer, an unemployed Newtown resident, said he and his wife spend $1,796 a month for insurance because their investment income puts them over the subsidy limit. His wife, 60, is retired.

"It just does not seem fair," Stephanie Schaefer said. Premiums "are outlandishly high and they're unreasonable."

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