Reviewing changes to insurance rates

In the middle of a public hearing last summer, after several insurance companies had proposed double-digit rate increases on their health care plans, Attorney General William Tong posed a series of questions that summed up the concerns of many who gathered at the state's Legislative Office Building that day.

"My understanding is that an actuarial analysis is undertaken to make sure an insurance company has enough assets to pay liabilities, right? That's what the analysis shows: 'Do you have enough money to pay claims?'" he asked.

"That is a consideration, yes," replied Neil Kelsey, vice president and chief actuary for ConnectiCare.

"Do you also do an analysis of whether your customers have the ability to pay for your premiums?" Tong pressed.

"From an actuarial standpoint? That is not a consideration," Kelsey said. "When we set rates, our rates cannot be excessive, they must be non-discriminatory, and they must be adequate. Those are the three stipulations or thresholds that the actuarial analysis has to comply with."

State Rep. Kate Farrar, a Democrat from West Hartford, followed up with a challenge for the state.

"I hear from the same nonprofits and small businesses in my district who struggle each and every year to offer essential health care benefits to employees," she said. "I would encourage that we use a consumer affordability measure as a central element of the insurance department's rate review process."

Each year, when insurers propose rate changes for health plans on and off the state's exchange, Connecticut's insurance department has the power to approve, reject or amend them. The department weighs trends in unit cost (the total expenditure incurred by the company), utilization of services and expected severity of claims. The rates cannot be excessive, inadequate or unfairly discriminatory.

Now, advocates, elected officials and consumers are calling for them to add a measure of affordability to the list.

This year, insurers asked the state to approve a 20% average rate increase on individual health plans, a request far higher than any proposed in recent years. By contrast, they sought an 8.6% average hike in 2021 and 6.3% in 2020. The state signed off on an average increase of 13% this year, though the cost of some plans will rise as much as 25%.

"We have been asking legislators to require the Connecticut Insurance Department to consider affordability for consumers and small businesses when they review the rate requests," said Lynne Ide, program lead for communications outreach and engagement at the Universal Health Care Foundation of Connecticut. "We have been told by the department each and every year, 'Listen, we're not required to do so statutorily.'

"We are always thinking about how the state's policy affects everyday people. The biggest complaint people have about health care is the cost and the sustainability of that cost."

Lawmakers frustrated by the high rate request this year say they plan to introduce a bill during the legislative session that begins in January that would change the state's rate review process to include consumer affordability as a standard.

"I would be really interested in overhauling the rate review process, including looking at affordability," said Sen. Matthew Lesser, D-Middletown, a co-chair of the Insurance and Real Estate Committee. "I don't think we should be afraid of a more adversarial system. I think we'd have to reimagine what that process looks like.

"Even though we have made progress in bringing down our uninsured rate, there is still a substantial portion of our population who are uninsured and a larger percentage who are underinsured – people who have insurance on paper but can't afford to access coverage when they're sick. I've never understood why we would want to ration care on the basis of people's ability to pay."

Sen. Saud Anwar, D-South Windsor, a vice chair of the Insurance Committee, said he also would support a change to the rate review process that includes adding affordability.

"I feel there's an urgency, because every day we are not making this a requirement, insurance companies are jacking up the prices," he said. "As those prices are getting jacked up, more people are unable to afford it."

In drafting a bill, Lesser said he would keep the safety and solvency of insurance companies as a consideration in the review process. "We should not back off from that," he said. "But they can also look at affordability."

Andrew Mais, Connecticut's insurance commissioner, defended the state's review process and praised his department's work through the years.

"We work diligently to make sure the people of Connecticut do not pay more for health insurance than they should," he said in a statement. "We have saved our state's consumers $365 million over four years by scrutinizing and reducing rate requests.

"We agree that the underlying and increasing cost of health care needs to be addressed. That is why we are working with the governor's office and the health care policy group on proposals for the upcoming legislative session to reduce growth in the cost of health care."

He did not elaborate on what proposals may come up this session.

Some legislators said the rising cost of medical care should be the focus of legislative reform, not the insurance department.

"We need to be putting pressure on the cost drivers, not on the people who are covering people," said Rep. Kerry Wood, D-Rocky Hill, co-chair of the insurance committee. "I feel that putting pressure on the insurance department in how they regulate plans is totally glossing over the big driver, which is the cost of health care."

But for Lesser and others, the rate review process is a focal point.

Lesser said he would look to the state's Office of Health Strategy to determine how affordability could be defined in the bill. This year, OHS developed a tool called the Health Care Affordability Index, which uses several factors, such as insurance type, family size, health status and age, to determine health care costs and affordability.

The office also recently began setting annual benchmarks for the ballooning cost of health care — requiring providers, insurers and others in the industry to report their yearly price increases.

The program is designed to expose the hospitals, medical practices and insurance companies whose costs soar beyond the state-imposed targets. There is no penalty for those who exceed the benchmarks, but officials say the annual reporting mandate would create public pressure to keep costs down.

OHS also tracks annual spending on primary care and sets targets for that.

"OHS considers health care affordability critical for the health and outcomes of Connecticut residents, and to the longevity and effectiveness of Connecticut's health care system," Tina Hyde, a spokeswoman for the office, said in a statement.

At least one state factors affordability into the insurance department's annual rate review process: Rhode Island.

In assessing affordability, officials in Rhode Island consider trends, including historical rates for existing products and national and regional health insurance trends; inflation; insurers' efforts to control administrative costs; the ability of low-income residents to pay for health insurance; price comparisons to other market rates for similar products; and strategies by insurers to increase affordability, according to an analysis by Connecticut's Office of Legislative Research.

Rhode Island's insurance commissioner also examines state and federal requirements such as benefit mandates; medical service costs over which plans have limited control; the third-party payer system and resulting decrease in consumer price sensitivity; and health plan solvency.

When determining if rates are affordable, officials look at whether insurance carriers have met the primary standards: increasing spending on primary care, adhering to certain quality of care and payment provisions, including an inflation cap on medical spending when contracting with hospitals, financially supporting the health information exchange, and adopting a patient-centered medical home model (places where consumers can receive treatment from a variety of specialists organized through their primary care physician).

Ted Doolittle, Connecticut's health care advocate, said he believes the state's policy already allows the insurance department to weigh affordability when approving or rejecting annual rates.

"My thought has always been that an aggressive, consumer-oriented administration could start to consider the issues of consumer affordability and underlying price right now," he said. "Historically they haven't. The insurers — who have a lot of sway with the insurance department, appropriately so in many regards — have no interest in going down this path, for obvious reasons."

Doolittle said he would support a bill that makes affordability a standard in statute.

"We are living in a high-deductible world where almost all folks have to pay all of their non-preventative care," he said. "A generation ago, the carriers were on the hook starting with Dollar One, but now the carriers have literally no skin in the game until I pay off my deductible.

"Since Connecticut families have to pay the first several thousand dollars of medical bills, [they] are entitled to understand exactly what price was negotiated on their behalf, and why."