HHS Says Health Insurer Charging Unreasonable Rate Increases

[somarco]

Just a couple of years ago it became known that Wellpoint was using the wrong actuarial table for their rate increase. Wellpoint is one of the top carriers.

There is no reason why the carriers cannot be transparent on this topic.

Actuarial tables are used for base rates and health care trends. Beyond that, unless things have changed dramatically, their tier their smaller groups to set the general guidelines for increases. Fully pooled groups are assigned risk factors, plus or minus, in as many as 10 different sub-groups.

Even still, the market determines what the real price is, not the carrier.

 

[ABC]

Fair question,

13 years ago when I got into the business there was 20 competitive carriers in my state. Now there are 3 in the under 100 market. Individual there are 2.

These companies now have a very large portion of the under 65 market.

There is no open market because a carrier cannot compete with a rented network.

So since these few companies have a lock on the market they have to pull back the curtain and show what they are doing.

I have seen top employees of major carriers come off so arrogant with clients I was shocked. If there was true free market they would not be able to act that way.

The telecommunication industry has had to show real transparency. Look at the current AT&T and T-Mobile deal. The Fed is not going to let that deal go through.

The Fed should have never let the mergers of the health insurance companies.

There is no reason why the carriers cannot be transparent on this topic.

ABC...Why should anyone in private industry be required to be transparant? Could you provide examples of other private industry entities that require transparancy?

 

[somarco]

The telecommunication industry has had to show real transparency. Look at the current AT&T and T-Mobile deal. The Fed is not going to let that deal go through.

Telecom is a regulated utility. At one time it was a monopoly until the govt decided to break it up in to (I believe) 5 different companies.

From that came competition, lower pricing and greater innovation.

Since then many of the baby Bells have merged and consolidated so now instead of half a dozen or so we only have 3 or so telecom carriers.

The govt has continued to dictate to telecom services what they can and cannot do, and it is not always to the advantage of the consumer.

I don't believe the govt has told telecom how much of their revenue must be spent on consumer services, dictated the rates they must charge, or told them how what kind of service they must provide.

But now the federal govt, which has no direct regulatory authority over insurance carriers, wants to tell them what kind of benefits they must offer, who they must have as customers, how much they are required to spend on customer benefits AND limit the price they can charge.

Apples and oranges.

 

[leevena]

Fair question,

13 years ago when I got into the business there was 20 competitive carriers in my state. Now there are 3 in the under 100 market. Individual there are 2.

These companies now have a very large portion of the under 65 market.

There is no open market because a carrier cannot compete with a rented network.

So since these few companies have a lock on the market they have to pull back the curtain and show what they are doing.

I have seen top employees of major carriers come off so arrogant with clients I was shocked. If there was true free market they would not be able to act that way.

The telecommunication industry has had to show real transparency. Look at the current AT&T and T-Mobile deal. The Fed is not going to let that deal go through.

The Fed should have never let the mergers of the health insurance companies.

Sorry, but I don't agree.

To begin with, you did not present a valid argument as to why a private company should be transparant. In our system of captialism, each company is allowed to be as transparant as they wish.

As for your comment about an open market, again, I disagree. How do you account for the 50% of Americans who are in a self-funded plan? And, since the Blues have traditionally had the price advantage in networks, how do you explain the non-blues business? If you structure and operate a medical plan correctly, and aggressively, you can out-perform a carrier network.

 

[ABC]

Since we have a lack of competition in the fully insured market, carriers have to open their books and justify rate increase. If there was true competition we would not need the books to be open. In my city 1 carrier has 65% of the fully insured market.
There are only 3 fully insured carriers that own their own network. The small companies cannot compete with a rented network. This is a lack of competition to me.

So if you are going to have 65% of the market, I think you should have to open your books on how you are coming up with rate increases.

Leevena, I don't know if you view this as a valid argument.
My experience with small groups is there are unjustified rates increase every month. When I am able to get 48% of those rate increase reduced something is up.




The self funded segment is an entirely different discussion. If the client does not realize the TPA or ASO are retaining a portion of the network discount then that's there fault.

Sorry, but I don't agree.

To begin with, you did not present a valid argument as to why a private company should be transparant. In our system of captialism, each company is allowed to be as transparant as they wish.

As for your comment about an open market, again, I disagree. How do you account for the 50% of Americans who are in a self-funded plan? And, since the Blues have traditionally had the price advantage in networks, how do you explain the non-blues business? If you structure and operate a medical plan correctly, and aggressively, you can out-perform a carrier network.

 

[somarco]

Since we have a lack of competition in the fully insured market, carriers have to open their books and justify rate increase. If there was true competition we would not need the books to be open. In my city 1 carrier has 65% of the fully insured market.

I have to disagree.

You sound like the folks in DC. If one carrier dominates in a free market it is because they deliver the best value.

Your argument is like saying in towns where the population is less than 100,000 Wal-Mart dominates and must be by implication "screwing" their customers, therefore the government must force them to open their books to justify their pricing schedule.

If a carrier, such as Blue, is dominating it is because they deliver a better value.

Either that or their customers are stupid to pay more when they could purchase a comparable product for less.

Taking the argument a step further, lets say Blue is subjected to an audit and it is determined their loss ratio is 75% rather than 85%.

If they lower their rates by 10% won't they increase their market share even more?

 

[ABC]

I don't think you can compare to the fully insured health insurance industry.

Your 10% questions the answer is yes. So in this example the transparency of the rate increase lead to a reduction premium.

I will be the first one to tell you I am not happy about the health care reform law but in the last 7 years a handful of carriers have been getting away with unjustified rate increase because there is no competition.

Had Anthem in Cali.not given out a ridiculous rate increase the health care reform would have never gone through.

Why would you want to protect an unjustified rate increase which hurts your clients?

I have to disagree.

You sound like the folks in DC. If one carrier dominates in a free market it is because they deliver the best value.

Your argument is like saying in towns where the population is less than 100,000 Wal-Mart dominates and must be by implication "screwing" their customers, therefore the government must force them to open their books to justify their pricing schedule.

If a carrier, such as Blue, is dominating it is because they deliver a better value.

Either that or their customers are stupid to pay more when they could purchase a comparable product for less.

Taking the argument a step further, lets say Blue is subjected to an audit and it is determined their loss ratio is 75% rather than 85%.

If they lower their rates by 10% won't they increase their market share even more?

 

[leevena]

A couple of points ABC.

1. You may lack competition in the fully insured market, but not the self-funded market. There are many small group (Spagg/Agg) self-funded plans available to groups.

2. You could sponsor a Captive Insurance plan and instantly have an alternative that you control.

3. I don't disagree with the rate increases (in general) or your ability to reduce 48% of the increases.

4. Sorry, but still no reason for transparancy. If you can articulate a reason, other than lack of compeititon, I would be happy to open my mind.

Anethem's rate increase of a few years ago was indeed a catalyst for reform. But keep in mind, the big carriers decided it was in their best interest and helped push reform. Once reform was passed, many of the smaller carriers who could not maintain the minimum loss ratio's got out of the market. Now look at the market, CIGNA (only wants under-500), Humana (is a Medicare/Medicaid model with desires for international), Aetna, United, the Blues and some local/regional players. So each market will have a Blues and 1, maybe 2 alterantives.

They are all going towards B2B E commerce will will further dilute the broker role.

But in this mess is a silver lining. You should seriously look at doing self-funding, either small or big. Only way a small-medium size group benefits broker will survive.

 

[somarco]

Your 10% questions the answer is yes. So in this example the transparency of the rate increase lead to a reduction premium.

Which means they gain even more market share further ginning the argument that there is not enough competition, and around we go again.

If the carrier is found to have a 95% loss ratio would the govt then require them to increase rates?

Your entire argument is on shaky ground, especially if you want to pair govt oversight and transparency with market share and competition.

in the last 7 years a handful of carriers have been getting away with unjustified rate increase because there is no competition

How do you know they are unjustified?

Why would you want to protect an unjustified rate increase which hurts your clients?

Never said I did . . . and I don't.

If the renewal is out of line we shop it.

On the other hand I have had groups that for several years running had loss ratio's in xs of 150% and never complained about a 25% renewal increase.

Small groups are not credible as I am sure you are aware which is why they are pooled by the carrier. The carrier makes some attempt to "reward" good groups with what amounts to a mod factor while at the same time charging a higher than norm rate for the money losers.

They do this by tiering the rates in steps separated by 4 - 8% graduations. If they use a 10 tier system and 6% steps a really good group might get a rate that is 30% less than the average increase while a "bad" group might be +30%.

Blue dominates here as they do in other markets but that does not mean they have the best rate.

Even with transparency most agents, clients and even govt officials would have no idea what they are looking at. This is proven over and over by bureaucrats picking a number out of their butt and saying any rate increase that is more than this is unfair.

I have had a few groups over the years that have had single digit increases and no one ever complains about those either.

 

[ABC]

Look, numbers do not lie!

If the carriers equation justifies the rate increase the carriers would have nothing to worry about. The problem is the equation the carriers are using does not justify all of the rate increases.


The arrogance that I am seeing on a monthly basis from top carriers is shocking.

I have had state VP's go into meetings on fully insured account and refuse to give an explanation on how claims pooling was determined. A case with a 55% loss ratio they still gave them 20% rate increase. You know why because there was no other competition and they knew it.

It's flat out BS what these carriers are doing because they have no real competition.

You can talk about self funding but the reality is much different. Go into a 60 life group and self fund them on an agg of 110% expected claims. Then try to get a guarantee that they will not laser anyone. Let me know which re insurance contract will do that? Go to any of the top carriers and request a ASO plan on a group under 100 lives. I bet it will look very similar to the fully insured premium. Can you get the full network discount on a self funded group under 200 lives....NO! the TPA or ASO is going to retain a portion of the savings on both network and RX.

All day long I am bidding and renewing group plans. Most of them are fully insured. My experience tells me that the rate increases are not justified. If they were justified why am I able to get rate relief on almost half of my renewing business? Avg relief have been close to 5%. I am talking 5 points on an avg. some I have pulled off crazy double digit relief.

I don't know what you are doing all day long so I don't know how you formed your views. If you are writing group business and keeping it on the books then you know my struggles.

If you don't share my views that is fine and we can agree to disagree.