MONTPELIER — Vermont’s largest health insurer is asking regulators to approve a double-digit increase in premiums as it deals with myriad cost pressures.
Blue Cross Blue Shield of Vermont has filed its requested 2018 health insurance rates for plans sold on the state’s exchange with the Green Mountain Care Board, the state’s health regulatory body that reviews and approves health insurance rates as well as hospital budgets. The insurer, which covers about 70,000 Vermonters, is seeking an average rate increase of 12.7 percent.
BCBS President and CEO Don George said the requested increase is based on the cost of health care services as well as policy decisions unrelated to care that the company does not control. Those outside pressures account for about 6 percent of the 12.7 percent increase, he said.
“When people see an increase like 12.7 [percent] I think its natural to assume that it’s directly correlated to the work being done by hospitals and other health care providers and that’s not the case,” George said. “We all know that our hospitals are not going up 12.7 (percent).”
Most notably, the Federal Insurer Tax, which is mandated by the federal Affordable Care Act, accounts for about one-quarter of the requested increase. The tax was included in health insurance premiums in 2015 and 2016, but Congress removed the tax in 2017. It is reinstated for 2018 plans, according to George.
“There was a hiatus from it, but we knew it was coming back this year,” he said.
About 2 percent of the increase comes from the so-called cost shift. Because Medicare and Medicaid — both government-sponsored programs — are underfunded, costs are passed on to private insurance. Another 1 percent of the increase is attributed “to the simple fact that Vermonters are getting older,” George said.
“We’re seeing this as a trend where we have this aging demographic that is not being replenished with younger people in the pool that are using less health care services,” George said.
Vermont is seeing more policy-related cost pressures on insurance costs than other states, according to George. While insurers in other states must also pay the Federal Insurer Tax, some states are seeing less impact related to the cost shift and are not facing the same demographic challenges as Vermont, he said.
George said about half of the requested increase is directly related to health care utilization and pharmacy costs. Utilization of health care services is increasing in Vermont, and the cost of health care services are also rising. Still, George said providers in Vermont have worked hard to control costs.
“We do think hospitals and health care providers are doing a commendable job containing costs,” he said.
Pharmacy costs now account for about 20 percent of the cost of health insurance premiums. The use of specialty pharmaceuticals to treat diseases and chronic conditions is on the rise. Drug prices continue to climb as well, George said.
Just 0.3 percent of the requested increase is to cover administrative costs.
Finally, 0.9 percent of the increase is needed because the board approved a 7.3 percent rate increase last year — less than the 8.2 percent BCBS requested.
“We have to carry that forward this year and so that has to go back into the pricing,” George said. “In the end, the hard truth is that if we do not fund these costs today we will only worsen the problem in the coming years.”
BCBS tries to turn in “highly credible” rate requests that fully fund what is needed to provide health insurance to Vermonters, George said. The company is aware of how rate increases impact consumers, he said.
“Our first reaction is thinking about our customers always,” George said. “We appreciate the impact that premiums in general, and this increase specifically, will have on our members.”
“We really think and take seriously our obligation to be up front about these costs, even when the news is going to be unwelcome,” he added.
MVP Health Care, the second insurer that sells health insurance plans on Vermont Health Connect, is also seeking a rate increase. MVP, which only covers about 10,000 Vermonters, is seeking a 6.7 percent average increase. It cited similar reasons for the increase.
Insurers around the country have filed requested rate increases that average 20 percent, with some exceeding 30 percent, according to the GMCB.
The board will now begin a 90-day review period. The board can approve, modify or reject the requested increases. A public hearing will be held for the MVP request on July 19, followed by a hearing on the BCBS request on July 20.