HELENA— Insurance companies in Montana are requesting double-digit rate increases next year for the health plans of more than 77,000 people covered through the online exchange created by President Barack Obama’s health law.
Blue Cross and Blue Shield of Montana is asking state regulators to approve an average increase of about 22 percent over the rates approved in 2015 for its individual plans. PacificSource is asking for an average 32 percent increase. The Montana Health Cooperative is requesting an average 34 percent increase.
The companies found the claims they paid out in 2014 were much higher than they expected when the online marketplace launched in 2013. For all three companies, the claims paid exceeded the premiums they took in that year, the first year the Affordable Care Act was in effect.
State Auditor Monica Lindeen has final say over whether to approve the requests, and her office has 60 days to review the proposals and send the companies objections.
If the rate increases are justified, they will be accepted, Lindeen said. Double-digit rate increases were the norm in the years leading up to the Affordable Care Act.
After the law passed, the companies had to set rates for a new marketplace without any history to base them on, she said.
“Not only were they shooting in the dark, they were competing with each other for business,” Lindeen said. “Obviously they were going as low as they could without it being unsustainable.”
The rate increase requests reflect an adjustment that is needed for the not-for-profit Montana Health Cooperative to survive long-term, CEO Jerry Dworak said.
“I firmly believe that this is a one-year deal, a one-year true-up to get where it should have been from the very beginning,” he said. “We definitely feel if we don’t get (the increase) our sustainability will be questionable going into the next four or five years.”
There are 44,782 Blue Cross customers in Montana with individual plans that may be affected by the rate increase, the company said in its filing. Blue Cross took in $143.4 million in premiums and paid $175.9 million in claims in 2014.
The company’s proposed increase is built on the experience and data of the last two years, spokesman John Doran said.
“We’re putting prices out there that we believe are affordable and that we think can be sustainable for our customers for years to come,” he said.
The Montana Health Cooperative took in $38.4 million in premiums and paid $54 million in claims in 2014. The rate increase would affect the 17,300 customers the cooperative had as of March, with increases ranging between 17 and 60 percent, depending on the plan.
People who earn less than 400 percent of the federal poverty level are eligible for federal subsidies to help pay for the plans. Dworak said 72 percent of his cooperative’s customers receive subsidies.
In addition to the proposed premium hike, the cooperative will discontinue its “platinum” level plan and increase the deductibles and out-of-pocket expenses in other plans, Dworak said.
PacificSource reported premium income of $26.5 million and claims of $35.2 million in Montana last year. The company has 11,058 Montana customers with individual plans.
Its proposed 32 percent rate hike is required for individual health plans to sustain themselves without being subsidized by other parts of the business, PacificSource’s Montana director, Todd Lovshin said.
“We have to figure out how to make them both affordable and where that market is paying for itself,” he said.