STATE OF CONNECTICUT

Transcription

1 STATE OF CONNECTICUT INSURANCE DEPARTMENT Anthem Health Plan Small Group July 2013 Finding of Facts 1. This rate filing applies to the following policy forms, N1064, N734 and N Historical experience: Earned Incurred Year Premium Claims Loss Ratio 2007 $448,909,084 $362,680, % 2008 $408,184,089 $332,503, % 2009 $345,416,973 $283,717, % 2010 $309,707,311 $251,483, % 2011 $331,382,899 $267,321, % 1/12 10/12 $403,009,660 $333,094, % Total $2,246,610,016 $1,830,800, % 3. Normalized unit cost data and trend are as follows: 2010/ 2011/ 11/11 10/12/ /10 10/11 Inpatient $2,798 $3,072 $3, % 7.2% 6.6% Outpatient $594 $629 $ % 10.5% 15.7% Professional $173 $181 $ % 2.2% 0.5% Pharmacy $90 $93 $ % 7.5% 6.1% 4. Utilization data (per thousand members) and trend are as follows: 2010/ 2011/ 11/11-10/12/ /10-10/11 Inpatient % -7.5% -5.1% Outpatient % 1.3% 1.5% Professional % -0.7% 1.9% Pharmacy % 1.0% 0.8% P.O. Box 816 Hartford, CT An Equal Opportunity Employer

2 5. Allowed claim PMPM trend (excluding leveraging): 2010/ 2011/ 11/11-10/12/ /10-10/11 Inpatient $60.52 $69.29 $ % -0.6% 1.2% Outpatient $70.10 $70.46 $ % 11.9% 17.4% Professional $ $ $ % 1.6% 2.7% Pharmacy $74.41 $77.36 $ % 8.9% 7.2% Total $ $ $ % 4.8% 6.5% 6. Provider contracting is expected to have a 0.2% greater impact as compared to the observed trend. 7. Deductible leveraging is calculated using Anthem s in-house relativity model, and is 0.9% for HMO based on membership distribution. 8. Based upon the aforementioned information, Anthem is proposing an 8.7% trend. The rating trend is developed from the expected allowed trend adjusted for leveraging to account for the impact of fixed member cost shares. The trend derivation is as follows: 12 months ending October: 6.5% H1N1 (return to historic average): 0.16% Provider Contracting: 0.16% Leveraging: 0.90% Brand to Generic/ESI/AWP Inflation: 1.27% Actuarial judgment: -0.29% Pricing Trend: 8.7% 9. Observed trends have been normalized to remove the impact of aging, shifts in gender and allowed impact of medical benefit changes and the inpatient claims are capped at $250,000. Due to the normalization for medical benefit changes, an explicit buy-down assumption is not necessary for the development of the rating trend. The 2013 medical trends are expected to increase in utilization impacting trend by 0.4% as 2012 produced below expected utilization levels. The Rx trend is also expected to increase due to expected new drugs 0.5% and a significant reduction in movement from brand to generic worth about 1.0% to the Rx trend. 10. Anthem is requesting a rate revision to the previously approved 13.9% third and 15.8% fourth quarter 2013 rate increases. This rate revision applies to small group business for the policy forms indicated above and is intended to align rates with emerging experience, new federal mandates and fees and market conditions.

3 11. Proposed premium rates were developed using incurred claims experience, trending to the rating period, adjusting for other benefit costs, mandates, benefit and cost share changes, and adding retention. The proposed third and fourth quarter 2013 rates represent an average increase of 9.9% over our third and fourth quarter 2012 rates. 12. An annual trend factor of 8.7% and the estimated impact of the Affordable Care Act (ACA) Insurer Fee and Reinsurance Fee applicable to the 2014 portion of the rate period are applied to generate the rates for the third and fourth quarter of Anthem will file a rate revision if it believes that the rates derived by the quarterly trend are no longer adequate for the fourth quarter Projected underlying cost of care assumptions are based on known and anticipated changes in provider network reimbursement levels, changes in utilization, and other claims trends including savings initiatives. Deductible and benefit leveraging is applied to the resulting claim cost trend. Deductible and benefit leveraging accounts for the impact of fixed member cost shares from the experience period to the rate period which are not accounted for in the development of the allowed trends. 14. Other claim adjustments include benefit expense costs for capitation, state assessments, a portion of medical management fees, a credit for pharmacy rebates and the impact of benefit and portfolio changes. State assessments include the vaccine assessment. The net impact of participation in the Connecticut Small Employer Health Reinsurance Pool (CSEHRP) is assumed to be break-even. 15. Consistency with most recent financial statement: Anthem reconciles its internal source systems monthly to ensure consistency with reported financials. Please note that the Small Group products contained in this filing are only a part of the total business reported on the financial statements. In addition there exist timing differences and certain definitional differences in the statutory statements compared to emerging experience utilized in this filing. 16. Anthem continually reviews its benefits to ensure we are meeting the needs of our customers and changes in our portfolio reflect the result of that process. Those changes to our portfolio are driven by the market need to better manage utilization and medical expenses, making rates more affordable. The overall proposed average rate increase and the proposed range of rate increases in this filing reflect the impact of benefit and cost share changes on our existing groups. 17. Specific adjustments were made in anticipation of new expenses due to the ACA. The Comparative Effectiveness Research (CER) Fee is effective for policy years ending on or after 10/1/2012. The impact is $2 per member per year for policy years ending on or after 10/1/2013 and before 10/1/2014. For this filing, the estimated impact is $0.17 per member per month (PMPM).

4 18. The ACA Insurer Fee and the Reinsurance Fee will take effect January 1, These fees do not take effect on renewal so it is necessary to incorporate the fees attributable to the portion of the renewal period in 2014 into the rate development. The estimated impact of the ACA Insurer Fee is 2.02% of premium, which equates to adjustments of 1.42%, for the third and fourth quarters. The estimated cost of the Reinsurance Fee is $5.25 PMPM, which equates to $3.70 PMPM for the third and fourth quarters. 19. Mandated benefit changes: The estimated impacts of coverage changes required under federal and state law are as follows: 0.3% for the federal Women s Preventive Health mandate and 0.5% for applicable state mandates, as referenced in our 2012 rate filing. Some of these coverage changes are related to previous time periods and are partially reflected in the experience. To determine the amount currently in the experience for coverage changes effective on renewal, a calculation was done using the current renewal distribution for the products contained in the filing and adjusting for benefit seasonality where applicable. The experience claims are then adjusted for the remaining impact from the experience period to the rating period, yielding a federal mandate adjustment of 0.3% and a state mandate adjustment of 0.3% in the rate development. 20. Components of Federal Women s Health Mandate Breastfeeding Impact 0.03% Medical Contraceptives & Sterilization 0.03% Counseling (Prevent STIs, Domestic Violence) 0.00% HIV Screening 0.00% HPV Screening 0.01% Screening for Gestational Diabetes 0.00% Rx Waive Cost Share on Contraceptives Total Impact 0.25% 0.32% The pricing of the medical components of the Women's Preventive mandate was based on internal data using industry utilization assumptions to adjust to a 100% benefit and then eliminating cost sharing. The pricing of the Rx components of the Women's Preventive mandate was based on internal data. Projected scripts by tier, retail and mail were used along with assumed increases and shifts in utilization due to generic and SSB at 100%. Internal cost share data was then used to value the elimination of cost sharing. 21. Retention charge used in the rate filing is 17.57% of which 3.38% is risk and net profit margin, 5.03% is administrative expense, 1.75% is state premium tax, 1.82% is federal income tax, 3.51% is commissions, 0.03% is comparative effectiveness research fee, 0.63% is ACA reinsurance fee, and 1.42% is ACA

5 insurer fee. The December 31, 2011 Annual Statement for Anthem Health Plans, Inc. has a retention amount of 20.1%. 22. The expected medical loss ratio at the proposed rate increase is 82.4%. The expected health care reform adjusted medical loss ratio at the proposed increase is 85.5%. This reflects the state premium tax of 1.75% and estimated federal income tax of 1.82%. 23. As of September 30, 2012, the capital and surplus for Anthem Health Plans, Inc. is $407,218, The average rate increase requested is 9.9%. This ranges from a 9.0% increase for 2013 fourth quarter rates to a 10.8% increase for 2013 third quarter rates. 25. There were 11 public comments received by the Department, below is a summary of those comments: Anthem just had a rate increase on Jan. 1 which I believe was approx. 10%, at the time they said the trend was 9.1%. Now they've lowered the trend to 8.7% which should be covered by the recent increase. These constant rate increases are unsustainable, in the current economy, by small businesses who have no choice but to pass these costs onto their employees. Salaries typically increase 3-4%, given the new income tax increases and recent insurance increase families cannot survive. Connecticut please take a stand against this corporate greed. As a small business owner, who supplies health insurance for herself, her partner and two employees, we cannot afford this rate hike. We are paying over $4,000 a month right now. If the rate hike goes into effect, we will no longer be able to afford coverage for the employees. I understand Anthem wants to increase its profits, but it is doing so on the backs of small business. It s not good for small business, it s not good for the middle class, and it s not good for the economy as a whole. Please be advised that the 9.9% increase Anthem is proposing will be extremely burdensome for our company. We employ 15 people and our company pays 100% of our employees' health premiums. We have absorbed increase after increase, year after year, and it is becoming impossible for us to keep pace with these increases and still provide the benefits we would like to provide for our employees. I am confident that the review process stipulated by Connecticut's insurance laws will result in a very thorough analysis of Anthem's numbers, and that in the end, a fair decision within the scope of these laws will be made. We just wanted to express our extreme concern and dismay at what seems like a neverending parade of increases every year passed along to those of us in the "Small Group" category. I know President Obama would approve of the health plan we offer. Please help us keep it intact, and not have to water it down to afford it.

6 Absolutely opposed. As an owner of a small business in CT our health insurance bill is $180,000. As the owners of this business and as we approach 65 years of age we may be forced to close our doors and add 13 employees to the unemployment line. This same plan just went up. Our total bill went up 18.46% from 2012 to our renewal in Part of this was from one person moving to a higher age bracket however, that only counts for a small portion of the increase. They have gone up every year much more than any C.O.L increase. This is not sustainable and will force people into other options. They are requesting too large an increase. Smaller increases are understandable from year to year but this is too much after the recent large increase. Health insurance is already unaffordable. Any rate increase is making health insurance impossible. We have only recently purchased a small group plan with Anthem and we are not happy that rates will potentially be rising so soon. Health care is a critical benefit provided to Connecticut employees and it is especially hard for small businesses and non-profit organizations like ours to afford to offer it. Anthem should be required to attempt to streamline their organization and make their work more efficient before being allowed to raise rates on consumers. This increase is also nearly 10% which will be incredibly hard to adjust to for small businesses. A roughly 10% rate increase is a tough pill to swallow; insurance rates are already extremely high. Thank you for the opportunity to voice my concerns regarding a possible 9.9% rate increase. I am representing a small business in Connecticut, and each day find it more difficult to keep up with the increase of utilities, taxes, property insurance, operating costs and health care insurance costs. I was forced to leave our health care provider, Connecticare, due to their increased premiums. At that time, which was only five months ago, our company switched to Anthem Blue Cross and Blue Shield. You may well imagine my frustration when receiving this notice regarding a possible rate hike. I feel a 9.9% increase would make it very difficult for our company to continue with Anthem. I realize we are only a small group, and again appreciate the opportunity to respond to your letter. Thank you for listening. dear sirs. As a small business owner in ct we are struggling to stay in business. Our 1 largest expense that increases every single year is anthem health insurance. We have not been able to raise our rates to our customers and stay competitive for the last 5 years of this recession. Please do not allow yet another ins. increase. We have already raised our deductibles to the max to try to bear the ever increasing costs. We do not want to drop health insurance altogether, but are considering that possibility or closing our doors and letting our employees go. Thank you for your consideration. I have received a letter from Anthem dated 2/27/13 informing us that the policy just started for our small group church staff will be subject to a 9%

7 increase in fees beginning 7/1/13. As a church trying to make sure our staff have adequate health insurance, we tried to choose the most affordable plan which would provide adequate coverage for our staff. Anthem had the plan which best met our budget and our staff's needs. Now we are being informed that the rates will increase within 6 months of signing on. We cannot afford this. Department Summary The actual full year incurred loss ratios have all been within a very tight range, 80.67% to 82.65%. The overall experience of this block of business, along with the resulting medical loss ratios, indicate an experience adjustment is not necessary at this time in order to achieve the MLR rebate loss ratio of 80% defined in regulation by HHS. Upon analyzing the trend data contained within the rate filing, the Department determined that the overall trend of 8.7% is appropriate as defined in the rate filing. The development of this medical and pharmacy trend is as follows: 12 months ending April 2012: 6.5% H1N1 (return to historic average): 0.16% Provider Contracting: 0.16% Leveraging: 0.9% Brand to Generic/ESI/AWP Inflation: 1.27% Actuarial judgment: -0.29% Pricing Trend: 8.7% Claim lag triangles were analyzed to confirm the most recent estimates of incurred claims and the difference between incurred and paid. Department Disposition Based upon the finding of fact, and the summary information described above, the rate increase request 9.0% for the third quarter and the 10.8% for the fourth quarter is approved as submitted. Please note that these are actually decreases from previously approved rate increases of 13.9% for the third quarter and 15.8% for the fourth quarter.

8 The rate increases are reasonable in relationship to the benefits being offered, they are also, neither excessive, inadequate or unfairly discriminatory. Dated May 2, Paul Lombardo, A.S.A., M.A.A.A. Insurance Actuary