Reason for Requesting Rate Increase Arkansas Blue Cross and Blue Shield is filing a modified rate request for 2018 in response to the Arkansas Insurance Department (AID) Bulletin number 14-2017 dated August 16. This amendment to our rate request filed on July 14 is being submitted based on the assumption that cost sharing reduction (CSR) payments will not be authorized by the federal government for the 2018 plan year. In the July 14 filing, Arkansas Blue Cross proposed an average revenue increase of 7.8% for our Affordable Care Act Individual products. These rates would be effective January 1, 2018 and assumed that the federal CSR payments would continue to be made to insurers. These payments help reduce health insurance copayments and deductibles for thousands of Arkansans. As of the filing 202,005 individuals currently benefit from these policies. Including in that filing, Arkansas Blue Cross noted that it would propose an average revenue increase of 14.2% for this same block of business should the CSR funding be removed. While requested rates for 2018 are being filed in an environment filled with much uncertainty, Arkansas Blue Cross Blue Shield remains committed to ensuring access to quality health insurance for all Arkansans. Additionally, in submitting our rate request for 2018, great consideration was given to the budget cap that the state has established for the Arkansas Works program, its unique approach to expanding coverage for many of our states most vulnerable citizens. The associated rate requests for 2018 are based on a variety of factors that will be detailed further in other parts of this document. More importantly, our formal rate filing is based on assumptions that the market will remain relatively stable and not experience the wide fluctuations in membership that have previously occurred once rates have been finalized. They are also based on the premise that the federal cost sharing reduction program will not be fully funded. It is undisputed that the Affordable Care Act (ACA) has expanded access to insurance for millions of Americans, guaranteed coverage for pre-existing conditions, removed underwriting adjustments for individuals and expanded benefits. Unfortunately, the ACA did nothing to control the continual rising of medical costs. Increased access to a previously uninsured population and the expansion of essential health benefits has created new costs. In determining premiums, we carefully consider the medical costs associated with a system in which everyone can obtain health insurance and pay the same premium rate regardless of health status or age. Medical costs continue to have the biggest impact on health insurance premiums. Our rates reflect the cost of care for those with chronic or long-term medical conditions, an aging population and the increased cost of new Page 1 of 5
medicines, procedures and technologies. Health insurance premiums are also impacted by many other factors, including who is enrolled in a health plan that is, the mix of healthy people vs. those with pre-existing or costly medical conditions. This naturally leads to a market where those that are healthier prefer to stay on products purchased prior to the implementation of the ACA. Such pre-aca policies generally have lower rates due to the healthier medical status of those enrolled as well as the exclusion of essential health benefits required in ACA policies. Conversely, those with chronic or costly medical conditions generally gravitate towards the fully ACA compliant products which are prohibited from having any medical underwriting. Today, more Arkansans have access to health care than ever before and our state has led the nation in reducing our uninsured population. Increasing the number of people with insurance has helped physicians and our community hospitals reduce their expenses for uncompensated care. The state s efforts also benefit the health of our citizens and the productivity of our workforce. In 2013, when we filed our rates for 2014, there was little if any definitive data on the majority of people who have now enrolled in these products. Then in 2014, when we filed our rates for 2015, it was clear that a pent up demand existed for medical services - most likely from individuals who previously couldn t afford such care. Then in 2015 there was a large amount of movement in the membership during the year that made it in hindsight difficult to quantify. Now in 2016 with a full year of more stable experience to review plus the analytical information now available, we have a much clearer picture of the medical and drug costs for members enrolled in individual qualified health plans. Amidst this ongoing trend of increasing costs, we continue focusing on meeting the needs of our members while also offering rates that are competitive in the exchange marketplace and that are also within the state s budgetary framework. In order to achieve those goals we have adjusted our benefit designs while still complying with the QHP framework, strengthened our efforts to ensure that appropriate and necessary care is being rendered and modified provider reimbursements. Based on market analysis, we are also exercising some operational tools and benefit designs to favorably impact costs that previously we hadn t fully utilized. We believe the line of products for 2018 offer a range of benefit options and costs so that Arkansans can choose the coverage that best fits their needs. Additionally, we continue offer the tools and resources people may need and count on such as additional customer service representatives with expanded hours to help our customers navigate the marketplace and understand their choices. Page 2 of 5
In addition to the continued high demand of medical and prescription drug services, it is also important to keep in mind the ongoing reforms since 2015 as well as other changes that have taken place that impact the proposed rates for 2018. Guaranteed Access to Insurance. The healthcare law guarantees access to coverage without any adjustments for pre-existing conditions which adds to the cost and is reflected in premiums. Rates Reflect Cost of Care. The cost of providing healthcare has the biggest impact on health insurance premiums. Our rates reflect the cost of caring for those with chronic illness and long-term medical conditions, an aging population and the increased cost of new medicines, procedures and technologies. A System in Flux. Health insurance premiums are affected by many factors, including who is enrolled in a health plan the number of healthy people and those with chronic medical conditions. So far in in 2017, we have seen a reduction of over 12,000 individuals representing approximately 6% of our membership. Wide membership fluctuations during plan years skew the mix of enrollees who were a factor in computing the original annual rate request. Grandmothered Plans. To keep rates in check, it is important to have a broad mix of people in the new ACA qualified health plans. Some people have kept their pre-aca plans, making the health status of people enrolled in new plans not as balanced as it could be. Those with more costly health care conditions are choosing to purchase ACA compliant plans. Loss of Coverage Mandate. Ongoing efforts by Congress to repeal the Individual Mandate without deciding how to replace that requirement adds to uncertainty in the marketplace. This adds 1.30% to projected claims costs. Returning Taxes. The Health Insurer Tax that was suspended in 2017 has been reinstated in 2018. In 2016, Arkansas Blue Cross paid more than $34 million for the Health Insurer Tax. Benefits. Under the ACA, health insurance companies are required to offer benefits that may be more than what an individual previously had or even desired. The expansion of essential health benefits has increased costs. Loss of CSR funding. These payments help reduce health insurance copayments and deductibles for thousands of Arkansans. In 2016, Page 3 of 5
Arkansas BlueCross received $57 million dollars from the federal government to refund CSR dollars. Our amended rate request encompasses the loss of this funding. Additionally, the cost of hospital services, physician services, and prescription drug coverage for our individual members continues to rise. Those increases are driven both by the increasing cost for healthcare as well as by the increased utilization of services. Higher payments to healthcare providers happens in two ways - 1) higher charges and 2) an increase in the utilization of high cost services. Administrative costs also contribute to premiums. These consist of many items, including, but not limited to, broker commissions, claims administration, customer service, marketing, and fixed overheads. In cases in which overall membership is declining and overhead costs remain fixed, an increase in per member administrative costs can result. Our goal is simple: We want our members to get the best possible healthcare at the lowest possible cost. Arkansas Blue Cross is working to help our customers stay healthy and ensure that, when they do get sick, they can be assured that their health claims will be paid and that they are protected from financial harm due to health care costs. In addition, our customers benefit by: Savings on Prescriptions. A variety of ways to save money on prescriptions, including mail order services are now available Plan Options. There is no one-size-fits-all health insurance plan; therefore we offer a variety of plans with diverse benefits and costs from which people can choose. Toll-free Telephone Support. Our toll-free line is available for customers to speak with a representative who will help find the most cost-effective health plan for their needs. Personalized Treatment Plans. Personalized treatment plans are available for our customers with long-term medical conditions such as high blood pressure and diabetes. We have dedicated medical and support staff to help our members manage their chronic conditions and assist them in their ongoing treatment. Page 4 of 5
We believe the requested rate increase of 14.2% is necessary to adequately support these products. Under current law, the federal Minimum Loss Ratio (MLR) requirement for individual policies mandates that 80% of premium dollars must be spent on medical care and on making improvements to the quality of care. If the proposed premium rates result in an MLR of less than the proscribed amount, we will be required to issue rebates to individuals insured by these policies. Arkansas Blue Cross has never had to issue rebates for its individual products and we are confident that our 2018 rate request will continue our pattern of appropriately pricing our products. Page 5 of 5