Risk Adjustment Seen as Primary Increase Driver
Boston - Minuteman Health (www.minutemanhealth.org) today submitted a preliminary 2017 rate filing with the New Hampshire Insurance Department. Final rates will be filed by July 15th after the federal Risk Adjustment program results are released on June 30th and any state-based adjustments to that program are made. A high degree of volatility in financial assumptions exists at this time due to Risk Adjustment, and Minuteman has therefore calculated a wide range of possible rate increase scenarios. The preliminary rates filed today are at the very high end of that range. This is in keeping with the approach Minuteman took last year; namely, to make conservative preliminary filings and then adjust those filings as more information becomes available.
The high-end-of-range preliminary rate projections shows a 45.2-percent increase in individual premiums ($273.70 in 2016 to $397.39 in 2017) and a 1.5-percent increase in small group rates ($339.85 in 2016 to $344.81 in 2017). This is virtually all driven by the federal Risk Adjustment program and its affects. Actual operating results remain positive and would generate a significantly lower change.
Minuteman Senior V.P. of Sales and Executive Director, New Hampshire Scott Colby cautioned that the initial filing is based on projections and could well change significantly as more information becomes available.
“What is perfectly clear is that the federal Risk Adjustment formula will be the determining factor in the final rates,” Colby said. “As it is written now, Risk Adjustment punishes high growth plans with efficient provider networks by forcing them to pay onerous sums to insurers that are slower-growth and have wide-open networks with more expensive providers. Minuteman’s model remains one focused on working with higher-efficency providers that can provide excellent care at a lower cost, and that is how we have delivered lower premiums. The current federal Risk Adjustment model forces all prices higher regardless how efficient or affordable we or any other carrier can be.”
Further complicating the calculation of the preliminary 2017 rates is the uncertain impact of the Premium Assistance Program (PAP) and how the federal Risk Adjustment program may disrupt the PAP rollout. PAP only went into effect three months ago and insufficient data is available at this time.
Colby said the final Risk Adjustment payout won’t be known until June 30. He said Minuteman is being conservative in its projections in order to prepare for all scenarios. Once Minuteman has more information about the Risk Adjustment program and its 2016 experience, it will calculate the actual final rates in July and file them at that time. Colby noted that Minuteman expects that its final filed rates may be very different than the preliminary rate filing made today.
“We’ve joined many other plans across the country in calling attention to the unfair burden placed upon certain plans by the current Risk Adjustment formula. This growing coalition, called CHOICES, will continue to work with state and federal regulators to dampen the volatility the current administration of Risk Adjustment has forced into the market. In the meantime we have to budget responsibly to cover whatever situations may arise, and we will adjust as more information becomes available,” Colby said.
New Hampshire membership grew by 8,177 over the last open enrollment period, from 8,267 in 2015 to 16,444 this year.
Despite the challenge posed by Risk Adjustment, Colby said Minuteman is in strong financial shape, with a healthy medical-expense-to-net-premium ratio even after consideration of the so-called ‘3Rs’ federal programs (Reinsurance, Risk Adjustment, and Risk Corridor) of 86.5% versus the Massachusetts target of 88% and the federal targets of 80% and 85%, respectively, for the individual and small group business in New Hampshire. Additionally, Minuteman has a strong and stable balance sheet with $93 million in cash and investments on hand as of December 31, 2015, that more than covers all known and projected liabilities for 2015 and 2016. RBC was a robust 621% even after including all federal Risk Adjustment–related reserve charges.
Minuteman Health is a new member-governed, non-profit health insurance option for Massachusetts’ residents. The company intends to offer individuals and small businesses lower-cost high-quality care with unprecedented transparency, increased efficiency and its unique member-governance structure. Plan members will directly participate by electing the board of directors, becoming board members and providing input for cost management and service delivery. Minuteman will be marketed through their website, brokers and the Massachusetts Health Connector.
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