Reversing course, new insurance market might negotiate rates

With four months to go before a new health insurance marketplace opens to the public, the Senate on Wednesday approved a proposal requiring it to take a more active role in determining the costs of the plans it sells.

The marketplace, known as the health insurance exchange, is being established as part of the federal health reform law, and is expected to sell coverage to 80,000 to 100,000 previously uninsured state residents. The staff and the board of the exchange previously opposed the idea of negotiating rates with insurers seeking to sell their products through the market.

But the board has since decided it wants to weigh in on what customers will be charged, said state Healthcare Advocate Victoria Veltri, a board member who has been pushing for a more active role.

The bill, which now goes to the House for consideration, would require the exchange to negotiate premiums with insurers that want to offer plans through the exchange. It has the support of consumer advocates, who say it can bring down costs, but is opposed by the insurance industry, which said it could complicate the implementation of health reform.

It comes amid anticipation about how much it will cost to buy health insurance once the provisions of health reform take effect. The insurance industry has warned that consumers will experience “rate shock” when they see the premiums required to comply with the new provisions of the health reform law, although critics of the industry say those concerns are exaggerated. So far, two insurers have submitted rate proposals to the Connecticut Insurance Department, which must approve all rates before they take effect.

Under the proposal that passed the Senate Wednesday, the exchange’s role in addressing rates would be in addition to what the insurance department does.

Veltri said the exchange’s board will have its own actuary review the rate proposals that carriers submit and examine whether they exhausted all options for keeping costs down. It will use existing channels to weigh in on the rate proposals — such as the public comment period the insurance department provides when reviewing rates — and the actuary might work with the carriers, Veltri said. She described it as a way for the exchange to do everything it could to ensure that the rates are as low as possible.

“In the end, making this thing successful means that consumers will buy it,” Veltri said. “We need to exert the leverage we have as a board to make sure that the rates are appropriate.”

But Keith Stover, a lobbyist for the Connecticut Association of Health Plans, said adding another layer of review for rates would be problematic.

“We have one rate-making authority in Connecticut and that’s the Department of Insurance,” he said. “I don’t know how you have parallel rate processes. I don’t know how you can claim that the process at DOI is actuarially based and actuarially sound, and then have a second process where theoretically there’s an insistence that you deviate from what’s actuarially sound. So I’m puzzled by it and disappointed.”

What changed?

Republicans raised many questions about the bill during a debate that stretched more than three hours.

Sen. Michael McLachlan, R-Danbury, pointed to the exchange board’s opposition last fall to negotiating rates.

At the time, the exchange’s staff, including CEO Kevin Counihan, opposed the idea of negotiating rates with carriers. While advocates argued that doing so would help keep the cost of plans down, the exchange staff said being too selective could keep carriers from offering products through the exchange, leaving customers with fewer choices. And they argued that the exchange would have a difficult time negotiating in the first year because there are so many unknowns, including how big its pool of customers will be.

The exchange’s board decided in November that it wouldn’t negotiate with carriers in the first year, but would develop a plan for ways to bring down costs and promote affordability, including the possibility of negotiations.

“This bill really is very different from the CEO’s point back in November of last year, and I’m just trying to understand what’s changed in the insurance market according to the professionals in the insurance market,” McLachlan said during the debate Wednesday. “What’s changed that is requiring the General Assembly here now, six months later, to change that and require negotiations for insurance companies to participate?”

“I believe that Mr. Counihan feels now is the time for negotiation of rates to be possible,” said Sen. Joseph Crisco, D-Woodbridge, chairman of the Insurance and Real Estate Committee.

Veltri said that many things have changed in recent months, including additional regulations released by the federal government. She said the exchange board wanted to take a more active role in ensuring that prices were as low as possible. That isn’t a criticism of the insurance department’s review process, she added.

“If one set of eyes is good, two sets of eyes are better,” Veltri said.

Jason Madrak, Access Health’s chief marketing officer, said Wednesday that the exchange staff was “agnostic” about the proposal. If the will of the people is for it to take a more active role in establishing prices, that’s fine, he said.

“This is just one of the many tools that are available,” he said.

Two price proposals in

Madrak and Veltri said they have been encouraged by the rate proposals submitted so far.

HealthyCT, a new nonprofit insurer, said its average monthly premiums would be $427 for individuals and $445 for small groups. ConnectiCare Benefits didn’t submit averages, but said that its base rates — the starting point, from which costs would be adjusted up or down depending on age, location and the specific plan a customer selects — would be $397 for individuals and $716 for small groups.

They’re not final because the insurance department has not yet issued decisions.

But Ellen Andrews, executive director of the Connecticut Health Policy Project, has been disappointed. She said the proposals so far are too high and could lead some people to choose not to buy insurance.

Andrews said other states, where the exchanges take a more active role in setting prices, are seeing more promising rate proposals.

Like Stover, she was surprised that the exchange bill moved forward in the Senate. But unlike him, she was pleased.