By JC Reindl
Some Michiganders who buy health insurance on the individual market will face double-digit rate hikes next year under rate changes approved by state regulators.
Citing the high costs of specialty drugs as well as pent-up demand among the newly insured, the state's largest insurer -- Blue Cross Blue Shield of Michigan -- received permission to raise its premium rates 11.4% for individual policies in 2016. And its Blue Care Network health maintenance organization will raise individual rates 9.7%. Both entities combined cover 310,000 people.
Last year, the state approved a 9.7% hike, on average, for Blue Cross marketplace plans.
"We've had some pent-up demand," said Rick Notter, director of individual business at Blue Cross. "You've had a lot of people who couldn't get coverage before, and now people are going to the doctor and getting things taken care of that maybe they had put off for years."
The Michigan Department of Insurance and Financial Services is responsible for reviewing, scrutinizing and approving rate changes sought by health insurers in the state for small employers and people buying insurance on their own. The department announced Tuesday that it had approved an average rate increase of 6.5% for individual market plans affecting more than 560,000 people.
The rate increase will be 1% for small group policies purchased by businesses with fewer than 51 employees. Those plans affect more than 345,000 people.
There have been reports of insurers across the country seeking double-digit premium hikes for 2016, often citing the pent-up demand for health care in the individual market and the rising costs of specialty drugs, such as those for cancer and the new Hepatitis C medication.
Under the 2010 Affordable Care Act also known as Obamacare, insurance companies can no longer reject sick individuals with pre-existing conditions.
"Many states are reporting rate increases well in excess of 10%, which is significantly higher than the rate of health care inflation," Patrick McPharlin, the insurance department's director, said in a statement. "We are pleased that Michigan consumers are seeing more modest increases." The department said it had actuaries review insurance companies' rate increase requests to ensure compliance with state and federal laws. Ultimately, every insurance company received the exact rate increase it requested.
Ryan Sullivan, policy director at Michigan Consumers for Healthcare, a nonprofit group, said it's not uncommon for health insurers in Michigan to get their desired rate increase approved by the state.
"These rates increases are requested and almost always approved, and it does make you question why they come in so accurately each time," Sullivan said.
The Insurance Department said in a statement that its actuaries conducted a thorough review of each request and considered the public comments received in June.
The individual plans are sold on and off the new online state exchange at healthcare.gov. Open enrollment for 2016 begins Nov. 1 and runs through Jan. 31.
Taxpayers, in general, will be impacted by these new rates because the Affordable Care Act's government subsidies will now increase to help cover the high prices for middle-income consumers.
The subsidies are available for consumers who make 400% of the federal poverty level or less. That means, for example, that a family of four with an income of up to $95,400 is likely eligible for some financial assistance. The lower their income, the bigger the tax-funded subsidy.
To prevent profiteering, the Affordable Care Act requires insurance companies to spend at least 80% to 85% of their premium dollars on actual claims -- not including administrative costs -- or else issue customer rebates. Blue Cross says it exceeds this requirement and spends 95% of its individual market premium dollars on claims.
Health care experts say that many Michigan businesses are dealing with the growing costs of employee health care by passing more of those costs on to workers and introducing high-deductible insurance plans that are less expensive for the business.
In contrast to its double-digit increases in the individual market, Blue Cross will raise small group rates just 1.7% in 2016 and lower its Blue Care Network small group rate 1.6%.
Health Alliance Plan will lower its small group rate 3.6%.
"When we looked at the current and past claims and the future medical expense containment, we were able to make some downward adjustments," said Steve Selinsky, director of new business for Health Alliance Plan. "It was a good situation when we went to file."
How big the rate hikes?
Largest individual plans:
Blue Cross Blue Shield +11.4%
Blue Care Network +9.7%
Health Alliance Plan +2.4%
Humana Medical Plan -4.9%
Priority Health +3.4%
Largest small group plans:
Blue Cross Blue Shield +1.7%
Blue Care Network -1.6%
Alliance Health +0.7%
Priority Health -2.1%
(c)2015 the Detroit Free Press