The state Department of Financial Services said Tuesday that it would allow insurers selling plans to individuals to raise rates by 14.6% on average in 2018, with uncertainty about federal payments contributing to the hikes. Insurers had asked for a 17.7% increase.
DFS adjusted the rates upward by 0.6% on average to account for the potential loss of cost sharing–reduction payments that insurers use to cover out-of-pocket expenses for lower-income consumers. The Trump administration has not committed to making the payments indefinitely, opting to fund the provision of the Affordable Care Act on a month-to-month basis.
The department said rising drug costs, especially specialty drug spending, were the greatest driver of price increases, in addition to spending on hospitals, specialists and diagnostic testing. Congressional attempts to repeal the ACA "caused some insurers to raise rates to account for the uncertainty," according to DFS.
"It is time for the federal government to act to protect our insurance markets and consumers' health care coverage, by fully paying the cost-sharing subsidies to insurers, enforcing the individual mandate, and addressing the cost drivers of health care including ever-increasing pharmaceutical costs," said Maria Vullo, the state superintendent of financial services, in a statement.
About 350,000 people buy plans on the state's individual insurance marketplace or directly from health plans.
The impact of premium increases will vary based on buyers' income levels: Nearly 60% of customers who bought a plan on the marketplace last year were eligible for subsidies. The department noted that individuals purchasing the cheapest silver-level plan, the most common choice, would pay 5% less next year than in 2017.
In contrast to years past, the state's largest health insurance trade group said it was pleased with the scale of DFS' rate modifications.
"We are gratified to see a common commitment on the part of plans and DFS to ensure actuarially sound rates that maintain the viability of New York's robust exchange," Paul Macielak, president and CEO of the state Health Plan Association, said in a statement.
But HPA still wants further action. Macielak said rising pharmaceutical costs and consolidation among hospitals "continue to go unchecked" and an Affordable Care Act tax on health insurance is also driving higher rates.
Among downstate insurers, CareConnect will implement the biggest rate hikes in both the individual and small-group markets. The insurer said in June that it needed a significant rate increase in the small-group market because of the federal risk-adjustment program, which aims to redistribute funds to plans with sicker members from those with healthier ones. CareConnect said the program's methodology is flawed.
The Northwell Health–owned insurer requested an average rate increase of 29.7% in the individual market but DFS ultimately approved a 23.5% increase. The state initially reduced the insurer's requested rate increase by 6.6% but then boosted it by 0.4% to account for uncertainty around future cost sharing–reduction payments. Care Connect will raise rates 15.5% in the small-group market.
Fidelis Care, which controlled the largest share, 21.3%, of the individual market last year, will raise rates 10.2%.
UnitedHealthcare saw the biggest disparity between its requested and approved rate increases in the individual market. The insurer, which has only a 1.8% market share, requested an average rate hike of 38.5% for its individual plans. The Department of Financial Services ultimately approved a 20% increase.
"New York approves 14.6% rate hike for health plans" originally appeared in Crain's New York Business.