State Insurance Commissioner Monica Lindeen says the health insurance premiums one company is charging in Montana next year are, “unreasonable,” and that those proposed by two other companies were too low and needed to be adjusted upward.
In June, Blue Cross Blue Shield of Montana asked for an average year-on-year price increase of more than 65 percent. Following public hearings, Blue Cross adjusted their rates downward, to a little over a 58 percent increase.
Not good enough, says Commissioner Lindeen.
"I found their individual and small group rates to be unreasonable," she said. "It means I think they're too high."
Lindeen only has the power to review health insurance premiums, not to accept or reject them. And she can only review a small segment of Montana's health insurance market. Most Montanans get their insurance through their jobs with larger employers, or through government programs, and the state insurance commissioner has no authority over what they charge.
Blue Cross Blue Shield of Montana Spokesman John Doran says that last year, his company lost money selling individual and small group health policies in the state.
"For every dollar that we brought in in premium revenue, we spent $1.26 in medical costs alone," Doran says. "That doesn't even take into consideration the cost of doing business. So, the dollars that we earned in premiums weren't even enough to cover the medical costs for this market. We need adequate rates that cover the true costs of medical services, and the costs of doing business."
Doran says that based on their analysis, Blue Cross needs to raise rates in the individual and small group markets an average of 58 percent next year to cover their costs and put away some money in reserve in case their estimates are off.
"Our reserves are there for times like this, where we sustain losses in a short-term," Doran says, "and so, in our 2017 rate filing, and it's very complex, but our portion to reserves is six percent. Now, keep in mind that over the last two years, not only have we lost money, we have not put away anything into reserves. And so the first portion of a rate filing that gets eaten up by medical costs is the contribution to reserves."
Lindeen disagrees with Blue Cross Blue Shield of Montana's assessment.
"As an insurance commissioner it's always my job to make sure that the companies have the money to pay claims," she says. "We in no way have said that they shouldn't have that much money to pay the claims. They have in our opinion gone above and beyond wanting to pay the claims."
The analysis Lindeen's office did that's at odds with Blue Cross Blue Shield's analysis of how much they need to charge won't be made public until Monday. The insurance company has declined to make it available before that legally-required release date.
Blue Cross has the biggest share of Montana's individual and small group health insurance markets. Two other companies sell in that market, too: PacificSource and Montana Health Co-op. Lindeen told those companies that the rates they were requesting for 2017 were too low.
"They actually had to adjust theirs upwards slightly. We didn't feel like they were charging enough in order to play claims," she says.
In June PacificSource said it was planning a 20 percent rate increase for next year. Now it's set its increase at more than 27 percent.
(A spokesman for Lindeen's office says it's impossible to make an apples-to apples comparison of PacificSource's rate adjustment, because the company adjusted the parameters of the insurance policies it's offering between June and now).
Montana Health Co-op has set its average rate increase at nearly 31 percent. That's up from the 22 percent the company originally announced in June.
"These rate increases in the individual market only affect those people who are purchasing in the individual marketplace, and who do not qualify for tax credits," Lindeen says. "So we're looking at somewhere around 35,000 Montanans – 38,000 Montanans."
The U.S. Department of Health and Human Services says that more than 70 percent of Montanans who buy health insurance in the individual market qualify for tax credits that bring their prices down to $75 a month or less. That's even with substantial rate hikes in 2017.
Montana's insurance commissioner has the power to review rates, and to make insurance companies publicly justify the prices they're charging, but does not have the power to reject rates.