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As Doctor Use Increases, Insurers Look To Raise Rates, Too

By MATTHEW STURDEVANT

September 24, 2012

Health insurers say Connecticut residents are visiting their doctors more frequently and, perhaps not surprisingly, those insurers are asking to raise their rates on average 10 to 12 percent next year, meaning medical premiums continue to grow much faster than other consumer goods.

Requests for rate increases submitted to the Connecticut Insurance Department have ranged from 5 percent to 15 percent in recent months. While those increases, some of which already have been granted for 2013, could take even larger chunks out of family income, they are not as steep as the 20 percent or 30 percent increases sought in 2010.

Interestingly, though, the greater use of medical services and the higher insurance rates might be a result, in part, of improvements in the economy.

"If the economy turns around and we're seeing an uptick in utilization, is it because people are feeling better and they're willing to pay that co-pay or co-insurance or deductible?" asked Paul Lombardo, an actuary with the Connecticut Insurance Department, which regulates health insurance rates. "Or is it because they didn't go to services they could have gone to before, and now it's much worse?"

It might be both.

It's a combination of chronically ill people needing more serious care, and an increase in the use of preventive services and disease-management programs designed to rein in growing medical costs in the long run, said Dr. John Foley, president of the Connecticut State Medical Society, the state's largest professional network for physicians.

"We've seen this over many years: The patients who are actually admitted to the hospital now, compared to five or 10 years ago, are a lot sicker, and they have a lot more significant medical issues and problems, and so their care is much more complex," said Foley, who also is the director of heart-failure services at William W. Backus Hospital in Norwich.

The health care industry also reports that in trying to cut back on expensive hospital stays, it is focusing on preventive care and disease management, increasing the number of people who use those services.

"As you try to make that shift … not admitting people [to a hospital] and taking care of them in the community, you're going to see a significant increase in utilization in the community, and that makes sense," Foley said. "While there may be more charges for care in the out-patient, it's an investment in keeping people healthier and out of the hospital, which is really the goal for everybody."

But it means more upfront costs.

Health insurance companies have asked state regulators to increase prices by 10 to 15 percent for more than 189,800 customers in Connecticut, and by 5 to 9.9 percent for an additional 53,000 policyholders.

Not all health plans, however, are regulated by the state Insurance Department. For example, large employers that are self-insured determine how much employees should contribute to the cost of health care.

Here are some examples of the average rates insurance companies requested this year for small-group health plans: Aetna proposed increasing premiums by 13.8 to 14 percent for about 39,300 customers; Anthem Blue Cross and Blue Shield in Connecticut is proposing a 13.8 percent increase for 52,000; ConnectiCare asked for 12.8 to 13.5 percent on more than 16,400 policyholders.

The Insurance Department can approve, modify or reject proposed health-insurance rates. Lombardo, the state actuary, said that in its review of rate requests, the state looks at an insurer's recent experience with paying medical claims, the history of claims and actuarial models. Then it makes a ruling.

For example, Aetna asked for 14 percent in one group of small-group plans; the department approved 12.6 percent. Oxford Health Plans — part of UnitedHealthcare — asked for 8.7 percent and was approved for 7.4 percent. ConnectiCare asked to decrease rates by 0.91 percent and regulators said the prices had to decrease by 3.4 percent.

Employees will learn soon of any approved increases.

It's fall — the season when employers typically offer a selection of health plans to their workers for the upcoming year. Many in Connecticut — about 60 percent, or 2 million people — had health insurance through an employer in 2009-10, according to the most recent information available by the nonpartisan health-economics and policy group Kaiser Family Foundation. That includes the 230,000 policyholders whose plans have been reviewed for a rate change starting next year.

Connecticut's largest health insurer by membership, Anthem Blue Cross and Blue Shield in Connecticut, is increasing premiums in its small-group plans, which "are driven primarily by the underlying growth in costs associated with medical services and increased utilization, as well as new mandated benefits," Anthem spokeswoman Sarah Yeager said.

"Anthem's individual [market] rate increases are driven by many factors, but primarily by increasing health care costs," Yeager said. "These factors are exacerbated by the downturn of the economy, as many healthy individuals are choosing to not purchase coverage, to drop coverage or to seek out less expensive coverage."

Less expensive insurance coverage typically carries higher deductibles and co-pays, meaning people must pay more out-of-pocket before insurance kicks in. That might cause some people to put off doctor visits, exacerbating a health issue that will cost more to treat later, Foley said.

Aetna also has noticed policyholders going to the doctor more often, though, and Cigna anticipates it.

"When the economic downturn first hit, utilization of medical services did decrease as people adjusted their spending habits for many things, including health care," said Brian Cuddeback, vice president for sales and client management at Cigna. "While we have not seen a significant increase yet, we do expect utilization will return to normal as people readjust their spending habits."

At Aetna, the company is seeing health care use return "to more normal, historic levels, although increases are still slightly lower than pre-recession levels," said Aetna spokeswoman Susan Millerick. "The actual cost of those services continues to grow, but we are working creatively with health care providers to develop solutions to help slow that growth."

Insurers, doctor groups and hospitals have worked together in recent years to rein in costs. For example, insurers have started accountable-care organizations that pay doctors to reduce medical costs while meeting quality measures. Insurers and medical professionals also have pushed wellness programs and disease management.

Insurers and hospitals have had very public battles about the reimbursement rates insurance companies pay to hospitals. For example, Anthem Blue Cross and Blue Shield in Connecticut and Connecticut Children's Medical Center in Hartford were at a standoff that left the hospital out of the network from April 15 until a contract resolution in June. Anthem agreed to retroactively cover services at in-network rates, but the battle is one of many between insurers and hospitals that illustrate the intense pressure to hold down medical costs while still providing high-quality care.

"Many hospitals, they are on very tight margins," Dr. Foley said. "If they have a bad period or two, that can mean the difference between staying in business and not. Those are important concerns because, if you lose a hospital, you lose access to care. … You can't have access to high-quality care if you don't have hospitals and doctors in the communities."

Tina Lender contributed to this report.