The Arkansas Insurance Department is submitting health insurance rate increase requests to the federal government for approval on Tuesday and state officials are already expecting an even larger hike this time next year.
On Monday, Insurance Commissioner Alan Kerr walked members of the Health Reform Legislative Task Force through premium rate proposals.
Arkansas Blue Cross Blue Shield initially submitted a rate hike request of 14.7 percent but state officials determined 9.7 percent to be more appropriate. Kerr told legislators the rate is a “compromise” he thinks is “palatable” to the interests of Arkansans and the insurance company. But the commissioner, prompted by the task force’s co-chair, State Majority Leader Jim Hendren (R-Gravette), said curbing the rate for 2017 doesn’t mean the difference won’t show up in 2018.
“Whatever rate we don’t take this year, if we make no changes at all, no course corrections at all, then yes we’re looking probably at a larger rate increase next year,” said Kerr. “We may be putting this off for another year. What that does is give us something that’s palatable and affordable for the next 12 months while we make course collections.”
The state Insurance Department said on average premium rates will increase 9.1 percent across plans from all carriers. From 2014 to 2015 the state’s premiums – contrary to trends nearly everywhere – went down about 2 percent on average. 2015 to 2016 saw an increase of just 4.3 percent across plans offered on the Arkansas Health Insurance Marketplace. The Affordable Care Act set up exchanges for private insurers to offer plans to be subsidized, primarily by federal funds. Rate increases over 10 percent require state and federal approval from the Department of Health and Human Services Centers For Medicaid Services.
Commissioner Kerr emphasized that Arkansas’s rates are still well below increases proposed in most of the country and especially in the region.
“Alabama is looking at a 39.3 percent increase Mississippi 32 percent increase, Missouri 34 percent, Tennessee 54, Texas 57. There’s a lot of activity going on around us,” Kerr said.
Committee Chair Charlie Collins, a state Representative from Fayetteville, offered a dairy bar-inspired argument for why marketplace rates are increasing.
“If you ran a free buffet, before it was free Jimmy ate two hamburgers. We’re going to say now that it’s free Jimmy can probably only stuff down one more hamburger. It never works that way. Jimmy brings a suitcase and sticks 500 hamburgers in his suitcase. Suddenly Jimmy goes where he had to pay buying two hamburgers to having 502 hamburgers and we’re stunned it’s 50 percent increase, or 100 percent increases or whatever it is,” argued Collins. “The reality is that was put in motion by Washington D.C. and we cannot control it.”
State Senator Linda Chesterfield (D-Little Rock) offered a different train of thought in a question to the commissioner.
“It would stand to reason that if you had a quarter-million people who never had health insurance that the cost of health insurance would go up.” Chesterfield asked, “Would that be a correct assessment Mr. Kerr?”
Kerr replied, “Historically, as we’ve seen that last three years, yes.”
Chesterfield hit on a point Kerr mentioned earlier in his remarks.
“If I’ve never had health insurance before and I get to go the doctor for the first time ever with diseases and conditions that have festered, costs are going to go up. If however, I stay with that doctor for a period of time. Should not the cost of care begin to go down because the initial cause is invariably higher than costs that come after. Does that make sense to you?”
Kerr agreed, “When you first go in to evaluate you’re going to have to run tests and so forth. Once they have that baseline, it’s a maintenance situation from that point on. I call in deferred maintenance.”
If insurance carriers reject federal regulators decisions to lower proposed rate hikes, the insurer is not allowed to sell policies on the state’s marketplace for five years. Over 250,000 low-income Arkansans have marketplace plans nearly entirely subsidized, as part of the private option/Arkansas Works. Over 60,000 Arkansans earning above 138 percent of the federal poverty level also receive subsidies.
The federal government currently foots the bill for Arkansas Works beneficiaries but the state will chip in 5 percent beginning next year. The state contribution will climb to 10 percent in 2020. The federal government covers the cost of subsidies for those earning too much to be covered under Medicaid expansion.
Federal health officials have argued that rate increases typically don’t reflect what actual consumers will pay when subsidies are factored in.
Earlier this month Blue Cross Blue Shield released a statement saying the company could lose $60 million on the plans next year.