State reduces 2021 rate-increase requests for health insurers

Insurance industry association disagrees with the decisions      

ALBANY — New York State has approved reduced rate increases for health insurers in the small-group market for the 2021 plan year.

The New York State Department of Financial Services (DFS) announced in mid-August that it approved a 0.9 percent rate increase for Excellus BlueCross BlueShield, a 1.2 percent rise for MVP Health Plan, and a 2.4 percent increase for UnitedHealthcare Insurance Co. of New York.

Rochester–based Excellus — Central New York’s largest health insurer — had requested a 4.4 percent increase for the 2021 plan year. Schenectady–based MVP Health Plan had sought a 4.1 percent hike and Minnetonka, Minnesota–based UnitedHealthcare (NYSE: UNH) had asked for a nearly 11 percent increase.

The average 4.2 percent rate increase for small-group plans is the “second lowest ever approved” by DFS during the last decade. 

DFS reduced 2021 requested rates for small-group plans 63 percent, which it says saved small businesses more than $565 million. Over 1.2 million New Yorkers are enrolled in individual and small group plans.

DFS said it reduced 2021 requested rates in New York’s individual market 85 percent overall, saving consumers over $221 million.  

Some health insurers are reporting record profits for the first half of 2020 due to the postponement of elective and non-emergency services, resulting in “lower claim pay outs than expected,” per DFS. 

Any excess premiums that insurers collected must be returned to policyholders under the Affordable Care Act, DFS said. 

Later in 2021, the federal Centers for Medicare & Medicaid Services will determine any rebates that may be owed to consumers based on a review of all 2020 claims. 

DFS noted “uncertainty” as to future claims and that profits reported so far this year could be offset by higher than expected claim payouts in the second half of 2020 and in 2021 as elective and non-emergency services resume. 

Additionally, the continued rise of health-care costs is the “main driver” of premium rates, “as in prior years,” DFS said. For the 2021 individual rates announced by the department, drug costs account for the largest share of medical expenses (37.7 percent), followed by inpatient hospital costs (17.3 percent), outpatient hospital costs (8.7 percent), primary care (7.7 percent), and radiology (6.4 percent).

Industry response

The New York Health Plan Association (HPA), which represents health insurers across the state, disagreed with the state’s reductions of insurers’ rate-increase requests.

“The premium rate requests health plans submitted in May were reasonable, reflecting the continued increases in the cost of prescription drugs, rising prices charged by providers, and the impact of the pandemic. We do not believe that the rates the Department of Financial Services approved fully account for these factors, particularly the costs associated with COVID-19,” Eric Linzer, president and CEO of the HPA, said in a statement about the DFS 2021 rate decisions. “Since the outset of the national coronavirus crisis, health plans have worked closely with the State and the Department to protect the health of New Yorkers, combat the spread of the virus, and address the economic impact of the pandemic. This has included eliminating cost-sharing for COVID-19 testing and treatment and for telehealth services, providing financial support to hospitals and others in the delivery system, and extending grace periods to individuals and small business, all of which have fiscal implications for health plans… as the final rates do not reflect the potential costs of testing, diagnosis and treatment for COVID-19 or fully recognize the cost of services deferred until 2021, we are concerned about the impact [the DFS] announcement will have on the long-term stability of the marketplace.”