MONTPELIER -- Vermont's largest health insurer said Tuesday that any reduction to its requested rate increase for plans it offers on the state's health exchange could hurt its solvency, but consumer advocates argue the increase will make coverage less affordable.
Blue Cross Blue Shield of Vermont is requesting an average 9.8 percent rate increase for its Vermont Health Connect plans in 2015. That translates to a $20 to $75 monthly increase in premiums, depending on the plan.
Blue Cross covers more than 90 percent of those who purchased commercial insurance through Vermont Health Connect, the state's health insurance marketplace.
"That's a significant portion of our business," Ruth Greene, the company's chief financial officer, told state regulators during a hearing on the request.
Greene said Blue Cross is committed to the exchange's success and continues to work closely with the state through contingency plans that have helped prop up the shaky Vermont Health Connect website.
That can only continue if the company has a "solid financial foundation" that will allow it to pay claims submitted by its members on the exchange, she said.
The Green Mountain Care Board will set rates in September for plans offered on the exchange next year. Another hearing will be held Wednesday for MVP Health Care, the other insurer participating in the exchange.
It's important to protect insurer solvency through the rate setting process, said board member Con Hogan, a former head of the Agency of Human Services, but it's also the board's job to "craft the best deal for people buying health insurance that we possibly can."
The Office of the Health Care Advocate, a Legal Aid project, represents consumers in the rate-setting process. Lila Richardson, an attorney for the project, said her office is concerned that Blue Cross' rate request would make premiums unaffordable for some people.
Low-income Vermonters will continue to receive subsidies, but those who are not will experience "the full weight" of a rate increase, she said. The same is true for employers in the small group market who will likely pass the additional cost on to employees, she said.
Blue Cross' membership has grown 25 percent in five years, increasing revenue and allowing it to scale for greater efficiencies, Greene said. But at the same time, it's paying more in claims to cover the growing cost of medical services.
The company's income and surplus must keep pace with the increased cost of medical services, Greene said. Insurers are required to maintain a surplus to cover unanticipated costs.
The lack of "claims experience" for the exchange population - meaning Blue Cross doesn't have a good idea of what it will cost to insure people on the new system - increases the importance of having sufficient revenue, Greene said.
However, an actuarial firm hired by the Green Mountain Care Board made several recommendations for adjustments that would shrink the Blue Cross rate increase.
The largest portion of Blue Cross' requested increase is to cover federal charges that help pay for Affordable Care Act subsidies. The board's actuaries said the Blue Cross estimate "rounded up" what it would likely pay in federal fees and they suggested a smaller increase.
Blue Cross said it received a preliminary tax bill from the IRS confirming the need for an increase.
There is also uncertainty about whether Blue Cross' estimates of its savings through a federal reimbursement program for insurers are reasonable.
The transitional reinsurance program is meant to soften insurers' entry into exchange markets by paying back a portion of an individual's medical costs. The program is meant to give insurers time to calibrate their rates, and is expected to be phased out after three years.
At issue is whether the feds will reduce the minimum amount of medical claims that need to be billed for an individual before the reimbursements kick in.
Last year, the Centers for Medicare and Medicaid Services reduced the minimum from $60,000 to $45,000. The official rule for 2015 increases that figure to $70,000, but in a preamble to the rule, CMS officials write they "intend to propose" a reduction to $45,000 again in 2015.
Blue Cross argues that its rate should be based on the rule as written, while the board's actuaries and an actuary retained by the Health Care Advocate argue the rate should be based on CMS' stated intention, especially in light of last year's reduction.
Using the lower minimum amount of $45,000 in claims would reduce Blue Cross' rate increase by 2 percent.
Paul Shultz, a Blue Cross actuary, said it would be "imprudent" to assume CMS will lower the amount, because if CMS does not, the Blue Cross rate won't cover its costs. Research the company has done shows insurers with significant market share in an exchange are using the $70,000 figure, he said.
Donna Novak, the actuary retained by the Health Care Advocate, said the Blue Cross affiliate in Rhode Island is using the lower $45,000 figure in its rate request. MVP Health Care is also using the lower figure.
If CMS makes the reduction to $45,000, Blue Cross would find a way to pass those savings on to members - either through a smaller rate increase in 2016 or through a direct rebate, Schultz said.
If the board reduces the Blue Cross rate and CMS does not lower the minimum amount to $45,000 - the company would be forced to make up the difference in 2016, he said.