Vermont's two insurers are asking regulators to approve rate increases for plans offered next year on the state's health care exchange.
Blue Cross and Blue Shield of Vermont, the state's biggest insurer, wants an average 5.3 percent hike for plans offered to individuals, families and small businesses.
The state's other insurer, MVP Health Care, is asking for an average 6.4 percent increase for those same types of plans.
The proposed changes are based in part on increased drug costs and higher hospital usage. But insurers also are factoring in an anticipated loss of customers due to the fact that, starting in January, the federal government no longer will penalize those who don't have insurance.
"As a result, it is expected that a number of healthy individuals will choose to forgo coverage and leave the single risk pool," Blue Cross' rate filing says. "This is expected to exert an upward pressure of 2.2 percent on premium rates."
The insurers' filings are the first step in the regulatory process. The Green Mountain Care Board, which oversees insurance rates, has scheduled three public hearings on the matter in late July.
Blue Cross and Blue Shield's hearing is scheduled for 9 a.m. on July 23 in Room 11 of the Vermont Statehouse. MVP's hearing will be held in the same place at 9 a.m. the following day.
Testimony is expected at each session from the insurers, the state Office of the Health Care Advocate and the Department of Financial Regulation. The board will take public comment at the end of each meeting.
The care board also will host a public comment session in Room 11 of the Statehouse at 5 p.m. July 25.
Additionally, the board is taking public comment from now through July 25 via the state's rate review website, email, mail or phone. Commenting instructions are available online.
The 2019 rate-increase requests are more complicated than usual due to a change at the state level.
Earlier this year, Vermont officials, legislators and insurers responded to the elimination of a federal health care subsidy by making a complex set of changes designed to control costs and tap into a different federal subsidy.
One byproduct of those changes was the artificial inflation of the cost of silver-level plans on Vermont Health Connect. Even though consumers won't actually pay those higher costs, they're reflected in the insurers' proposed rates for 2019.
So, on the surface, Blue Cross wants an average 7.5 percent rate hike for next year, and MVP's average is even higher at 10.9 percent. But the lower averages that don't account for artificially costlier silver plans — 5.3 percent for Blue Cross and 6.4 percent for MVP — are a better indicator of the increases consumers face.
"This percent change is the rate that is most comparable to previous filings and is the increase that will actually be experienced by Vermont individuals and small businesses," said Sara Teachout, a spokesperson for Blue Cross and Blue Shield.
Blue Cross and Blue Shield's rate request is much lower than last year, when the company asked for a 12.7 percent hike for 2018. The care board eventually approved a 9.2 percent increase.
Teachout said federal tax changes and the elimination of a federal fee are two factors behind the smaller rate-hike request for 2019. She also said the insurer, which covers about 240,000 Vermonters, is continuing to focus on containing costs and saving money where possible.
Nevertheless, Blue Cross says its costs are going up.
That's in part due to increased health care utilization, which drives up hospital revenues but also increases expenses for insurers.
Insurers also are dealing with continued increases in pharmaceutical costs: Teachout said the price of specialty drugs is growing at more than 20 percent.
"We work hard to negotiate rebates and discounts," Teachout said of efforts to reduce drug costs. "We're doing generic substitutions when possible. We're doing everything we can."
The pending loss of a federal mandate to buy health insurance also is playing a role in the insurers' requested rate increases.
A federal tax overhaul approved by Congress last year means that, as of 2019, there will be no financial penalty for the uninsured. Officials and insurers predict that will lead some portion of the population to drop their insurance, thus leading to higher premiums for those who remain insured.
Vermont legislators voted this month to enact a state "individual mandate" to buy health insurance. But that wouldn't take effect until 2020.
Blue Cross and Blue Shield has built an additional 2.2 percent premium increase into its proposed 2019 rates due to the loss of the federal individual mandate. That's not inconsequential, given that each percentage point is worth about $3.5 million in premium increases statewide.
It wasn't immediately clear how much of MVP's average proposed rate hike is due to the loss of the federal insurance mandate. But the company's rate filing makes clear that administrators are expecting some impact.
"It is assumed that a portion of members with claim costs that are significantly less than their premium will exit the market due to the lack of a (federal) financial penalty," MVP administrators wrote. "As healthier members drop coverage, the overall cost of the market will increase, as the remaining members are higher utilizers of their health coverage."
MVP's rate request for 2019 is similar to last year's, when the insurer asked the state for a 6.7 percent hike. The care board eventually approved a 3.5 percent increase for MVP.
The care board is expected to issue decisions on 2019 insurance rates in August.
Mike Fisher, the state's chief health care advocate, said his office will be involved throughout the regulatory process "to represent Vermonters and to make sure Vermonters' voices and concerns are heard whenever an insurance company proposes to raise its rates."
"We put considerable effort into understanding assumptions, checking the math and developing arguments around affordability and access to care," Fisher said.