Virginia SCC to Optima Health: We offered you a chance to lower your rates and YOU BLEW IT!


Just in case anyone thinks state insurance regulatory boards can't be hard-core badasses, consider the Optima Health situation in Virginia which I wrote about a couple of weeks ago:

By early September, it was clear that Trump would indeed be cutting off CSR funding. With just a few weeks left before the final deadline to sign 2018 ACA exchange contracts, Optima suddenly announced that they were not only jacking up rates a whopping 81%, they were also pulling out of a large chunk of the state, leaving large areas at risk of "going bare" without any ACA carriers whatsoever.

...Then, on September 14, with just days to spare and thanks to what I assume were some pretty intense backroom deals being made, Anthem suddenly announced that they were back in the game after all!

...That brings me to this year. Virginia was once again the first state to post preliminary rate changes for 2019, and both Anthem and Optima had a very different request: A mere 5.6% increase for Anthem and a 2% drop in average premiums for Optima...a few weeks ago, Anthem made another big announcement: They've decided to expand into moreparts of Virginia next year...including the Charlottesville region. Anthem lowered their average 2019 premium increase slightly (from 5.6% down to 4.9%)...but Optima didn't budge at that time.

Cut to a few weeks ago, where it appears that Optima suddenly realized that sticking with sky-high premiums in light of lower-priced competition moving back into town wasn't the smart play, so they decided to try and slash their rates after all...but they apparently had sat on their butts for too long:

Optima Health Plan ("Optima"), by counsel, pursuant to Rules 100(B) and (C) of the Rules of Practice and Procedure of the State Corporation Commission ("Commission")1, hereby files this petition ("Petition") for:

(a) a declaratory judgment affirming Optima's right to submit rate revisions to its 2019 Rate Filing and to have its previously submitted rate revisions considered by the Bureau of Insurance ("BOI"); and

(b) an order directing the BOI to promptly consider such filing as soon as possible and in accordance with the federal deadlines pertaining to the Federally-Facilitated Marketplace ("FFM") developed by the Centers for Medicare and Medicaid Services ("CMS").

As time is of the essence, Optima further requests that the Commission establish an expedited schedule for the disposition of this Petition, including setting a hearing at the earliest day possible to ensure compliance with federal deadlines.

The state Board of Insurance didn't take too kindly to that, pointing out that:

Optima's Second Revised Filing was submitted after the August 10 deadline not because the Company was prevented from making the same changes earlier, but because it was previously unwilling to do so. The reality is: Optima was unwilling to offer better rates, as reflected in its Second Revised Filing, until after HealthKeepers came forward on August 10 with a more competitive bid, a fact that the Petition fails to mention.14

In other words, Optima knew what the timeline was, knew what the deadlines were, and waited until it was too late before deciding to cut their prices.

Well, apparently the Virginia State Corporation Commission agreed, because on Friday, this happened:

Optima Health Plan’s post-deadline effort to more substantially lower its 2019 health insurance premiums on Virginia’s Affordable Care Act marketplace has been rejected by state regulators — and a local group that formed in protest of Optima’s rates is happy about the decision.

The case before the State Corporation Commission involved a back-and-forth about whether Virginia’s Bureau of Insurance, the body responsible for reviewing health insurance rates in the state, set reasonable requirements for filings, and whether private companies can revise filings to make them more competitive.

After being surprised by a last-minute decision by Anthem HealthKeepers to return to the ACA marketplace in Central Virginia, Optima asked to reduce next year’s premiums, but missed the state deadline for revising rates. The company claimed Anthem’s re-entry would cost Optima the majority of its customers and about $400 million in revenue. In a decision Thursday, the commission upheld the bureau’s ability to set deadlines and chided Optima for its late attempt to lower rates.

“The decision not to submit its most competitive rates by the August 10th filing date was Optima’s, and Optima’s alone,” the commission wrote. “Only after seeing a more competitive (and timely submitted) rate filing did Optima attempt to submit lower or more competitive rates after the filing date.”

...The commission agreed, finding that the bureau has consistently and reasonably used deadlines to oversee rate filings and that inconsistency would jeopardize the state again.

“Virginia’s individual market has been affected even more than many other states, as evidenced by the disruption last year, when it appeared for several months that consumers in many counties and cities in Virginia would have no option at all for obtaining insurance in the individual market,” the commission wrote in its decision. “The Bureau’s actions in 2018 have been reasonable and rational responses to individual market conditions it did not create, but which it must consider in carrying out its statutory duties.”

The most interesting twist here is that the citizen's group I've written about before, which was formed specifically to protest Optima's insanely high rate hikes in the first place, actually supports this decision:

The grassroots group Charlottesville for Reasonable Health Insurance, formed in the wake of the revelation of Optima’s 2018 rates, wrote a statement supporting the bureau.

While this may seem backwards/nonsensical at first glance, I completely understand their rationale:

“As a grassroots consumer advocacy group that exists only because of Optima’s price-gouging in 2018, particularly in the Charlottesville area, we want to make it clear to the [bureau] and the [commission] that it is NOT in consumers’ best interest to allow Optima to reduce its rates after an established deadline and only because a competitor (Anthem) reentered their markets with better pricing,” the group wrote on its Facebook page on Sept. 5.

...“Enforcing the Aug. 10 deadline [to revise 2019 rates] and denying Optima’s petition means Optima and all other insurers will understand in future years that it is a risky proposition to overcharge consumers in uncompetitive markets, and that doing so may result in unexpected market share losses if a competitor increases its service areas late in the process,” the group wrote. “Insurers will now be motivated to offer competitive rates even when it seems they may have monopolies.”

Optima decided to take unfair advantage of what they thought would be their monopoly market position. When that status changed, they scrambled to reverse themselves...which, if they'd been successful, would've meant that they could game the system either way: Play fair when there's competitors around, price gouge when there isn't. By slamming the door shut on their 2019 rates, they'll presumably learn a painful lesson about keeping their prices reasonable whether they "have" to or not.