Vermont: Carriers request 6.8% avg. rate hikes for 2021; #COVID19 impact is a big ol' ¯\_(ツ)_/¯
Annnnnd we're off! In the middle of a deadly global pandemic which has already killed more than 85,000 Americans and completely disrupted the entire U.S. healthcare system, private insurance carriers still have to go about preparing their annual premium rate change filings for 2021. This is a long, complicated process which begins a good nine months before the new plans and prices are actually enrolled in.
The task of setting 2020 premiums was the first time since the ACA went into effect which was relatively calm for insurance carrier actuaries. Unlike setting rates for 2014 or 2015, they weren't dealing with a complete overhaul of the entire insurance industry. Unlike 2016-2017, they weren't dealing with the prospect of ACA premiums being crippled for 3/4 of the country (via King v. Burwell) or the fallout of the Risk Corridor Massacre. Unlike 2018, they weren't dealing with how to deal with CSR rembursements being cut off or the entire ACA being repealed by Congress. Unlike 2019, they didn't have the unknown impact of the individual mandate being repealed to consider.
While there was still the 800-lb gorilla of the Texas Fold'em case (now called CA vs. TX), which could strike down the entire Affordable Care Act, they knew that the case wasn't likely to see final resolution for well over a year...and sure enough, it's not going to be heard by the U.S. Supreme Court until this fall.
2021 should have been the 2nd year of (relative) calm on the premium rate filing front--yes, there's still CA vs. TX to worry about and yes, the Presidential election will have a huge impact as well, but the rates for 2021 are locked in this year; any impact from either of those likely won't be felt until 2022.
And then...COVID-19 struck, throwing everything into chaos and uncertainty, from the healthcare industry to the economy at large. While things are a complete mess this year, what does it all mean for next year?
On the one hand, the cost of testing and treating COVID patients is no doubt massive, and the disruption is causing havoc among hospital systems and doctors offices in terms of supply, demand and employment...which will no doubt have an impact on healthcare service pricing. On the other hand, there's a ton of "elective", or at least non-emegency medical procedures which have been delayed or cancelled...but that's this year. How many of those procedures will be performed next year instead?
In short, it's a big fat question mark, and while actuaries will be poring over their data as carefully as they can, in the end 2021 is still very much a crapshoot.
With that in mind, let's look at Vermont, which only has two carriers serving the merged Individual and Small Group Markets:
Insurers File Proposed 2021 Vermont Health Connect Rates
Friday, May 8th, the Green Mountain Care Board (GMCB) received and began its review of the proposed 2021 health insurance rates for plans offered to individuals, families and small businesses through Vermont Health Connect. Blue Cross Blue Shield of Vermont (BCBSVT) is requesting an average annual rate increase of 6.3% over 2020 rates, while MVP Health Care (MVP) is requesting a 7.3% average annual rate increase. The rate filings will be posted online at ratereview.vermont.gov/ on Monday, May 11th .
1.4. Proposed Rate Increase(s)
The average increase is 6.3 percent. Increases for specific plans range from -0.7 percent to 13.3 percent. The range of increases is due to changes to the actuarial values and plan designs. Apart from the Catastrophic plan and the Vermont Select CDHP Gold, the increases range from 3.4 percent to 7.2 percent.
This memorandum details the methods and assumptions underlying the proposed 2021 premium rates for the State of Vermont’s individual and small group ACA compliant market. These products will be issued by MVP Health Plan, Inc. (MVP), a non-profit subsidiary of MVP Health Care, Inc. The rate filing has been prepared to satisfy the requirements of 8 V.S.A §5104 as well as the requirements of the Federal ACA including 45 CFR Part 156, §156.80. The premium rates are effective between 1/1/2021 and 12/31/2021. There are no benefit plans being retired, nor are there any new benefit plans being added. MVP modified several the benefits being offered, and the updated forms have been submitted in a separate SERFF filing. The rate increase including on-exchange Silver members (MVP’s revenue increase) is 7.3%, with increases ranging from 0.5% to 9.5%.
According to the filings, BCBSVT has 39.2K enrollees in the combined market, while MVP has 37K. Here's what that looks like:
OK, so they're asking for an average increase of 6.8%. That's higher than lasts year's national average, but actually lower than the 11.5% increase they had approved for 2020. What's the deal with COVID-19?
From BCBSVT's filing:
The various impacts of the COVID-19 pandemic will impact 2021 costs, and they will do so in both an upward and a downward direction. Based on information currently available, it is difficult to so much as predict an overall directional impact, particularly because future government actions will drive the timing and magnitude of many of the above considerations.
We believe that it is entirely reasonable to forecast that the ongoing pandemic will increase 2021 claims costs beyond the levels projected within this filing. However, because of the margin guidance provided in Attachment C (as discussed in section 126.96.36.199), the addition of a COVID related factor of any magnitude would be offset by a reduction in CTR of equal and opposite magnitude, resulting in no change to the premiums presented herein. Furthermore, based on information known at the time of filing, we see no reason to believe that the best estimate of the pandemic impact is a decrease in 2021 claims costs. We therefore include a COVID-19 impact of zero within the 2021 premium rates.
In other words, BCBSVT figures that the increased costs of the COVID-19 pandemic will be cancelled out by...the reduction in other costs by the COVID-19 pandemic. Huh.
What about MVP?
Line 17- Adjustment for COVID-19 Immunization Cost
MVP is assuming that a vaccine to prevent the novel coronavirus (COVID-19) will be tested and widely available in 2021. To account for the costs an immunization would add to claim cost, MVP is assuming that an immunization would be covered in full at the cost of $75 per dose. MVP is also assuming that 80% of the population would obtain the vaccine (based on an analysis published by Wakely Consulting), which corresponds to a PMPM claim cost of $5.00 PMPM ($75 per dose times 80% utilization PMPY divided by 12 months). This adjustment is reflected on line 17 of Exhibit 3.
Line 18- Adjustment for COVID-19 Pent-up Demand
As a result of the COVID-19 pandemic, elective surgeries and associated services have been postponed for effectively all of MVP’s service area. As of the time of the filing, both Vermont and New Hampshire have announced that they are allowing the ramp up of elective procedures again. Therefore, MVP is assuming that 2 months of elective surgeries have been canceled in 2020.
MVP analyzed its entire commercial population for 2019 and found that the claim cost related to elective services was $45.09 PMPM. To value what the delay of these elective services will be worth in 2021, MVP made the following assumptions:
- – Resumption of a normal level of elective services will begin in mid-May 2020
- – Twenty percent (20%) of elective services deferred during the 2 months will be eliminated
- – In order to recoup lost revenue, beginning in August 2020 providers will perform 110% of their prior elective service volume until deferred services were fully performed.
These assumptions combine to add $4.51 PMPM in claim cost for the time period of January to April 2021 (at which point all deferred services will be made up and providers will return to normal utilization levels). MVP is reflecting $1.50 PMPM ($4.51 PMPM for 4 months, converted to an annual PMPM) in this filing to account for the increased utilization.
In short, BCBSVT is assuming no net impact one way or the other, while MVP is tacking on an extra $10/month to cover what they assume will be a presumed COVID-19 vaccine plus pent-up demand of elective services pushed out from this year. If I'm reading it correctly, MVP figures their average 2021 premiums will run around $593/month (vs. $555 this year) so $10/mo makes up roughly 2.3 percentage points of it.
What we are seeing is two sets of actuaries looking at an incredible amount of known unknowns and probably several unknown unknowns and making good faith guesses (they call them projections as that justifies their hourly rate). BCBS-VT is systemically making a slightly more optimistic projection than MVP. BCBS could be right, they could be wrong. Given how ACA subsidies are structured, BCBS-VT optimism is giving them a slight pricing advantage and thus enrollment gain compared to a universe where there is a mandated set of uniform assumptions or a universe where the BCBS actuaries were as pessmistic as the MVP actuaries.