HealthSource RI refused to sell 2 low-cost insurance plans

RI Obamacare marketplace says average premiums will decline by 0.6% in 2017

Healthsource RI enrollment fair

PROVIDENCE, R.I. (WPRI) – Health insurance premiums on Rhode Island’s Obamacare marketplace will dip slightly next year, but they’d be going down even more if state regulators hadn’t rejected two low-cost options Neighborhood Health Plan wanted to offer.

Officials at HealthSource RI, which handled insurance coverage for about 35,000 people this year, say the average premium for its enrollees will decrease by 0.6% in 2017. By contrast, the federal government estimates that premiums in the 39 states which don’t operate their own marketplaces will jump by 22% on average.

“I would say it’s a testament to the competitive marketplace that we foster here in Rhode Island, as well as the commitment – our commitment and the commitment of our carriers – to providing high-quality, affordable health plans,” Zachary Sherman, HealthSource RI’s executive director, told Eyewitness News on Wednesday.

HealthSource RI’s fourth open-enrollment period begins Tuesday and lasts until Jan. 31. Only two insurers – Neighborhood and Blue Cross & Blue Shield of Rhode Island – will be offering plans to individuals in 2017. A third carrier, UnitedHealthcare, declined to do so after attracting few customers this year and last.

The decline in average premiums for individuals is being driven by Neighborhood, a relative newcomer on the state’s insurance scene, which says its average premium will decline nearly 6% in 2017 compared with this year. Blue Cross says a weighted average of its premiums shows they will increase 5.9%.

“Here in Rhode Island we’ve been fortunate,” Neighborhood President and CEO Peter Marino told Eyewitness News. “Neighborhood has really focused on making sure that we provide affordable plans for folks.”

HealthSource fears loss of tax credits

However, Neighborhood’s original cost-cutting push was even more ambitious.

Earlier this year, Neighborhood won approval from the health insurance commissioner’s office to sell three new low-cost plans on HealthSource. But when Neighborhood asked HealthSource to certify the plans and allow them to be offered on the marketplace, Sherman’s team rejected two of the three.

“We’re disappointed that that decision was made by HealthSource,” Marino said. “We think it wasn’t the right decision. But we’ll move forward. We still have the lowest-priced plans on the exchange.”

HealthSource’s decision to reject the two low-cost Neighborhood plans would appear somewhat at odds with President Obama’s rationale for creating the marketplaces, which had much to do with increasing competition between insurers to reduce prices.

A Kaiser Family Foundation analysis, which originally included the two Neighborhood plans rejected by HealthSource, suggested they would have lowered the average premium for HealthSource’s second-cheapest mid-tier plan by 14% in 2017. Instead that number will only decrease by 0.5%, according to HealthSource.

But HealthSource officials said their decision was driven by the federal formula for premium subsidies, which are provided to about 90% of the Rhode Islanders who buy insurance through the marketplace.

The amount of those premium subsidies – which are technically tax credits – is tied to average costs across all plans in a state’s marketplace. Adding the two low-cost Neighborhood plans “would have the effect of making all of the plans that we offer less affordable,” Sherman said, because it would have pulled down the amount of tax credits provided by the federal government to subsidize every plan.

“Had we not taken this action, the average rate that our customers would pay after the tax credit would go from $107 that they pay now up to $152 next year,” Sherman said. HealthSource estimates the amount of federal subsidies provided to Rhode Islanders would have dropped by nearly $17 million.

Lindsay Lang, HealthSource’s chief of staff and general counsel, said the marketplace has “to act in the interest of our customers” and did so by rejecting the two Neighborhood plans. “We need to ensure these plans are accessible to Rhode Islanders, and that means protecting their affordability,” Lang said.

We disagree with their rationale’

Neighborhood isn’t convinced.

“We disagree with their rationale,” Marino said. “We think they should have been offered because Rhode Islanders should have a wide range of choices. Customers in Rhode Island are smart folks. They know what they need and want and to have more options would have been better for them.”

HealthSource’s own budget is also tied to the cost of the plans it sells. Under an agreement approved by lawmakers last year, the marketplace is financed by levying a fee equal to a percentage of premium revenue.

Sherman said he wouldn’t rule out such plans being allowed onto HealthSource in the future. “We have great interest in new, innovative and cheap plans to come into the marketplace,” he said.

Blue Cross’s market share among individuals who buy plans through HealthSource has plunged from 97% in 2014 to 47% as of last year, and might have fallen further in 2017 if Neighborhood’s low-cost plans had been approved. Blue Cross lost $52 million during the first half of this year, but its chief financial officer said its HealthSource plans’ profitability had been on target.

“Blue Cross & Blue Shield of Rhode Island has a long history in the individual market, predating the Affordable Care Act,” spokeswoman Stacy Paterno said in an email. “Our current suite of products and their pricing is based on our detailed data on trends in utilization, hospitalizations, pharmaceutical costs and the other aspects of care.” Fees and taxes are another factor, she said.

Meanwhile, HealthSource officials are bracing for the possibility of technical problems when open enrollment begins Tuesday, because they’ll be using the same $364-million Unified Health Infrastructure Project (UHIP) IT system that went online last month and has run into issues.

HealthSource released the following information about open enrollment:

Rhode Islanders once again have the option to get in person help at the HealthSource RI walk-in center at 401 Wampanoag Trail in East Providence, or they may go online at HealthSourceRI.com or call 1-855-840-4774. HealthSource RI’s hours are Monday – Friday 8 a.m. – 7 p.m.

HealthSource RI will also be adding Saturday hours during Open Enrollment, 8 a.m. – 7 p.m., with the exceptions of the Saturday following Thanksgiving, Christmas Eve and with limited hours on New Year’s Eve (9 a.m. – 2 p.m.). …

Rhode Islanders who want their 2017 coverage to begin on Jan. 1 must pick a plan and pay for their coverage by Dec. 23, 2016. If auto-renewed, customers’ coverage will continue in 2017 as long as they pay their health insurance bill by Dec. 23.

Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com. He writes The Saturday Morning Post and hosts Executive Suite. Follow him on Twitter, Facebook and Instagram