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Major insurers seek 2023 rate increases; small businesses see ‘rough few years’ COURTESY PHOTO

Major insurers seek 2023 rate increases; small businesses see ‘rough few years’

BY Friday, May 27, 2022 02:29pm

Michigan’s two largest health insurers again seek to raise small business rates for 2023 as medical claims rise and pandemic-related costs are considered for the first time.

Grand Rapids-based Priority Health proposes to increase premiums by a statewide average of 7.6 percent for its HMO product, according to a filing with state regulators. Priority Health Insurance Co. seeks regulatory approval for a 7.3-percent average increase for PPO and point-of-service health plans for the small group market that consists of employers with 50 employees and less.

Blue Cross Blue Shield of Michigan seeks to increase rates by 5 percent next year for its PPO plan for small employers. HMO subsidiary Blue Care Network proposes a 6.9-percent increase for 2023, according to rate filings to the Michigan Department of Insurance and Financial Services.

The proposals are statewide averages and may vary by specific employers. Regulators typically act on rate proposals in the early fall, just prior to the annual open renewal period for employers, many of which renew policies on Jan. 1.

Blue Cross Blue Shield’s proposed increases are similar to its rates approved for 2022 but are much higher than yearly increases that averaged 2.4 percent over the prior seven years.

Reflecting a growing number of medical claims, the 2023 rate proposals also for the first time factor in pandemic-related costs to test, treat and administer COVID-19 vaccines. In the pandemic’s first two years, health insurers largely absorbed those costs and “priced as if COVID wasn’t there” in rate proposals for 2021 and 2022, said Sandra Fester, vice president of Michigan business for Blue Cross Blue Shield of Michigan.

COVID-related costs for Blue Cross Blue Shield totaled $860 million in 2021 for fully insured members, Fester said. Those costs account for 1 percentage point in the insurer’s proposed rate adjustments for 2023, Fester said.

“COVID obviously brought in additional complexities that we had to account for,” she said. “Overall, I feel really good about where we landed, especially when you think of the past seven years. The reality is there’s been so much uncertainty centered around COVID. Also in ’21, we made a lot of decisions around absorbing some of those costs, but now that we’re two years in, I feel like we’re making the right move by incorporating that 1 percentage (point) because we want to bring stability in our rates. We’ve done that in the past and we’re being thoughtful about how we approach it.”

Blue Cross Blue Shield executives earlier this year reported that the company incurred $2.1 billion in COVID-related costs over two years that were not factored into present rates.

Minus pandemic-related costs, Blue Cross Blue Shield’s rate proposal for 2023 reflects current trends for medical and prescription drug claims, including high-cost specialty drugs and pent-up demand for people who delayed care earlier in the pandemic, Fester said.

More than 20,000 small businesses across the state subscribe to a Blue Cross Blue Shield health plan.

Small group health insurance premiums increased a statewide average of 7.1 percent for 2022 policy renewals across all carriers and products.

State regulators last year approved average increases of 5 percent each for Priority Health and Priority Health Insurance Co. for 2022. Blue Cross Blue Shield received regulatory approval for a 6.9-percent increase for 2022 policy renewals and Blue Care Networked earned approval for a 6.9 percent rate adjustment.

At Priority Health, rate proposals for 2023 were crafted using a 5.3-percent cost trend for inpatient and outpatient medical care and injectable medications, said Diane Wolfenden, the health plan’s vice president in eastern Michigan who oversees the small group market across the state. Prescription medications have trended up by 7.4 percent, largely because of higher pricing, Wolfenden said.

“The rate changes are higher than prior years, but we’ve really made it a point to keep it as low as we can based on current economic conditions,” she said. “We’ve been very thoughtful about the increase and tried to be minimal.”

Claims trends, COVID-related costs, and price increases at hospitals and other care providers hit financially by the pandemic were each built into Priority Health’s rate proposals, Wolfenden said.

“Providers are facing all sorts of cost increases in terms of running their business,” she said, citing staffing and nursing shortages that have driven up wages and the rising cost of supplies as inflation runs at a 40-year high in the U.S.

“As time goes on, we’d be naïve not to realize (inflation’s) having an impact there as well,” Wolfenden said. “They’re not insulated from that. They’re right in the thick of things.”

Priority Health has about 100,000 people enrolled in group health policies for small businesses, Wolfenden said.

Given the medical claims trends, COVID-related costs and rising prices for care, Small Business Association of Michigan CEO Brian Calley said in a recent weekly briefing for members that small employers can expect premiums to rise at a higher rate than what they’ve the past several years.

“It’s going to be a rough few years in terms of cost increases,” Calley said. “We’ve had a few years there where it did level off a little bit, but then kind of right back up.”

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EDITOR’S NOTE: This story has been updated with Sandra Fester’s current title as vice president of Michigan business at Blue Cross Blue Shield of Michigan.

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