Driven by higher medical claims trends, insurance rates for small business and individual health policies would increase significantly in 2022 compared to recent years under rate proposals before state regulators.
Proposed rate increases submitted to the Michigan Department of Insurance and Financial Services for 2022 policy renewals average 7.1 percent statewide among the 14 insurance carriers in Michigan’s small group health insurance market. That includes employers with 50 and fewer employees.
The 2022 rate proposals compare to an average 1.5-percent increase statewide that regulators approved last fall for 2021 policy renewals with 16 insurance carriers in the small group health insurance market, according to a summary of rate proposals sent to state regulators.
Shannon Enders, managing partner at Lakeshore Employee Benefits in Norton Shores, called the 2022 rate proposals “disappointing, for sure,” after a number of years of rate moderation.
For small businesses whose policies renew in the second half of 2021, Lakeshore Employee Benefits has been delivering renewal notices with 4- to 6-percent increases, and some as high as 9 percent, Enders wrote in an email to MiBiz.
Nearly all employers have opted against adjusting benefit levels and renewed policies “as is” amid difficulty finding and retaining employees, Enders said.
“Employers seem more worried about their staffing issues and losing employees over reducing benefits than health plan costs,” he said.
Trending up, employers shop
Most of the rate proposals submitted to the state were for increases within 5 to 10 percent. Regulators typically act on the rate proposals prior to the start of the state’s new fiscal year on Oct. 1. Many of the proposals were in line with at least one forecast for medical claims trends for next year.
Nationally, the PwC Research Institute forecasts a 6.5-percent increase in medical cost trends in 2022. PwC noted in a recent report that 2020 medical spending fell below a projected 6-percent growth rate, largely because of deferred care during the COVID-19 pandemic.
Health insurance rate proposals reflect the expected higher claims trend following 2020 when health plans experienced large declines in claims during the pandemic for non-urgent care, such as elective surgeries and annual checkups, said John Antvelink, a producer in the employee benefits division at Grand Rapids-based insurance and employee benefits agency Lighthouse Group.
He said the proposed increases that are larger than proposals from recent years were expected.
“Because we saw that big dip in 2020 and now that things are starting to get back to normal and people are going to start going back to their providers to get those elective procedures done or to start going in for their annual checkups, we’re going to see some larger-than-normal amounts of claims activity,” he said. “(Insurance carriers) are going to be loading their rates a little higher for 2022 and 2023 because there’s going to be a lot higher than expected claims activity.”
The tight labor market across many industries limits employers’ ability to make major changes in health benefits, and “there’s no solution that’s going to be right for anyone,” Antvelink said. Employers need to make sure they understand what their employees need and their tolerance for increased cost sharing, “and how complex their HR departments are and what they can handle,” he said.
Most employers today are shopping around their health benefits and getting quotes from other carriers, or they’re looking to move to a lower-cost policy such as switching from a PPO to an HMO or a high-deductible plan. Employers are also examining a self-funded or fully insured option, Antvelink said.
“We are doing a lot more quoting just trying to get more creative with plan design options,” he said. “We’re just having a lot more conversations about cost containment and what that really means from a group-to-group basis.”
Prescription drug costs a factor
Grand Rapids-based Priority Health, which covers more than 69,000 people enrolled in small group market policies statewide, proposed a below-average 5-percent rate increase for 2022 for HMO, PPO and point-of-service plans. Priority Health Insurance Co., with 3,131 people in fully insured group policies for small employers, also proposed a 5-percent rate increase for next year.
Last year, state regulators approved an average 2.6-percent increase for Priority Health’s 2021 renewals, and 1.5 percent for Priority Health Insurance Co. Priority Health’s rates from 2015 to 2021 increased an average of just 1.2 percent annually.
Priority Health Vice President Diane Wolfenden, who oversees the health plan’s statewide small group market, told MiBiz in May that the 2022 rate proposals were the result of medical claims trends, led by the ever-increasing cost of prescription drugs.
Priority Health’s increased medical claims trend has been running at about 4 percent, while the trend for prescription drug costs has been 8 percent. The cost trend was in the double digits for expensive specialty drugs, Wolfenden said.
The largest player in the state’s small group market, Blue Cross Blue Shield of Michigan, proposes to increase rates by a statewide average of 7.9 percent for 2022. HMO subsidiary Blue Care Network proposed a 6.9-percent increase.
Blue Cross Blue Shield and Blue Care Network combined cover nearly 291,000 of the 423,177 people in Michigan enrolled in group policies for small employers.
The largest proposed increase submitted to the state was for 14.6 percent from UnitedHealthCare Community Plan Inc.’s Medicare and Medicaid plans that reported having 2,105 people enrolled in the small group market. UnitedHealthcare Insurance Co., with a current enrollment of 21,125, proposed a 12.8-percent rate increase.
Still, some Michigan health plans in the small group market have proposed rate decreases for 2022.
One insurance carrier with just 262 members between two plans proposed rate decreases. Paramount Care of Michigan Inc. requested to lower its rates by 11.3 percent, and Paramount Insurance Co. proposed a 5.1-percent reduction.
Lansing-based Physicians Health Plan, with more than 3,900 enrollees, proposed a 0.2-percent decrease, while PHP Insurance Co., with 1,106 members, proposed a 0.6-percent decrease.
In the individual health insurance market that covers nearly 319,000 people in Michigan, the 12 participating insurance carriers proposed rate adjustments for 2022 that have a combined statewide average increase of 4.5 percent.
Blue Cross Blue Shield proposed a 5-percent increase in rates for individual policies, and Blue Care Network submitted a proposal for a 6-percent increase. The two combined have more than 170,000 people enrolled in individual health insurance policies.
Priority Health, with more than 11,500 individual policyholders, proposed a 3.9-percent increase for 2022 renewals.