Health insurance premiums for many small employers would dip in 2019 under rate proposals filed with state regulators.
Seven of the 17 health insurance carriers in Michigan’s small group market (for employers with 50 or fewer employees) proposed lower rates for next year. The rate proposals equate to a statewide average decrease of 0.2 percent, according to a summary of 2019 rate proposals from the Michigan Department of Insurance and Financial Services.
Grand Rapids-based Priority Health proposes an average statewide rate decrease of 2.6 percent for HMO and point-of-service plans that begin Jan. 1, 2019, and a 0.8-percent decrease in rates for PPO plans sold by subsidiary Priority Health Insurance Co.
“We’ve seen some favorability in managing our underlying costs that has allowed us to offer that average rate decrease,” said Mike Jasperson, who oversees the small group market for Priority Health.
Priority Health’s rate proposal for 2019 follows average rate declines of 4.7 percent for small group policies renewed in the third and fourth quarters of 2018, Jasperson said. This year, Priority Health had nearly 47,000 small group members at 6,000 small employers statewide.
Blue Cross Blue Shield of Michigan would lower small group rates an average of 0.1 percent statewide. The insurer’s HMO subsidiary, Blue Care Network, proposes a decrease of 2.7 percent. The insurer provides health coverage to nearly 293,000 people enrolled in small group policies this year.
Collectively, Blue Cross Blue Shield and Priority Health hold significant shares of most West Michigan health insurance markets. Together, they account for nearly three-quarters of the statewide small group market. Blue Cross Blue Shield alone has a market share of more than 63 percent among small employers, according to the state summary.
The rate proposals continue a trend of moderation in the small group market after years of volatility in which some small employers saw significant increases after the passage of the federal Affordable Care Act in 2010, which altered how health insurers set rates.
Executives at Priority Health and Blue Cross Blue Shield credit their 2019 rate proposals to a variety of factors that have combined to better control costs. They include:
- The movement to value-based contracting that pays care providers for outcomes and value rather than their volume of care
- More transparency in the cost of care and greater consumerism, which has allowed people better access to look up health care costs and then opt for the lower-cost, higher quality provider
- The steady migration by employers to lower-cost, high-deductible plans, which has led to consumers paying a larger share for the cost of coverage and to their willingness to consider options for care “rather than take the easier option to go to,” Jasperson said
- A greater focus on wellness and managing high-cost chronic illnesses
- The emergence of lower-cost care options such as telehealth
“There’s no kind of silver bullet,” Jasperson said. “It’s really a compilation of those factors that have led us to a strong underlying performance.”
The rate proposals to regulators are statewide averages. Actual rate changes can vary for individual small employers based on factors that include geography.
At Blue Cross Blue Shield, initiatives to contain costs led to premium increases in small group rates over the last three years that averaged less than 1 percent annually, said Jeff Connolly, the insurer’s president in West Michigan.
“That’s not just stabilization (of rates), that’s bending the curve, which is what we need to continue to do,” Connolly said.
He notes that 90 percent of what Blue Cross Blue Shield spends annually on medical claims now goes to providers in value-based contracts that are designed to drive up quality and eliminate waste.
“We’re pretty confident that’s the base of the pyramid as to why we’re seeing some stability here,” he said.
Even with all of the efforts to better control costs, health coverage has become “very expensive,” Connolly said.
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The 147 West Michigan employers responding to this year’s cost survey by The Employers’ Association in Grand Rapids reported an average annual premium of $17,748 for a family health plan. A two-person plan cost $13,572.
Even with the better rate environment today compared to years ago, the rate moderation and decreases proposed for 2019 come after recent sizable increases that pushed premiums to new heights, said Matt Hylant, team leader for employee benefits at the Grand Rapids office of Hylant Group Inc.
In the years after the ACA passed, it was “not uncommon” for some small employers to get hit with 20-percent or 30-percent annual increases for policy renewals, Hylant added.
The present environment has brought a welcome change when delivering annual policy renewals to customers, he said.
“When you’re delivering a decrease, it makes for a happy client,” Hylant said.
How long the present period of rate stability in the small group market will continue remains an unknown.
Health insurers must weigh various factors that can drive premiums higher, Connolly said, citing an aging population that will require more care, the high costs of prescription drugs, and the development of new high-cost specialty medications that will come to market in the year ahead.
However, Connolly believes the rate stability can continue for at least the short term.
“For the next 12 to 24 months, we’re fairly confident that the trends are going to remain pretty stable,” he said.
Any adjustments that Congress might make to the ACA add uncertainty to where rates could go in the future, said Jasperson, adding that Priority Health expects the Trump administration to push for further changes to the law.
“I don’t think anybody has a crystal ball and can say with exact precision where we see the market is going,” Jasperson said. “It is nice — and it speaks to the marketplace — to see options and some semblance of stability, but unfortunately the only certainty is uncertainty, and so we anticipate continued changes (and) continued challenges in these markets going forward.
“Our hope is to see continued stability and to see competition and the availability of carriers as an option in the marketplace.”
The small-group rate proposals for 2019 come despite an estimated medical inflation rate of 6 percent this year, said Dominick Pallone, executive director of the Michigan Association of Health Plans, a trade group that represents HMOs.
“While these are initial numbers, it is evidence that our health plans continue to do what they can to keep premiums down for health care coverage purchasers,” Pallone said.
The present rate environment for small employers in the state also prevails for now in the individual insurance market.
Priority Health proposes a statewide aggregate rate decrease of 2.5 percent for 2019 individual health plans. Blue Cross Blue Shield would raise rates a “relatively small” 4.2 percent for individual PPO policies, and increase rates 1.1 percent for individual plans sold by HMO subsidiary Blue Care Network.