These two trends drove insurance rate increases in 2016

A two-day hearing held by the Massachuetts Division of Insurance presented two reasons health insurers are proposing an average 9.1% increase next quarter

Insurance News

By Lyle Adriano

A two-day hearing held by the Massachusetts Division of Insurance (DOI) for proposed rate changes by the state’s health insurers revealed that two trends were largely responsible for the rate hikes: rising pharmaceutical drug costs and the ACA risk adjustment requirement.

On the first day of the hearing, Jan. 11, twelve insurers reported that their rates had experienced an average increase of 9.1% year-on-year.

During the hearing, insurers admitted that they were unable to assert any control over the growing prices of prescription drugs, and thus had to scale their premiums accordingly. Specialty drugs for health conditions, such as hepatitis C, cholesterol and cancer were an area of concern for insurers, as the new drugs were often priced high by their manufacturers. Some insurers revealed that the size of their health plans also determined how much leverage they had over pharmaceutical manufacturers and their pricing.

Another factor the carriers have identified that influenced them to raise their rates was the risk adjustment requirement under the ACA. Through the requirement, insurers’ funds are reallocated based on the average risk of their members to ensure fair coverage. This forced some policyholders to pay more than what their plans originally cost due to the adjusted premiums. Many insurers argued that this adjustment is not actually helping, but harming, the market.

The public record for the hearing was kept open until Jan. 19 for any written submissions, but only the Associated Industries of Massachusetts offered its comments.

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