Decision – Approved on April 4, 2013
On January 31, 2013, Aetna Health Inc. requested an average rate increase of 13 percent for health care coverage used by small employers – businesses with less than 50 workers. There are about 13,000 people – employees and their dependents – covered under these health plans in Connecticut.
The company said it sought the new rates because of rising medical costs and increase demand for medical services. Those increases combined are called “trend” and are expected to impact the rates by about 11.3 percent.
The company said another impact on premium rates are two new federal fees and taxes – Reinsurance Contribution and Health Insurer Fee – mandated by the Affordable Care Act that take effect January 1, 2014. These fees “are applicable to premium earned in 2014, regardless of when the policy renews,” the company said in its filing. As an example the company explained that policies sold or renewed in February 2013 will have one month of premium earned in February 2014. Aetna is applying the new fees on pro-rated basis to reflect the actual portion on each policy’s premium. The Reinsurance Contribution is expected to have a 1.12 percent impact on premium rates and the Health Insurer Fee will have a 2.4 percent impact.
Additionally, Aetna asked to reduce its base rate by 1.5 percent to reflect some contractual changes in its HMO network.
The company estimates that the proposed new rates will result in an expected Medical Loss Ratio (MLR) of at least 80 percent for rebates purposes under the ACA. The federal MLR for individual and small group market requires that a carrier spend at least 80 cents of every premium dollar on medical services.
During the Department’s 20-day public comment period on this filing, two public comments in opposition of the rate increase were received and are included in the final disposition.
After an actuarial review, the Department substantiated Aetna’s information supporting the rate request. On Apri 4, 2013, the Department approved the rates, determining they were appropriate for the benefits provided and neither excessive nor inadequate.
The new rates take effect July 1, 2013.