Rate request: 15.23 percent average increase
Decision: Disapproved September 24, 2014, reduced to 8.82 percent increase
On June 30, 2014, CIGNA Health & Life Insurance Co. (CHLIC) filed a rate increase request averaging 15.23 percent for individual health insurance plans sold in the open market through brokers, agents and directly to consumers and not through the state-sponsored exchange. There are currently 327 policies in force in this block of business.
The company reported that the plans meet all the Essential Health Benefits criteria mandated under the Affordable Care Act (ACA). Because this only the second year these plans have been sold in Connecticut, the company has no credible historical experience from this block of business. As a result the company calculated claims costs based on experience from its established large group market.
In developing the rate, CHLIC applied a medical inflation or “trend” factor of 7.8 percent, meaning that it anticipates that the cost of medical services and the demand for them will increase by about 7.8 percent over the next year.
The company also factored in “morbidity” – a reflection of the overall health of its members and anticipated that previously uninsured people who now have insurance as a result of the ACA will result in more claims costs. Other potential factors contributing to the rate increase are changes in claims costs based on geographical area and an increase in the ACA’s Health Insurer Fee.
After an actuarial review, the Department concluded that the 7.8 percent impact of trend is appropriate even though the company did not provide cost and utilization data in accordance with Department guidelines.
The Department also concluded that because all Connecticut plans with the exception of grandfathered plans (those issued before March 23, 2010) will be ACA compliant on January 1, 2015, the plans are eligible for the federal temporary reinsurance program. Because other states have delayed the transition to fully ACA compliant plans until 2016, the Department believes that there should be excess federal funds available in the temporary reinsurance program that Connecticut carriers must apply toward their calculation to lower some of their pricing.
As a result of the actuarial review, the anticipated impact of the reinsurance program and other factors, the Department disapproved the original rate increase request and on September 24, 2014, reduced it to an average increase of 8.82 percent. The Department determined that the resulting rates relative to the benefits being offered are neither excessive, inadequate nor unfairly discriminatory.
The new rates take effect January 1, 2015.