2014 aetna health rate proposal

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2014 Aetna/Coventry Health Care of Iowa RATE PROPOSAL

REVIEW DECISION

Issued October 8, 2014

Introduction

The Iowa Insurance Division (the Division) received an annual individual health

insurance premium rate (rate) filing for Aetna/Coventry Health (Coventry) in June,

2014. The proposed rate increase for Coventry proposed rate increases, which may

vary by plan, effective January 1, 2015, of an average of 8.7%. The proposed rates for

2015 were based on experience from Coventrys existing individual business, and

projected member movement from the entire insured and uninsured population. There

was little 2014 claims experience available when the carrier filed the 2015 rates, with

little information on the makeup of the customer base and utilization. The claims

experience used to file the 2015 rate increase is substantially higher than was projectedin 2013. Therefore, a significant portion of the rate request is due to claims experience

that was higher than expected.

Rate Filing and Review Procedure

Pursuant to a Governors directive from 2010, and in accordance with Iowa Code

section 505.15, whenever any health insurance company that conducts business in

Iowa submits a health insurance premium rate increase request to the Division, the

Commissioner must utilize an independent, qualified third-party actuary to conduct a

secondary review to determine the adequacy and appropriateness of the proposedrate. The Division maintains a list of independent actuarial firms, and selected from

them NovaRest to perform the independent actuarial review. The report of NovaRest is

available on the Division website (as an attachment to the posted version of this Review

Decision atwww.iid.iowa.gov). Specific tests and criteria used to determine the validity

of the request is outlined in each of the detailed reports. The independent review is

performed simultaneously with the statutorily required Division in-house review.

In addition, Iowa Code section 505.19 requires the Iowa Insurance Commissioner, (the

Commissioner) to hold a public hearing on a proposed health insurance rate increase

which exceeds the average annual health spending growth rate as published by the

Centers for Medicare and Medicaid Services of the United State Department of Healthand Human Services. The current rate is 6.1%. Prior to the public hearing, the

Consumer Advocate for the Division solicits and receives public comments on the

proposed health insurance rate increase. Those comments are posted online (as an

attachment to the posted version of this Review Decision atwww.iid.iowa.gov).

A hearing on the proposed rate was held on Saturday, July 26, 2014 at 11:30 a.m. at

the Mercy College of Health Sciences, Sullivan Center, Des Moines, Iowa. Access to
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the hearing was made available at six locations around the state via the Iowa

Communications Network (ICN). The Divisions Consumer Advocate presented public

testimony on the written comments previously received from consumers. The

Commissioner took comments from policyholders and concerned citizens present at the

hearing. Comments also were received from citizens accessing the hearing through the

ICN sites. A transcript of the hearing is posted (as an attachment to the posted versionof this Review Decision atwww.iid.iowa.gov).

The Commissioner reviewed the actuarial reports from NovaRest. In addition, the

Commissioner reviewed the comments made at the public hearing on July 26, 2014,

and the comments received through phone calls, mail and the internet to the Consumer

Advocate. The Commissioner also consulted with financial and actuarial staff within the

Division.

Consumer Concerns and Issues

The Consumer Advocate received 16 comments and concerns directly from

policyholders or members of the public. None of the comments received supported the

requested rate increase. The reasoning given varied, but the most frequently stated

concern was in regards to affordability. The majority of the comments received

expressed concerns about the insureds continued ability to afford premiums, the

inability to maintain insurance, and whether the increased cost of health insurance

would fit into fixed budgets. Some commenters expressed concern that they were

unemployed and would be forced to drop coverage or apply for state assistance through

Medicaid and some comments even contemplated that the rate increases would

continue to happen annually, pricing individuals out of health insurance. Half of the

commentators stated that their coverage was purchased to comply with therequirements of the federal Patient Protection and Affordable Care Act (ACA) and the

sentiment was shared that high insurance costs were inconsistent with the affordability

goals of the ACA. Disappointment was expressed regarding how soon after policies

were issued that the rate increase was needed.

Conclusion and Decision

The Division is mindful that several key provisions of the ACA went into effect in 2014

that also impacted health insurance premium rates and pricing. As noted earlier,

carriers did not possess much claims data on these changes prior to formulating theirrates for the 2014 enrollment season. Even at the time of this rate increase request for

2015, the carrier did not possess much claims data. Some of the items impacting

health insurance premiums, beginning in 2014, include: insurers are not able to decline

coverage to applicants with pre-existing conditions; insurers are required to provide

plans with minimum essential health benefits that may be broader than benefits
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provided under certain pre-ACA plans; and gender and health risks were eliminated as

rating factors and limits were placed on age rating.

The complicated rollout ofwww.healthcare.govled to the continuation of non-ACA

compliant plans being offered through October 2016. In response, thousands of Iowans

retained their existing coverage in the small group and individual market. This

increased length of time to transition to a single risk pool led to the Division

commissioning a study to determine the impact on the individual market by continuing

non-ACA compliant plans. That study found the impact to the ACA plans to be on

average a 2% increase. To help alleviate adverse selection, the ACA created risk

mitigation tools (reinsurance, risk adjustment and risk corridor). Carriers expect to

receive payments under these programs in the event their risk pools turns out to be

sicker and more expensive than priced for. These tools helped moderate even higher

increases that may be needed in the future when the risk corridor and reinsurance

terminate in 2017 and a carrier will no longer expect to receive compensation for poorer

than expected risk pools.

The Commissioner has reviewed the testimony of policyholders and consumers, studied

the actuarial reports, and consulted with various Division staff regarding the Coventry

rate increase proposal. Whether to approve the rate increase is not a decision the

Commissioner has taken lightly. Thousands of Iowans will be impacted by this

decision. Balancing the needs of Iowa consumers and the solvency of an insurance

carrier must be weighed carefully.

The Commissioner finds that there is no evidence that the proposed rate filings are

discriminatory or excessive under Iowa statute. The Commissioner therefore approves

the proposed individual rate increase filed by Coventry for implementation.

Dated October 8, 2014

Nick Gerhart

Commissioner

Iowa Insurance Division
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2014 aetna health rate proposal

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