Optima Health is now planning a less robust cut to its relatively sky-high insurance premiums for some Charlottesville-area residents for next year, despite ongoing questions from state regulators and a grassroots group.
Though rates will not be finalized until the fall, under filings made last week, an individual in Charlottesville or Albemarle, Fluvanna or Greene counties would pay $967 per month in premiums for a silver plan through the Affordable Care Act, compared with $424 in Virginia Beach.
The proposed $967 is up from a May filing by Optima that called for a rate of $934 per month. In 2018, a comparable silver plan — typically the most popular on the marketplace — costs $1,143 per month. That rate is among the highest in the country.
The adjustments come just days ahead of public hearings before the State Corporation Commission in Richmond on Tuesday. The new filing does not address questions about the Charlottesville rates from a state insurance examiner at the end of June.
“We note that the area 2 factor in the individual market is one of the highest in the state … while the corresponding factor in the small group market is the lowest in the state,” an insurance market examiner wrote to the company on June 26. “Please provide an actuarial explanation for this large variance.”
Individual and small group markets vary in experience, provider agreements and competitive considerations, the company replied on July 3. Two weeks later, the company cited its experience in the area, Medicaid expansion, the health of the population and provider experiences when it revised Central Virginia individual marketplace rates upward to the now-expected $967 premiums.
But those justifications have been questioned by the consumer group and by the University of Virginia Medical Center, which Optima blamed for part of the 2018 premium increases of between 195 percent to 247 percent.
The Medical Center has said it holds identical agreements with Optima’s individual and small group plans. UVa officials also have noted that the Medical Center sees very few of Optima’s individually insured patients.
With seven months of data from the individual marketplace, the consumer group Charlottesville for Reasonable Health Insurance said Optima should be able to provide data proving the cost of delivering health care — the only appropriate reason to adjust geographic rates, according to the Centers for Medicare & Medicaid Services (CMS) — is actually more expensive in the area.
“We were unable to find any other insurer in the nation with such a large gap between Small Group and Individual [area rating factors] for a market,” the local group wrote in its July 16 letter to the bureau. “Also, the difference in ARFs cannot be explained by differences in treatment mix.”
But the Charlottesville group believes that Optima’s justifications, citing provider agreements and the health of consumers, also go against the CMS’ policy. In its letter, the group asked the Bureau of Insurance to reject Optima’s 2019 individual and small group rate filings.
“Now [Optima has] actual experience with 8,610 members; they don’t have to make assumptions,” said Karl Quist, one of the founders of the local group. “We’ve also presented evidence that the way Optima created these rates was against the law.”
Optima officials would not agree to an interview, but sent a written statement about the group’s allegations.
“We continue to develop products that serve Virginians and may further refine the number of plans ultimately offered during open enrollment,” the statement read. “All plan offerings and rates will not be finalized until the fall, per the schedule set forth by the Bureau of Insurance.”
The plans could offer relief for the self-employed in the Charlottesville area with high premiums.
Optima also revised its small group area rate factors this month, bumping up Charlottesville’s small group factor from the lowest in the state to middling. But the range between small group and individual marketplace costs in Charlottesville is still large.
An April letter from the state insurance commissioner, Scott White, said the bureau found Optima’s use of different area rate factors was “appropriate based on the relative competitiveness of each market.” Optima chose to avoid disruption in the small group market, maintaining a lower rate, White said.
But relative competitiveness and market disruption should not be factors in rates, according to Tim Jost, a professor emeritus at Washington and Lee University and an expert on health law. And even if Optima’s assertions that UVa raises provider costs and that local health is poor are true and justify the high individual rates, neither is a legal assertion, Jost said.
“From what I’ve seen, the rates just don’t make any sense if you’re using legal means,” Jost said.
Jost said he believes the high costs and the rate variance are due to Optima’s monopoly position in the area.
“The [Bureau] of Insurance is over a barrel, and Optima said they would cover the area, but at what cost,” Jost said. “They have a monopoly. The market is not competitive on the individual market and they can charge whatever they want, whereas in the small group market there is competition.”
Member of Charlottesville for Reasonable Health Insurance say they will continue to fight Optima’s filings.
“Regarding the rate increase this week, I would say that this development underscores the need for the BOI to enforce the law exactly as it’s written as it pertains to how insurers set rates in different markets,” said Ian Dixon, another founder of the local group. “Optima has been emboldened by the BOI’s approval of record high ACA rates for 2018 in Charlottesville and is brazenly ignoring the law again.”