This week, local advocacy group Charlottesville for Reasonable Health Insurance challenged the Virginia Bureau of Insurance on Sentara/Optima’s 2019 rate filings for the Charlottesville area, citing new information that contradicts Optima’s assertions that the unprecedented premium hikes were driven by high local healthcare costs. CRHI also challenged the Bureau on its explanation of Optima’s 2018 premiums, citing information they received directly from the Centers for Medicare and Medicaid Services (CMS).
Charlottesville and surrounding counties (Albemarle, Green, Fluvanna) have the most expensive health care premiums in the nation in 2018, 23% higher than the next most expensive market and double the national average. Rates more than tripled for consumers buying coverage on the ACA Individual Exchange, making comprehensive insurance unaffordable for people who do not qualify for subsidy assistance. A typical family of four is being charged $3,000 per month for high deductible plans in 2018.
While Optima’s initial rates for 2019 are lower, they are still more than twice 2017 rates. Optima is owned by Sentara, which owns a health system in Charlottesville.
Optima’s leadership repeatedly blamed the tripling of premiums on high costs on UVA’s high rates, both in the press and in a December meeting with CRHI. On June 28th, Dr. Rick Shannon, Executive Vice President, Health Affairs at the University of Virginia met with CRHI to rebut these assertions.
“Based on information provided by UVA, we now understand that Optima’s total claims paid to the UVA Health System represent a small fraction of the over $100 million in premiums Optima collects on Charlottesville policies,” said Sara Stovall with CRHI.
“Optima has also claimed that high provider costs led to a tripling of premiums in Charlottesville. We now understand that Optima’s negotiated rates with UVA are just single-digit percentage points higher than the previous insurer who served this market, and do not justify rates that are three times as high as 2017 rates,” said Stovall.
Based on this new information, the group projects that Optima spends just one-third of its Charlottesville premiums on claims. For a family of 4 paying $3,000 in monthly premiums for a high-deductible Bronze plan, that translates to approximately $2,000 per month in profit for Optima – $24,000 per year.
The group has asked the Bureau to require Optima to provide a record of year-to-date premiums collected and claims paid in the Charlottesville market to justify the 24.8% surcharge it is proposing for Charlottesville residents. Such an analysis is expected to show that Optima has dramatically overcharged Charlottesville residents, and is preparing to do so again in 2019.
CRHI points out the disparity between Optima’s 2019 Individual Market filing, which states that treatment prices in Charlottesville are 25% higher than the state average, and Optima’s own 2019 Small Group Market filing which states that treatment prices in Charlottesville are 6% less than the state average. The complaint argues that both of these cannot be true.
When confronted about a similar disparity in Optima’s 2018 filings, the Bureau, in a letter dated April, 11th 2018, asserted that Optima based their 2018 geographic rate adjustments in part on market conditions and competitiveness. CRHI has since confirmed with CMS (the federal agency charged responsible for regulating ACA plans) that according to Health and Human Services guidelines, it is improper to consider market conditions when setting rates. Only local provider costs can be used for geographic rate setting.
CRHI also consulted with Emeritus Professor, Tim Jost, of Washington and Lee University School of Law and healthcare law expert, who concurs that allowing Optima to use “relative competitiveness” or “market disruption” when calculating ARFs clearly violates CMS rules for setting Area Rate Factors.
By incorrectly applying these important guidelines, the Bureau has allowed Optima to set wildly different and contradictory rates in their individual and small group plans in Charlottesville.
Members of CRHI call for Commissioner Scott White to acknowledge the mistakes that were made when approving Optima’s 2018 rates, to properly administer the relevant federal regulations, and to reject Optima’s proposed 2019 rates.
According to Stovall, “These recent revelations — of Optima’s obscene profit margins in Charlottesville, and the bureau’s misinterpretation of a simple rule only strengthen our resolve to fight for fair insurance prices for Charlottesville’s residents.”
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