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Record profits for health insurers as Charlottesville healthcare costs skyrocket

healthcareSentara Health and its health plan subsidiary Optima Health are generating record profits, according to an analysis by local consumer advocacy group Charlottesville for Reasonable Health Insurance, which reviewed third quarter financial disclosure statements for Sentara Health and Optima Health.

“Sentara have reported a profit of $381 million dollars thru September 30th, up $100 million from this point last year, and are having their most profitable year ever, largely because of the unprecedented rate hike imposed by Optima in its monopoly markets,” says Ian Dixon, a founding member of CRHI.  “We also observed a highly unusual drop in claims expense during the quarter, which raises concerns about Optima’s arrangements with its parent company, Sentara.”

Within its individual market business, Sentara’s health insurance subsidiary, Optima Health Plan, generated profits of over $208 million during the first 9 months of the year.  During the 3rd quarter, just 45% of individual-market premium dollars were spent on medical claims, far below the 80% requirement established by the Affordable Care Act.

In September of 2017, the Virginia Bureau of Insurance, approved Optima’s rates, leaving Charlottesville with the highest premiums in the history of the ACA — 21% higher than any other market in the country.  The Bureau approved Optima’s unprecedented 2018 rates without asking a single question about the basis for the record-setting premiums.

“Optima justified its outrageous rate increases by claiming that its claims costs were rising.  Today’s filings show the opposite — Optima’s average monthly claims per member have actually dropped by over 50% from last year, yet Charlottesville consumers are paying rates that are three times as high.  A family of four now pays almost $3,000/month for the cheapest Bronze plan,” says Karl Quist, another founder of CRHI who has been investigating Optima’s premium rate increases.

In challenging Optima’s rate increases, CRHI has uncovered numerous misrepresentations by Optima related to its 2018 and 2019 filings:

  • Contrary to public claims made by Optima’s leadership, claims costs at UVA Health System represent a small fraction of the total premiums collected by Optima in Charlottesville.
  • Optima Health violated federal CMS regulations in considering “market conditions” when setting its geographic area factors.
  • Optima Health considered “morbidity” when setting its area rate factors.  This is explicitly prohibited by ACA regulations.
  • Contradictory representations about the costs in Charlottesville within Optima’s own filings.  Optima’s Small Group filings asserts that provider costs in Charlottesville are lower than average, while Optima’s Individual Market filings claim that Charlottesville’s costs are higher than average.  Both cannot be true.

“These latest filings confirm what has been apparent since December of last year — Optima dramatically inflated its claims projections for 2018 in order to ram through the largest premium increases in the history of the Affordable Care Act,” says Quist.  “It’s time for state regulators to stop making excuses for Optima’s behavior and to hold them accountable for the harm they are doing to Virginia consumers.”