MEGA Individual Rate Filing FAQs
On August 31, 2012, MEGA sent out notices to approximately 12,000 policyholders of a proposed change in rates to be applied to individual health insurance policies effective November 1, 2012. The effective date was delayed due to rate review and approval until March 1, 2013. The average increase requested was 6.5%. If you received a notice, these questions and answers should assist you with understanding what contributed to the change in your premiums.
Q: I received a notice from MEGA and my premium would increase by more than 10%. Isn’t that illegal under Maine law?
A: Maine law does not prohibit rate increases above a specific percentage. Due to recent legislative changes, individual medical insurance rate increase requests are only subject to Bureau of Insurance approval under certain circumstances.
If the average rate increase is below 10% and the company agrees to spend a certain percentage of each premium dollar on the payment of claims (the guaranteed medical loss ratio), there is no approval required. The Bureau does, however, review all rates for compliance with Maine law.
MEGA’s filed rates were below the average 10% threshold; however, MEGA did not guarantee it would meet the 80% medical loss ratio for these policies, making the rates subject to prior approval by the Bureau.
Q: If the average increase is 6.5%, why is my increase greater than that?
A: Some increases are above the average due to changes in age and geography factors that companies are allowed to charge. While some policyholders are seeing increases in premiums, others are receiving decreases. The largest increase is 47.2% and the largest decrease is 32.7%.
Q: What has caused this rate increase?
A: The root cause of the increasing cost of health insurance is the rising cost of health care. Both the price and utilization rates of health care services have been increasing and new procedures and new drugs have further added to costs. State agencies are working to figure out how to reign in ever increasing healthcare costs, for example by looking at how to implement a statewide electronic medical system so tests don't have to be duplicated each time a person sees a new provider or goes to a hospital. If medical cost increases can be slowed, premium increase requests will slow down as well.
The changes in how insurers use age to calculate rates likely contributed to your increase. Maine’s new health reform law gives insurers more flexibility to vary premiums according to age, geography, and tobacco use. The changes in age rating will be phased in over time and will allow insurers to charge lower rates for younger consumers than they can currently charge – relative to others buying the same coverage – and higher rates for older consumers.
The allowable age factors changed from 1.5:1 to 2:1. Changes in geographic factors also changed to 1.5:1, contributing to the increases and decreases seen by policyholders.
Q: What policies are affected and how are they different?
A: There are four ‘tiers’, or blocks, of policies that are affected by the increases: tiers A-D, and several riders:
- Tiers A & B: 3.5% increase
- Tier C: 15% increase
- Tier D: 9% increase
- Tier A are grandfathered policies and not subject to all the requirements of the Affordable Care Act (ACA). These policies had lifetime limits removed, but no preventive care benefits added. They also have annual limits.
- Tier B are policies that are not grandfathered. These policies have preventive care benefits and no life time limits. These policies retain annual/internal limits in the policy due to a benefits waiver granted by HHS.
- Tiers C and D are policies that were issued with all benefits required under the ACA. The difference in these two tiers is a result of the rate levels that were approved in 2011. An increase was requested for the last filing on these two tiers for the preventive services benefit and for the base plan to bring the rates more in line with the initial pricing. Part of the increase was approved for new sales (i.e., for Tier D consisting of those policies applied for and issued after 6/26/2011), but this increase was not approved for inforce policies (i.e., for Tier C). Inforce policies in Tier C instead received a 3% increase, which is the same increase approved on the Tier A book of business for 2011.
Increases for riders:
- 9% for Ambulatory Care
- 9% for Emergency Room
- 50% for Doctor’s Office Visits
Q: What is a “grandfathered plan”?
A: A grandfathered plan is a health plan in which you were enrolled on March 23, 2010. Grandfathered status means that the plan is exempt from some of the requirements of the Affordable Care Act, such as coverage of recommended preventive care without cost sharing. There are many ways, however, in which a plan can lose its grandfathered status including: significantly raising co-pays, deductibles, or coinsurance charges, or significantly reducing benefits.
If your plan is grandfathered and you choose to switch to a new product, this will change the benefits provided to you, as the new plan is subject to the ACA’s requirements. A potential new policy should be carefully compared to your current plan, as once you leave a grandfathered plan, you may not be able to return to your original coverage.
Q: I can’t afford my new premium. Are there any other options for me?
A: There are other individual health plans available, which may have lower rates. It is important, however, to compare the benefits of one plan to another. If you are paying less in premiums, that may mean a reduction in the services that are covered or a larger amount you will have to pay for specific services (examples: higher deductibles or coinsurance). For additional information on plans that are available, please see the Bureau’s brochure: A Consumer’s Guide to Individual Health Insurance.
Q: Where can I send comments about my rate change?
A: Comments may be submitted to:
Department of Professional & Financial Regulation
Bureau of Insurance
#34 State House Station
Augusta, ME 04333-0034
Or by email to: Insurance.PFR@maine.gov (subject line: MEGA Rate Comment)