Timing of the Filing Meets OHIC Schedule; New Rates Would Only Apply to Group Renewals Beginning in January 2011
With the state's annual healthcare expenditures expected to exceed $9 billion in 2010, double what they were 10 years ago, Blue Cross & Blue Shield of Rhode Island (BCBSRI) today asked the Office of the Health Insurance Commissioner (OHIC) to approve increases in 2011 rates an average of 12.4 percent for small groups and 13.4 percent for large groups. Under new OHIC regulations, all of the state's insurers must submit 2011 rate requests by May 17. However, any premium changes resulting from the filing will not go into effect until January 1, 2011, and no group will experience more than one rate increase in any 12-month period.
Premium costs directly reflect the increasing cost of healthcare," said Gus Manocchia, M.D., BCBSRI vice president and chief medical officer. "Driven primarily by hospital and prescription drug increases, the cost of providing medical care continues to significantly exceed inflation. Given these circumstances, premium rates have not been able to keep pace with increasing medical claims costs, which for BCBSRI were approximately $1.5 billion in 2009."
Dr. Manocchia explained that hospital costs now account for approximately 42 percent of BCBSRI member claims, standing out as the most significant driver of rising healthcare costs, with prescription drugs and outpatient services also contributing to cost increases.
"We realize that these cost increases cannot—and should not—continue," said Dr. Manocchia. "That's why BCBSRI is taking aggressive short and long-term steps to not only moderate healthcare costs, but to also partner with the state's healthcare providers to improve the quality of care provided to our members."
Among the many cost-saving initiatives being undertaken by the company, Dr. Manocchia said that BCBSRI will moderate hospital reimbursement costs by striving to limit future hospital reimbursements to no more than that of inflation. The company is also expanding several successful cost-control programs, including those designed to encourage the use of generic drugs, eliminate medically unnecessary imaging, and prevent medical fraud and abuse.
According to Dr. Manocchia, BCBSRI is also committed to significantly reducing the company's operating expenses over the next two years, and will continue efforts to aggressively manage every dollar spent while still providing superior service to its members and customers.
Longer term, BCBSRI is continuing to implement its plans to control costs by supporting improvements in the local healthcare delivery system. As recently as last week, the health insurer announced a four-year collaborative agreement with the state's largest primary care practice, Rhode Island Primary Care Physicians Corporation, which cares for approximately 120,000 BCBSRI members, to transform into what will ultimately become the largest and most comprehensive patient centered medical home (PCMH) program in Rhode Island. PCMHs are an innovative business model designed to improve patients' health and to moderate long-term healthcare costs through an emphasis on preventive, proactive, and coordinated care.
"There is no question that our current healthcare system is too expensive," the BCBSRI chief medical officer said. "That's why BCBSRI is so committed to supporting local healthcare providers in their pursuit of exciting new initiatives such as PCMHs and coordinated care, which have been proven in early pilot studies to measurably improve health and lower costs long-term. In fact, according to a new study in the May issue of Health Affairs, every $1 invested in a PCMH returned $1.50 in savings, mostly by keeping patients out of the emergency room and the hospital. As an added benefit, PCMH patients also ‘reported better care experiences.'"
However, he concluded, such sweeping changes will take time. "For the immediate future, as BCBSRI undertakes the important task of impacting the cost and quality of the local healthcare delivery system, premium rates must better reflect the actual cost of providing healthcare coverage," Dr. Manocchia said.
Blue Cross & Blue Shield of Rhode Island is the state's leading health insurer and covers more than 600,000 members. Blue Cross and Blue Shield of Rhode Island is an independent licensee of the Blue Cross and Blue Shield Association.