In a sweeping and unprecedented move by New York State regulators, the NYS Department of Financial Services has slashed all 2019 health insurer rate increase requests by an average of 64% in the individual market, and by an average of 50% in the small group market. Citing claims of a “sustained attack by the federal government on the Affordable Care Act (ACA)”, Superintendent Maria T. Vullo decided that the best course of action to take against the federal government was by directly harming NYS-domiciled health insurance companies (over twenty of them). In doing so, Vullo feels that this will “help” all NYS health insurance consumers (via artificially controlling health insurance market pricing).

But will this move really help the consumers of health insurance in New York? Well, that remains to be seen…

Like any business in any industry, a business can only survive if it is profiting. If a business runs “in the red” (operating at a net loss), they shut down. Therefore, if a health insurance company is requesting say a 20% premium increase in order for them to remain profitable, but where the government says they will only allow a 7.2% increase, that insurance company will need to make cuts somewhere (BIG cuts in this case) in order to remain profitable, or leave the market entirely.

So how will these cuts manifest themselves, and what will it mean for consumers? Here’s how:

Insurers Leaving The Market

As we have already seen with Aetna, Humana, and United Healthcare in most states over the past several years, the most extreme reaction to this DFS move will be insurance companies completely exiting the individual and small group health insurance markets. In New York, CareConnect left the individual market in January of 2018 (as well as a gradual small group exit in 2018), and Oxford left the individual market in January of 2017, thus narrowing the field of competing carriers in our state. Seeing more NY-based health insurance companies leaving these market segments all together is certainly not out of the question…not with a 50%-64% rate request denial by state regulators.

Provider Reimbursement Rate Cuts

For those carriers which decide not to exit the market all together, one of the biggest “hidden” cuts customers will realize is cuts to medical provider reimbursement rates. Medical providers (e.g. hospitals, doctors, blood labs, MRI facilities, etc.) who participate in health insurance provider networks receive reimbursement payments from the insurance companies. As many people already know, many providers have already opted-out of the provider networks being offered in the individual market since the ACA (“Obamacare”) kicked in on 1/1/14. If provider reimbursement rates are reduced even further, how many more high quality doctors & facilities will choose to not participate in these provider networks? In other words, what good is a less expensive health insurance policy if no high quality providers will take the coverage?

Scaling Down Prescription Drug Lists

Another way insurance companies can make expense cuts is by having less drugs being covered under a health insurance policy. We’re already seeing this now in the individual market as compared to the small group market. In most cases, small group policy drug lists are more robust than individual policy drug lists. As such, we can expect to see a further degradation of prescription drug lists (or drug “formularies”) now that the DFS will be further restricting how much a health insurance company can profit.

In a rapidly improving US economy, it’s hard to fathom why NYS regulators would want to further reduce our health insurance choices. Of course, one can speculate whether this DFS move was purely political in nature, but I will leave that up to my readers to decide.

For more information regarding individual and small group health insurance for you, your family, or for your business, contact a health insurance broker today.