Fallout from sky-high 2018 Affordable Care Act premiums in Central Virginia will continue this fall after a review of Optima Health by the state Bureau of Insurance, which contributed to significantly lower proposals for 2020 premiums and record rebates for Virginia consumers.
Virginians who had ACA individual marketplace plans in 2018 will receive among the highest rebates in the country, according to an analysis by the Kaiser Family Foundation. The state Bureau of Insurance conducted a review of those 2018 rates this summer, and told the company to change its methodology moving forward, according to public filings reviewed by The Daily Progress. Optima’s 2020 rates now will be among the lowest in the state.
The company will mail rebate checks to 53,000 consumers who held policies on the individual marketplace on Oct. 1, according to a spokesman. Rebates are calculated on a three-year, statewide average, and occur when a company does not spend the correct ratio of premiums collected directly on patients. Regulations require 80 cents of every dollar to be spent on patient care.
Across all markets in the country, insurers in Virginia will pay out the highest total rebates ($149.6 million), followed by Pennsylvania ($130 million) and Florida ($107.4 million), according to an analysis by the foundation. In the individual market alone, total rebates range from $0 in at least 13 states to a high of $111.3 million in Virginia.
“Virginia ranks high largely because one insurer, Sentara (also known as Optima), had the highest individual premiums in the country in 2018 and now owes especially large rebates,” the foundation wrote in its analysis.
The Norfolk-based insurer tripled local individual marketplace rates in 2018 after national health care providers left the state exchange leaving it the only Affordable Care Act insurer in Central Virginia.
“Rebate checks will be mailed to 53,500 Optima members by Tuesday, October 1. Check amounts will vary from consumer to consumer and are based on strict guidance by CMS,” a spokesman from Optima said. “For 2020, Optima presented rates to the BOI representing an 11.3 percent decrease from 2019 levels, and our rates for 2020 will be the lowest in the state.”
The consumer group Charlottesville for Reasonable Healthcare estimated that Charlottesville-area consumers paid more than $14,000 per person in premiums during the year.
“The Optima rebates are really high, which clearly indicates something wrong with how they conducted their rates in 2018,” said Tim Jost, a professor emeritus of Washington and Lee University who specializes in health law.
The company declined to provide executives for interview requests, and sent a statement in response to written questions.
“As a local Virginia-based organization, Optima is committed to creating more affordable health plan options for Virginians,” a spokesman said in a statement. “Optima followed all state and federal guidelines in determining 2018 rates, and we continue to focus on lowering the cost of care. For the last two years Optima has lowered rates, and our 2020 rates will be the lowest in the state.”
The company has banked on former consumers returning to its rolls in 2020. Optima went from covering more than 17,000 people on the individual marketplace in 2017 to covering 60,000 in 2018 in Virginia, but when Anthem returned to Virginia in 2019, a large number of Central Virginia consumers switched companies. Optima believes that 2020 price reductions will allow it to regain approximately 60% of its lost membership, according to an August filing.
“I’m not super excited by Anthem, but between Anthem and Optima I feel there’s no choice,” said Linda Goldstein, an early retiree who relies on Affordable Care Act options. She used Optima in 2018, switched to Anthem in 2019 and plans to reenroll with an Anthem plan in 2020. “Optima would have to do some pretty extraordinary things for me to come back.”
Goldstein said her premiums tripled in 2018 and she had to dip into savings to pay them.
“Because of my education and other privileges in life, I had financial options that not everyone had. There were folks who didn’t have the resources to cover the steep increases, and that’s not right,” she said. “Nobody should suffer severe financial hardships to meet insurance and health expenses. I am grateful for a partial rebate, but I don’t think they will come close to compensating for anyone’s increased premiums in 2018.”
In June, according to filings, the Bureau of Insurance determined that Optima’s 2018 rates were based on calculations that did not adequately remove morbidity, and instructed the company to be more stringent in the future.
“The Milliman actuary did not provide documentation indicating that morbidity was removed in developing the area rate factors,” the state employee wrote in the memo, referring to an actuary at an international firm hired by Optima to review its 2018 rates. “Therefore, any actuarial certification included that indicated otherwise would be incorrect.”
The employee added that he didn’t believe the actuary meant to mislead regulators. Milliman did not respond to requests for comment.
The bureau asked Optima to apply stricter guidelines — ones that explicitly remove morbidity from calculations — to its rate filings. Morbidity measures how sick a given population is; companies are allowed to calculate a state-wide average, but are not allowed to calculate for specific regions.
“While we disagree with the Bureau’s findings regarding the inclusion of morbidity in our rate development, we have addressed this concern in the development of area factors for the more recently submitted rate filing,” the company wrote in a July memo.
After some back and forth, the bureau approved the company’s 2020 rate filings, which included lower rates than those originally proposed by the company.
Ken Schrad, a spokesman for the bureau, said the bureau’s review of Optima’s 2018 rates represents the close of a particular investigation that will be used to inform future work.
In 2020, according to the state bureau, an person in Virginia can expect to pay an average rate of about $600 on an individual marketplace plan, which represents a decrease in average price from almost every insurer.
In the Charlottesville area, which includes the city and Albemarle, Greene, Fluvanna and Nelson counties, a 45-year-old person can expect to pay $456 per month in premiums in 2020 for a low-cost Optima bronze plan, according to filings. In 2019, a similar Optima plan cost $675 per month, according to filings.
Central Virginia residents can also choose Anthem plans in 2020. According to state filings, a comparable Anthem bronze plan will cost a consumer $455 per month next year.