Both Sentara Healthcare and its subsidiary, Optima Health Plan, reported continued increases in revenues and earnings in Optima’s third quarter of running a virtual health insurance monopoly in Central Virginia.
In 2018, Optima Health became the only insurer on the individual marketplace in Charlottesville and Albemarle, Orange and Greene counties after Aetna and Anthem HealthKeepers left due to rising costs and political uncertainty in Washington, D.C. The company went from covering more than 17,000 people on the individual marketplace in 2017 to 60,000 people in 2018. State regulators and a consumer group have raised questions about Optima’s position in the area and its rates, which saw record increases this year.
According to Sentara’s third-quarter financial report, the company earned $382 million in net operating income in the first nine months of the year. Total operating revenues were $4.7 billion, a 19 percent increase compared to this time last year. The increase in operating revenue, according to the company’s report, was primarily due to increases in premium and capitation revenue from the groups’ Medicaid and individual insurance products. Optima Health has earned $507,476,165 from premiums and has spent $298,789,699 so far on claims and improving patient care, according to filings.
Optima has attributed the increase in premiums to a high cost of care in Charlottesville and federal changes in policy that removed the individual mandate to buy health insurance and lowered the reimbursement insurers could receive from the government.
“In the face of significant uncertainty last year, Optima Health stood by the consumers needing individual plans in several markets, including Charlottesville, when Anthem chose to abandon them,” a spokeswoman for the company, Kelsea Smith, said in an email. “Our decision to return to the Charlottesville area in 2018 gave more than 5,000 people who receive subsidies an affordable option when they otherwise would have had no access to insurance. Our intentions remain to provide lower rates to benefit consumers in Charlottesville and across Virginia.”
Each year, insurers and hospitals hash out rates for various services. Smith said Optima believes its current rates with UVa Medical Center are 24 percent higher than Anthem’s 2017 individual market rates, and that, on average and adjusted for the severity of UVa’s cases, UVa costs are almost double the company’s rates at in-network Sentara Martha Jefferson and 75 percent higher than Hampton Roads hospitals.
“It has been stated that Optima is a small part of UVa’s revenue stream, however, UVa in fact represents a very large portion, two-thirds, of Optima’s hospital costs in the Charlottesville market,” Smith wrote.
Rick Shannon, UVa’s executive vice president for health affairs, said Wednesday that he stood by previous statements that Optima’s business with UVa on the exchange represents 2 percent of UVa’s business “and can’t possibly cost anywhere near what they charged in premiums.”
The health care company owns Optima, whose local marketplace rates are among highest in the U.S.
Consumer group Charlottesville for Reasonable Health Insurance, formed after the premium spikes a year ago, said it believed the filings showed premiums had been inflated.
Sentara is “having their most profitable year ever, largely because of the unprecedented rate hike imposed by Optima in its monopoly markets,” said Ian Dixon, a founding member of the group.
Optima maintains it has followed federal and state guidelines.
The group also pointed to Optima’s medical claims numbers. According to filings, in the third quarter, Optima spent 45 cents out of every premium dollar on its customers’ medical claims and quality of care. Over the whole year so far, this year’s ratio, known as a medical loss ratio, is 59 percent.
“Optima justified its outrageous rate increases by claiming that its claims costs were rising,” said Karl Quist, another founding member of CRHI. “Filings show the opposite — Optima’s average monthly claims per member have actually dropped by over 50 percent from last year, yet Charlottesville consumers are paying rates that are three times as high. A family of four now pays almost $3,000 per month for the cheapest Bronze plan.”
Smith said the company’s medical loss ratio is expected to climb in the final quarter, as is typical for insurers. If a company’s ratio is below 80 percent, it must rebate the surplus premiums collected.
Anthem will reenter the area in 2019; both its and Optima’s 2019 premiums will be cheaper than current rates. Some of Anthem and Optima’s 2019 plans will be narrow network and exclude all or some UVa providers. Subsidies will also decrease in the area; Virginia residents have until Dec. 15 to apply for care or switch plans on healthcare.gov.