February 22, 2010

 

 

Mr. Christopher F. Koller

Health Insurance Commissioner

Office of Health Insurance Commissioner

1511 Pontiac Avenue, Building 69-1

Cranston, RI   02920

           

 

Dear Mr. Koller:

 

We are writing on behalf of the Rhode Island Manufacturers Association ("RIMA") in connection with your solicitation of public comment on the above-referenced matter.  In particular, we are writing with regard to the group rate factor filing (the "Filing") made with your office on or about January 22, 2010, by Blue Cross & Blue Shield of Rhode Island ("BCBSRI").

 

RIMA is a trade association that represents the interests of nearly three hundred (300) Rhode Island manufacturing companies, ranging from small businesses to much larger manufacturers.  RIMA's member companies employ as many as 30,000 people in Rhode Island.  Those companies make a substantial contribution to the economy and the work force in this state, and are therefore understandably concerned about the rapidly rising costs of health care insurance.  Manufacturers provide high quality jobs with benefits, and are therefore invariably impacted by spiraling costs in the health care insurance market.

First, the Filing by BCBSRI states that it "holds administrative charges at current levels as measured on a percent of premium basis."  We believe, however, that this statement is misleading and therefore is not an accurate representation of the relevant facts.  The reality is that administrative costs are not being held at current levels, but are increasing at the same rate as the increase in the claims portion of the premiums (11.4% for small groups and 14.6% for large groups).  It is hard to understand why these increases would be so high if, in fact, BCBSRI is maintaining administrative costs "at current levels."  Please note that BCBSRI has also excluded certain "extraordinary" expenses associated with its new "core operational computer system" and its "integrated health management initiative" from its administrative expenses.  Therefore, these expenses are being passed on to insureds and their employers, in addition to the 11.4% and 14.6% percent increases set forth above, in the form of increased reserve factors.

 

Second, BCBSRI states in its Filing that it has eliminated 157 full-time positions in the last two years, and has taken steps to decrease employee salaries.  At the same time, however, BCBSRI's own data submitted with the Filing indicates that payroll and benefits have increased by 17.6% (for small groups) and 13.9% (for large groups), respectively.  It is entirely unclear how these payroll and benefit costs can increase so substantially if 157 full-time positions have been eliminated.  Other data suggests that virtually every category of administrative expense has increased.  RIMA believes that this is actually the basis for the proposed rate increase, despite statements to the contrary by BCBSRI in its Filing.  We suspect that BCBSRI has been forced by its major self-insured clients to lower the administrative costs that they are charged and has chosen instead to pass on the difference to its insured businesses, such as RIMA members.  BCBSRI should be reducing costs, not transferring them to others.

 

Third, and finally, BCBSRI seeks a reserve factor of 2.34%, up from 1.34%.  Competing insurers have sought reserve factors substantially lower, or none at all.  RIMA asserts that BCBSRI, through this reserve factor, is passing on the costs of its new claims system, its new office building, and other expenses to its insureds, and has been doing so by increases in this reserve factor for a period of many years.   This increase in the reserve factor would not be necessary if BCBSRI would instead hold its administrative costs at current levels.

 

In sum, RIMA and its member employers and employees urge you, on behalf of the people of the State of Rhode Island, to give serious scrutiny to the statements made by BCBSRI in support of its Filing, and to question, in particular, the statement that this Filing "holds administrative charges at current levels."  In fact, RIMA suggests that there is no support for that statement, and, rather, that BCBSRI is attempting to pass on a substantial increase in its administrative costs to its insureds and their employers in the form of premium increases.  On behalf of the many employers and employees in this state that are routinely and increasingly burdened by spiraling health care insurance costs, we urge your office to reject any increase in administrative expenses proposed by BCBSRI and to limit any proposed increases in premium rates to no more than the CPI index.  BCBSRI should be joining all other employers in the State of Rhode Island in taking real and concrete steps to control its costs, and to ensure that the benefits of any such steps are passed on to its customers.

 

On behalf of RIMA, we request an opportunity to be heard further on these issues at any future public hearings held on this Filing.  Thank you for your consideration.

Respectfully submitted,

 

Mark W. Freel

 

 

cc:        Mr. John Grady

            Mr. Al T. Lubrano

            Mr. Wally Gernt