Rhode Island ties insurer rate hikes to reining in hospital costs

Rhode Island Health Insurance Commissioner Christopher Koller last week approved smaller-than-requested premium increases for the state's three health insurers (Blue Cross and Blue Shield of Rhode Island, UnitedHealthcare of New England and Tufts Health Plan), but tied those increases to certain conditions involving hospital costs, reports the Providence Business News.

Koller granted average increases for 2011 employer group rates of 8.4 percent to 12.3 percent. The increases were between 1.4 and 3.6 percentage points less than the insurers had requested, reports the Providence Journal.

"The rate factors represent a balance between solvent insurers, adequately compensated providers and rates of increase that risk making health insurance even less affordable," said Koller. "The rate factors, however, are not as affordable as they should be. The data presented to OHIC [the Office of the Health Insurance Commissioner] and available for the public to see is clear--health insurance is expensive because medical care is expensive. Health plans predicted rates of increase for hospital services alone of up to fourteen percent. Affordable rates of increase will not occur until we change the way our medical care is organized and delivered."

To jump start that change, Koller linked the payment increases to insurers taking six key steps when signing new contracts: creating incentive-based payment methodologies for inpatient and outpatient hospital services, setting an annual maximum price increase for inpatient and outpatient hospital services, requiring hospital contracts to have quality incentives, creating administrative efficiency standards and provider communications standards, and providing public access to details about those terms.

Insurers aren't wild about the rate increases. Blue Cross spokeswoman Laura Calenda said the increases likely wouldn't cover the costs of members' claims. However, the insurer "appreciates the new requirements adopted by the OHIC's decision related to hospital contracts, which are designed to drive hospital reimbursement reform," she told the Providence Business News.

To learn more:
- read this Providence Business News article
- read these reports from the Providence Journal: article 1 and article 2
- access the OHIC documentation here