The process for determining Vermont Health Connect premium rates starts Monday. State officials say rates next year will likely go up because of a variety of factors.

In its first year, the state's federally mandated online insurance marketplace enrolled 60,835 people in small group and individual market health plans.

The rates approved by the board will determine what those people pay in premiums and out-of-pocket costs in 2015.

The two carriers participating in the state's health insurance exchange must submit their rate requests to the Green Mountain Care Board on Monday.

The board will have 90 days to evaluate the assumptions underlying the rate requests from Blue Cross Blue Shield of Vermont and MVP Health Care and to then approve a new set of rates. (Last year's rates can be seen here.)

"My guess is that rates will go up," said Al Gobeille, chair of the Green Mountain Care Board.

That is likely to be unwelcome news for Vermonters and Vermont businesses when many are already struggling to afford the commercial insurance from the exchange - in some cases even with the government subsidies meant to make insurance more affordable.

If health insurance rates are rising at a higher percentage than people's income, it becomes increasingly unaffordable, said Lila Richardson, an attorney with the Office of the Health Care Advocate, a Legal Aid project.


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"Our office gets a lot of calls where people aren't really saying, 'I'm calling about insurance rate reviews,' but they're talking about the fact that they're very stressed to pay for insurance products, especially in the individual market," Richardson said at a public forum on the rate review process hosted by the Green Mountain Care Board in Burlington on Thursday night.

She said businesses are also having difficulty affording the rising cost of coverage for their employees, Richardson said.

A report from the federal Department of Health and Human Services showed that plans offered through Vermont Health Connect had the fifth-highest rates of any exchange.

"We're the second-smallest state in the country, so our fixed costs are very high," said Con Hogan, former head of the Agency of Human Services and a member of the board.

Insurers finance much of health care, and in Vermont the cost of care is driven partly by the need to maintain the health delivery infrastructure for providing services to a small population.

The federal report drew a strong connection between competition and rates, noting that states with more carriers participating had lower rates.

"We only had two qualified health plans providing products in the exchange because years ago Vermonters made the moral and societal decision to get rid of community rating and make sure we had guaranteed issue of the products provided to Vermonters," said Dr. Alan Ramsay, a longtime family medicine doctor and member of the board.

Vermont's guaranteed issue policy ensures that people receive health insurance for pre-existing conditions, and its community rating policy requires that all insurers charge patients the same rate for the same policies.

That means insurers can't offer different rates to different age groups or different rates based on health indicators, such as if someone is a smoker. Older and sicker people require more health care, and providing coverage to those groups drives up prices for everyone.

The trend is exacerbated by Vermont's having the second-oldest population of any state.

Nationally, much of the conversation about whether exchange premiums and out-of-pocket costs will rise in 2015 is dominated by speculation about whether - and how many - new insurers will jump into the online marketplaces.

But that's not likely to happen in Vermont for the reasons stated above, and because of the governor's stated intent to bring a publicly financed health care system to Vermont.

Private health insurance would largely cease to exist in a single-payer system - there is some debate over whether large self-insured companies would be able to continue to offer their own health plans - and it's unlikely any carrier would want to invest in a Vermont operation for just a few years until that system can be put in place.

"Also, the pie just isn't that big," Gobeille said, noting that there aren't that many potential customers for any company considering Vermont's exchange.

But that doesn't mean the process isn't competitive between Blue Cross Blue Shield and MVP.

"This is true competition, because you have two companies trying to get to the lower rate," Gobeille said.

"It's going to be very interesting to see how they value the changes that have been made," as a result of the Affordable Care Act, he said.

Actuaries for the carriers have worked for months developing the requests that will be submitted Monday, making complex calculations to try to offer competitive rates that will also cover the cost of their customers' health needs.

"The reason it's complicated is because the process includes things we know and things we don't know, and it turns out as we develop rates, there's more things we don't know than things we know," said Kevin Goddard, Vice President of External Relations for Blue Cross Blue Shield of Vermont.

"We don't know what the utilization will be, so we make some assumptions," Goddard said.

Those assumptions are modeled by looking back at utilization by the same population in previous years. But the Affordable Care Act has had a dramatic impact on how people are insured, and is likely to affect patterns of use in health care.

Vermont's individual market ballooned from 1,815 in May 2013 to 27,221. The small group market shrunk from 46,643 last year to 33,614 this year.

In addition, the window of claims information that actuaries for the carriers can examine was curtailed by the extended open enrollment period, which ended in April. Insurers didn't have a good sense of the population they would be covering through the exchange until that time, and even less information about how those people were using health services.

This difficult set of calculations can have serious consequences, Goddard said.

"Blue Cross provides a billion dollars in health care financing for Vermonters so if we're off by 1 percent, that's $10 million," he said.

Vermonters spent roughly $5 billion on health care in 2011, and in 2012 the state had $914 million in Medicare spending.

There are some factors that the carriers do know will have to be covered by their rate requests, such as their administrative costs fees and assessments charged to them by the government to pay for subsidies offered to lower-income people purchasing plans through the exchange.

The board has contracted with its own actuaries to assess the knowable expenses included in the carrier's rate requests as well as the assumptions about the unknowns.

This will be the third year the Green Mountain Care Board will be responsible for setting health insurance rates, and the first year the Department of Financial Regulation won't make its own recommendations to the board - except to weigh in on whether the rates will keep carriers solvent.

Historically, Vermont's health insurance rate-setting process was focused on the solvency of carriers and if the rates were discriminatory, meaning they would unnecessarily charge one group more than another. The board's mandate requires it to consider affordability in the rate-setting process.

Public hearings on the rate review process can be requested by the Office of the Health Care Advocate, or by the carriers. The board has the discretion to hold a hearing even if one isn't requested.

The hearing is an opportunity for the carrier or the advocate's office to present their position to the board before its decision, or for the board to gather more information about the requests.