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July 30, 2015

Comments on United Rate Filing HIOS Issue ID #14162

I. Introduction
United proposes to raise its rates for its off-exchange plans by 15.9%. It redacts its
conclusions and doesn't show its assumptions or calculations,. But based on its narrative
explanation its proposed increase is almost certain to be excessive and unreasonable.
II. Lack of relevance to Missouri of Uniteds general explanation of its rate increase
United's explanation of the "Source and Appropriateness of Data Used" is apparently
boilerplate taken from its standard rate filing and is inapplicable to Missouri. That is because
United says that "we relied on the guarantee issue claims experience and rate development of
affiliated small group carriers to develop our previously approved individual rates for the 2015
plan year," and that "our 2016 individual rates are subsequently developed from those previously
approved individual projections for the 2015 plan year and other available information." (3 of
18) Those are inaccurate statements with respect to Missouri, since Missouri does not approve
rates. United also does not explain how it developed its individual rates from its small group
rates. Did it assume that its individual rates would be lower or higher than its small group, and
by how much? And how did it reach its conclusion? United doesn't say.
III. Lack of meaningful explanation
The only explanation United gives as to how it decided on its 2016 rates is that they were
"developed from those previously approved individual projections for the 2015 plan year and
other available information. (Id.) It does not describe what that "other available information"
is, much less disclose it.

IV. Trend
United does not explain either what trend it is assuming or what the basis for that
assumption is.
V. Morbidity
United estimates that in states that allowed transitional relief -- i.e., that allowed people in
non-ACA-compliant plans to renew those policies -- morbidity would be higher than the average
morbidity in the small group market. This makes sense, since the people in those non-compliant
plans necessarily are predominantly healthy because when they bought their policies insurers
could decline people based on health status. So to the extent that those people are not in the
ACA-compliant pool, that pool of people will have worse health status. On the other hand, some
people who were in non-ACA-compliant plans in 2014 and 2015 can reasonably be expected to
buy ACA-compliant plans in 2016, as can some people who were in grandfathered plans -- plans
in effect when the ACA was passed that did not materially change their benefits. United does
not discuss the effect on its individual business of these predominantly healthy people enrolling
in 2016.
Further, United says that it has determined that it must increase its rates because it has had higher
than anticipated experience on its 2014 business. However, it does not consider the industry's
consistent insistence that the least healthy people would sign up as soon as they could -- i.e., in
2014 -- thus leaving a more healthy pool to sign up in 2016. It is therefore not reasonable to
assume that 2016 enrollees will have as high claims experience as have 2014 enrollees. Making
such an assumption still more unreasonable is the increase in the penalty for not having
insurance -- from the greater of $95 or 1% of income in 2014 to the greater of $695 or 2.5% of
income in 2016. Moreover, the 2014 enrollees had pent-up demand that can reasonably be
expected to have been satisfied in 2014 and 2015. Therefore, because 2016 new enrollees are
likely to be healthier than 2014 enrollees and because 2014 enrollees are likely to have had pent2

up demand that was satisfied in 2014, Uniteds assumption that 2016 rates should be based on
the experience of 2014 enrollees is unreasonable.
VI. Benefit differential and network adjustment
United says that it made adjustments to account for changes in utilization because of
differences in deductibles and co-payments and to account for narrower networks. However, it
neither quantifies these adjustments nor even discloses what whether they raise the increase or
reduce the increase. Nor does it explain how it arrived at its estimates. Presumably, because the
network adjustment "was made to account for a narrower network applicable to our individual
plans," (Id.) that adjustment would reduce the proposed increase. However, United doesn't say
VII. Risk adjustment and reinsurance
United's explanation of risk adjustment and reinsurance is inadequate in several ways.
First, United assumes that it must raise its rates (by an amount it does not specify) due to higher
than anticipated claims after taking into consideration the anticipated impact of reinsurance and
risk adjustment. It therefore necessarily assumes that its claims are higher than average and thus
that it will be receiving risk-adjustment payments from those carriers whose claims are lower
than average. In its explanation of risk adjustment, however, United says that it is "assuming
zero risk adjustment transfers," (5 of 18) i.e., that it will neither make nor receive a riskadjustment payment. United therefore tries to have it both ways: It seeks to raise its rates based
on its assumption that it will have worse than average experience, but does not reduce its rates
because it will receive risk-adjustment payments as a result of that worse than average
In addition, the redaction United makes after stating that it is assuming no risk adjustment
transfers is particularly unreasonable. It redacts the amount of the risk adjustment user fee per

member even though that amount is specified in, and United admits that amount is specified in,
the HHS Notice of Benefit and Payment Parameters for 2016, which is a public document.
Finally, United also redacts all its assumptions regarding the reinsurance payment it is
likely to receive.
VIII. Administrative expense load
United redacts both the total amount it projects it will spend on administrative expenses
and the amounts it will spend on individual components of administrative expenses, including
commissions, quality improvement and SG&A, even though these amounts are available in other
documents, such as the annual statement insurers file with state insurance departments and the
NAIC, and the MLR statement the insurers file with HHS.
IX. Profit and risk margin
United has redacted its assumed profit margin for Missouri.
X. Taxes and fees
United has redacted the taxes and fees it expects to pay even though those taxes and fees
are standard among insurers and contained in other public documents. United also redacts the
premium tax rate for Missouri, which is set by statute and therefore is public.
XI. Identity of person who prepared the filing
United redacts the name of the actuary who prepared the rate filing. This is unreasonable
because a major way in which an actuary's analysis can be challenged, just as any witness's
statement can be challenged, is by showing prior inconsistent statements. For example, if an
actuary uses a 7% trend factor in one rate filing but a 5% trend based on the same data and for
the same experience period in another filing, her use of the 5% can call into question the validity
of the 7%. By preventing the public from knowing the identity of the actuary who prepared the
filing United is preventing the public from challenging inconsistent statements that actuary has
made. Such secrecy would also seem to violate concepts of basic fairness: when an insurer is

seeking to raise its rates, those who would pay those rates should be able to determine who has
concluded that rates should be raised.