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Close scrutiny of proposed health insurance premiums for 2014 has cut over $69 million in waste and unjustified costs from premiums for Oregon consumers and small businesses, according to a new OSPIRG Foundation report released today. The new cuts come after OSPIRG Foundation’s analysis questioned the justifications of five major rate proposals. Taken together with cuts made since new standards were implemented, state officials have required insurers to cut $155 million in waste since 2010.
“This is a major step forward and another piece of evidence that accountability works to bring down costs,” said Jesse O’Brien, OSPIRG Foundation Health Care Advocate. “Now, it’s time to build on the successes of Oregon’s rate review program, and take the next steps toward bringing the cost of health care under control.”
Under the Oregon Insurance Division’s (OID) health insurance rate review program, health insurers seeking to increase their rates on small businesses or people purchasing coverage on their own must submit a written justification. The OID then evaluates whether the proposal is reasonable and goes on to approve, disapprove or cut back the proposed rate. OSPIRG Foundation’s analysis focuses on the OID’s recent decisions for health insurance rates for 2014.
Key findings of OSPIRG Foundation’s report:
- Two of Oregon’s biggest insurers, Kaiser and Providence, made major errors in their initial filings. After admitting to these errors, both insurers suggested sizable cuts to their proposed rates, and the final decisions cut rates back even further. All together, the cuts applied to the rates proposed by these two insurers amount to over $38 million.
- Many insurers overstated or incorrectly calculated the costs of implementing health reform, while failing to properly account for cost savings. The OID found that some insurers’ projections of increased costs due to covering the currently uninsured were unsubstantiated, and cut back those rate proposals accordingly. The OID also cut every single rate request for Oregon’s Individual market by at least 1.5% due to a failure to properly account for savings due to programs to stabilize health insurance rates in the first three years of federal healthcare reform.
- Some insurers overstated trends in medical costs. A number of national studies have demonstrated a slowdown in health care cost growth, yet several insurers projected accelerating cost growth in the year ahead, with some projecting costs increases more than 2-3 times the national average over the past few years. In a few cases, the OID questioned these projections, and cut back those proposals accordingly.
“Without Oregon’s robust rate review program, consumers and small businesses would be paying millions more for coverage,” said O’Brien. “But with study after study demonstrating that a third or more of health care spending is waste, we know we can do better.”
Oregon Governor John Kitzhaber recently called for recommendations to improve Oregon’s health insurance rate review program, and the report highlights a number of opportunities to learn from the recent review process to strengthen the program.
Key recommendations of the report:
- Insurers should be required to reveal more information to justify their projections of increases in medical costs.
- Insurers should be required to pass along to policyholders the cost savings that will come as uncompensated hospital care declines as hundreds of thousands of uninsured Oregonians gain health coverage due to health reform.
- Insurers should be required to demonstrate that they are doing all they can to reduce costs and improve quality of care before moving forward with a rate proposal.
Prior to the recent rate decisions, OSPIRG Foundation conducted an in-depth analysis of rate proposals from five of Oregon’s top insurers: Kaiser, Providence, LifeWise, BridgeSpan and Moda (formerly ODS). All rate filing documentation, including the OID’s decisions, is available on the OID’s rate review website, www.oregonhealthrates.org
Background on Oregon’s health insurance rate review program
In 2010, new rules went into effect strengthening the standards that health insurance companies must meet before raising premiums. Insurers must justify rate hikes in writing, showing that they are not excessive and explaining how the insurer is working to reduce costs. All rate filings are public information, available online, and open to public comment. The Oregon Insurance Division evaluates these justifications, and must take public input into consideration. In 2011, the Insurance Division began to hold public hearings on significant rate increases.
Since these changes have taken effect, the Oregon Insurance Division has significantly stepped up their scrutiny of health insurers’ rate hike requests. Since 2010, it made cuts to a majority of requests, cutting over $80 million in waste and unjustified costs from consumers’ and small businesses’ premiums from 2010-2013.
OSPIRG Foundation is a non-profit, non-partisan statewide consumer organization.
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