Report: Health Insurance Rate Watch Project

Advancing Accountability, Cutting Health Care Waste

A progress report on health insurance rate review in Oregon and how to build on its success
Released by: OSPIRG Foundation

EXECUTIVE SUMMARY

The cost of health care for average Oregonians has risen unsustainably for decades. Yet the outline of the solution is already clear.

In this report, we examine the success so far of one tool to rein in runaway costs – Oregon’s health insurance rate review program. We also propose changes to the process that will enable Oregon to take its successful rate review program to the next level by tackling the biggest driver of costs: Waste in the health care delivery system.

Studies have shown that a third or more of all health care spending is spent in ways that do not improve health—and in too many cases even do harm.  In the face of this mounting evidence, it is good news that policymakers and health care leaders are focusing attention on reining in health care costs by cutting waste and focusing on prevention, not by cutting care and passing more costs on to consumers.

The Oregon Insurance Division’s (OID) rate review program requires that insurers in the individual and small business markets justify premium rate hikes in writing, showing that they are not excessive and explaining how the insurer is working to reduce costs.

Oregon’s rate review program is widely considered a national model, fostering unprecedented transparency, more meaningful public involvement, and closer scrutiny of rate increases. Since new rate review standards were implemented in 2010, Oregon consumers have experienced measurable gains.

In our analysis, we examined 222 rate filings, 110 before and 112 after these standards went into effect.

KEY FINDINGS:

  • Stronger rate review has cut over $80 million in unjustified costs from consumers’ and small businesses’ premiums since 2010.
  • State officials have cut rate hikes over 17% on average. Prior to 2010, rate review decisions trimmed rate increases by an average of only 6%.  This difference cannot be explained by insurers simply requesting higher rate increases, as requested rates have also declined on average since 2010.
  • Since 2010, rate review decisions have reduced the portion of premium spent on administrative costs by 5.4% on average, a reversal of the trend seen before 2010.

Many factors affect costs in any market as large as health care, but the trends are clear. Heightened scrutiny of rate increases has been associated with real progress toward a more efficient and cost-effective health insurance market.

We now encourage Oregon to widen the scope of rate review to begin to address the chief underlying cause of high insurance rates – medical costs. In this report, we make the case for improvements to several traditional components of rate review, and lay out possibilities to make use of rate review to reduce waste in the health care delivery system.

KEY RECOMMENDATIONS:

  • Strengthen standards for insurers’ cost containment and quality improvement efforts. By focusing on insurers’ payment strategies and quantitative goals and results, rate review can complement other efforts to drive systemic reforms to improve safety, increase care coordination, boost prevention, and bring down costs for consumers and small businesses.
  • Preserve and strengthen the integrity of the process. Insurers should not be allowed to raise rates without robust review of all data necessary to evaluate the reasonableness of their projections of future cost growth. The Insurance Division should have the authority to take all necessary steps to ensure that this data is available in a timely fashion and accessible for independent review.
  • Make rate review more transparent and user-friendly. Consumers and small businesses should be notified of pending rate requests that affect them, and informed of opportunities to comment on proposed increases. Rate filings should also be made more easily digestible for the public., and c Consumers should be able to determine the impact of a rate request on their own premium without difficulty.

Health insurance costs are one part of a larger puzzle, and rate review cannot be expected to resolve every driver of out-of-control health care costs. However, it is a key piece of the puzzle, and its proven successes in Oregon suggest that more progress is possible.

Studies continue to demonstrate the waste in our health care system. Taking a few common-sense steps to improve the rate review process now will put our state in a better position to make real progress toward cutting waste, improving quality and making health care work better for Oregon families and small businesses.

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