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Comments on Moda Health Plan's proposal to raise individual health insurance rates
Moda’s reasons for the increase include a projected 7.2% increase in the cost of providing medical services, 10.2% due to the end of federal and state reinsurance programs, 3.8% due to increasing administrative costs, and 5.1% due to a change in the company’s service area.
Moda has experienced major financial turmoil over the past year and was briefly taken into supervision by the state of Oregon before entering into a consent decree in February enabling the company to continue offering health coverage. This turmoil was caused in part by financial losses stemming from the company’s Individual plans. Moda projects it will spend $1.12 on health care for its Individual members for every premium dollar received in 2015, and sustain a 37% loss on its Individual market business. In such a situation, it is not unreasonable for an insurer to seek a rate increase.
However, we are deeply concerned about the impact of this large increase on consumers, and on the Oregon Individual market. While some increase is likely needed for Moda’s long-term financial stability, we are concerned that the proposed hike may be larger than necessary, and may overcharge consumers as a result. Ongoing insurer financial losses are not sustainable for the long term, but it is also unsustainable to continue hiking rates without addressing the drivers of health care cost growth.
We urge the Oregon Department of Consumer and Business Services (DCBS) to scrutinize the filing closely. We are concerned that, in some areas, Moda has not provided enough information to justify elements of their case for a rate hike.
At the same time, we urge DCBS and Oregon policymakers to take stronger steps to address the underlying drivers of health care costs and instability in the Individual market. Action is urgently needed to ensure that Oregon consumers are not subjected to unreasonable and unsustainable rate increases going forward, and that they are not being asked to foot the bill for waste, estimated to represent a third or more of every dollar we spend on health care.
To prepare this analysis, OSPIRG Foundation staff and consulting actuary reviewed the initial rate filing as well as supplemental information from the insurer in response to questions from DCBS and OSPIRG Foundation. All of this information is public record and is or will be available on the Oregon Insurance Division’s rate review website, www.oregonhealthrates.org.
- It is unclear from the information provided whether Moda is sufficiently adjusting its cost projections to reflect reductions in costs to Oregon hospitals. Public filings from Oregon hospitals continue to demonstrate that factors including record-low levels of uncompensated care are contributing to large hospital profit margins across the state. In light of these surpluses, it seems reasonable for insurers to expect commensurate savings on hospital costs.
- Moda’s medical cost trend projections may be excessive. Moda’s 7.4% medical trend projection is higher than many of their competitors, and insufficiently supported. While Moda’s filing indicated that a number of items were considered in developing its trend projections, Moda’s explanation of how these items were considered was vague. Since the burden of proof is on the insurance company to justify the proposed rate increase, and considering the high annual trend proposed by Moda, we would urge DCBS to scrutinize these projections closely.
- Moda’s administrative cost projections may be excessive. Moda’s 3.8% projected premium increase due to administrative costs is also insufficiently supported. Moda has projected that its administrative costs will increase by more than 70% per member per month from 2016 to 2017. While some increase in per member costs could be explained by an expected decrease in membership in 2017, passing along a 70% projected increase appears to be excessive, especially since the basis for the large increase was not provided.
- A 32.3% increase would have a significant negative impact on affected Oregonians, representing thousands of dollars in additional premium costs per year for many Moda members. Such a large increase would be highly disruptive for consumers. While many Moda members can avoid or mitigate this impact via the Affordable Care Act’s tax credits, or by switching coverage, such a large increase will still be disruptive for many Oregon families.
- Moda has chosen to stop offering coverage in many parts of the state. Moda is currently offering plans statewide, but has chosen to stop offering coverage in 2017 for much of Central, Eastern and Southern Oregon, as well as Eugene and much of the mid-Willamette Valley region. This will have a disruptive effect not only for current Moda members living in these areas, but for the competitive landscape in these regions. With fewer insurance companies competing for members in these places, the remaining insurers will have less incentive to keep down costs going forward. While this would seem at first glance to be a cost-cutting move for Moda, the insurer is actually including an increase due to its service area changes that at least partially offsets any gains from tighter control of the insurer’s provider network. This increase merits close scrutiny. We also urge DCBS to consider the impact of this decision and develop a strategy to ensure sustainable access to reasonably-priced health coverage in all parts of the state.
- When it comes to reducing costs and improving the quality of care, it is unclear whether Moda is doing all it can. Moda outlines a number of cost containment and quality improvement programs in its filing that may be worthwhile, but the company did not provide the cost and quality metrics required in rate filings or respond to OSPIRG Foundation’s questions about these issues until very recently, and we have not had the opportunity to fully consider the answers provided. With the company projecting a large medical cost trend going forward, it is all the more urgent to ensure that it is doing all it can to contain costs and cut waste before passing these costs along to consumers in the form of higher rates.
 As Moda’s filing explains, the 84.2% increase would only be experienced by members currently enrolled in the insurer’s Catastrophic plan, which is being discontinued. Excluding this plan, the maximum increase Moda members would experience is 58.4%
 Moda had 58,280 members as of March 31, 2016. However, because of service area reductions by Moda for 2017, the number of these members in 2017 services areas is 31,317; or about 46% lower.
 Moda’s original filing included a provision of 5.1% for this item. (see Exhibit 3) In response to OSPIRG Foundation’s questions, item 12, Moda changed this value to 3.8%. “Having discovered an error in our original calculation, the service area adjustment should be 3.8%.” It is not clear if Moda will be adjusting its proposed rate downward to reflect this.
 OSPIRG Foundation’s analysis is based upon the information currently available. OSPIRG Foundation reserves the right to submit further comments if additional relevant information becomes available.
 See, e.g., http://www.wweek.com/news/2016/04/13/the-five-things-hospitals-dont-want-you-to-know-about-obamacare/ for background on this issue.
 See, e.g., Moda’s response to OSPIRG Foundation request item 11.
 Moda’s response to OSPIRG Foundation request item 14. $46.82 (2017 Filed Admin PMPM) / $27.33 (2016 Filed Admin PMPM) = 1.713
 The cost, quality and utilization metrics demonstrate a mixed bag of results. Moda’s ER costs per member per month increased slightly and are significantly higher than many of their competitors, and pharmacy costs increased by over 43% PMPM, but its inpatient hospital costs decreased. Moda’s performance on the five quality metrics included in the filing varied only slightly from last year’s filing.
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