This summer, consumers and businesses nationwide will receive $500 million in rebates from health insurance companies. For the second year in a row, thanks to the federal health reform bill, insurers that spend less than 80% of our premium dollars on providing medical care will be required to make up the difference with checks to their customers. Only 1 in every 200 Oregonians will see a dime as a result of this program, and that’s great news for our state.
Here’s why: The overwhelming majority of Oregonians don’t need the new law to ensure that most of their premium is spent on health care because Oregon has already taken the first steps to hold insurance companies accountable.
One of the key steps that brought us here is Oregon’s health insurance rate review program. Insurers offering coverage to Oregon individuals, families and small businesses purchasing coverage on their own must justify their prices in writing, showing that they are not excessive and explaining how the insurer is working to keep costs down.
As outlined in an OSPIRG Foundation report released in April, rate review has been particularly effective in pushing Oregon’s insurers to keep administrative costs and other non-medical expenses in check, especially since the passage of an OSPIRG-backed law in 2009 heightened scrutiny and strengthened the standards state regulators use to evaluate rate hikes. According to our most recent estimate, this scrutiny has cut over $155 million in waste and unjustified costs from premiums since the law came fully into effect in 2010.
While the low volume of rebates in Oregon is likely due to multiple causes, the impact of Oregon’s efforts can be seen clearly in comparison with other states. States with similarly high levels of scrutiny for health insurance rates, such as Washington or Rhode Island, have similarly low volumes of rebates per capita. Many states where regulators lack the authority to deny unreasonable rate increases, such as California, Texas or Arizona, have 2-3 times the volume of rebates per capita as Oregon or more. This shows that consumers and businesses get better value for their premium dollar in states that have taken steps to hold insurance companies accountable.
This is not to say that all is well. As any average Oregon family or business owner can tell you, health care still costs too much, and does not provide enough value for the money. But thanks to the steps Oregon has taken in the past few years, we are moving in the right direction. And over the next year, we believe that we have a good chance to take another big step forward. Stay tuned.