Here’s the skinny on OSPIRG Foundation’s new analysis of 2016 rates proposed by four Oregon insurers—LifeWise, Moda, PacificSource and Regence. There’s some good news, some concerning news, and some very concerning news, but the best news of all is that thanks to Oregon’s health insurance rate review process, the insurers don’t get the last word.
Oregon’s health insurers must get permission from state officials, after they conduct an extensive review, before insurers can raise premiums on individuals and small businesses. For several years, OSPIRG Foundation has put a magnifying glass to premium hike proposals to lend the consumers’ perspective to the process. Meanwhile, thousands of Oregonians have participated by weighing with their own perspectives to the state’s Insurance Division. All this additional scrutiny has helped cut over $179 million in waste from health insurance premiums since 2010.
Here’s what our investigation found this year.
The Good News
- Oregon’s health insurance market remains highly competitive, and consumers who do experience rate increases will have options if they shop around. Kaiser is proposing a rate decrease for next year, and some other insurers are proposing to keep rates pretty much the same as this year.
- After changes won with the support of over 30,000 Oregonians, for the second year in a row, every Oregon insurer submitted hard data on health care quality, cost and utilization as part of the rate filing process. These metrics represent a step forward for transparency and provide some helpful information to evaluate insurers’ efforts to contain costs and improve quality of care.
The Concerning News
- Many insurers’ cost projections for covering their current members and future enrollees may be overestimated. While the cost of covering the new members that enrolled in health coverage in 2014 has been higher than a number of insurers initially projected, there are reasons to believe that these costs will go down in future years. Most Oregon insurers acknowledge this to some degree, but it is possible that insurers are prematurely overcorrecting before it is widely understood how the market will develop. Many of the Oregonians who signed up for coverage in 2014 had been unable to access coverage in prior years due to pre-existing medical conditions. The cost of providing medical services to individuals who have been blocked from coverage for many years is likely to go down in future years as those conditions require fewer acute interventions and become more manageable with ongoing treatment. These costs are also likely to be offset by more Oregonians purchasing coverage in 2015 and 2016.
- Despite financial losses for some in 2014, the financial position of Oregon’s major insurers remains sound. This means that Oregon insurers could take a more moderate approach to increasing rates to avoid large, disruptive rate increases in 2016, yet many have chosen to request large rate hikes instead. Some insurers, including PacificSource, Moda and Regence, are proposing to add to their surpluses while also proposing some of the largest rate increases in recent Oregon history.
- Some insurers are still failing to adjust cost projections to reflect reductions in “bad debt” from the Affordable Care Act’s expansion of coverage. Recent public filings from Oregon hospitals demonstrate record-low levels of uncompensated care resulting in large hospital profit margins across the state, and these cost savings should be shared with consumers through lower hospital costs and lower premiums. Last year, Oregon regulators cut back many rate proposals to ensure that they appropriately included these reductions, but this year, a number of insurers, including Regence and LifeWise, have again failed to account for these savings. With many Oregon hospitals posting margins of 10% or more, the potential savings are dramatic, but consumers will not benefit unless the savings are appropriately incorporated into premium rates.
- Some Oregon insurers appear to be overstating medical cost trends. With a number of national studies demonstrating a slowdown in health care cost growth in recent years, projections as high as 8.8% (from Regence) merit close scrutiny.
- PacificSource is projecting that their prescription drug costs will rise by 16%—much more than most of their competitors. The insurer provides little justification for this projection, which appears to have been based on a proprietary model that the insurer did not provide.
- The new cost, quality and utilization metrics submitted for the second time this year raise some important questions for some insurers that have yet to be fully answered.
The Very Concerning News
--Some Oregon insurers are proposing historically large rate increases that will have a major negative effect on tens of thousands of Oregon families across the state. The large rate hike proposals we examined from Regence (12.3%), Moda (25.6%), LifeWise (37.2%) and PacificSource (42.7%) will affect over 150,000 Oregonians across the state, potentially costing families thousands of additional premium dollars per year.
These large increases would be highly disruptive for consumers. While Oregon’s economy appears to be improving, these increases would still take place against a backdrop of largely stagnant wage growth, and represent increases many times in excess of the rate of inflation in the broader economy
While Oregon has a highly competitive health insurance marketplace and consumers have the option of shopping around, large year-to-year premium fluctuations can be highly disruptive for consumers and for the stability of the health insurance market as a whole. Tax credits available through healthcare.gov will mitigate some of these costs for eligible individuals, but it is worth pointing out that individuals currently receiving tax credits may see increases in effective premium far in excess of the average increases included in the insurers’ filings if their rates increase faster than the value of the tax credits, which are pegged to the second-cheapest Silver plan available through healthcare.gov.
--Oregon’s insurers are still not doing enough to demonstrate that they are doing all they can to keep down costs. Rising medical and prescription drug costs are far and away the most significant driver of rising health insurance costs. Health insurance companies have a significant role to play to help lower these underlying costs—not by cutting access to needed care—but by cutting waste and working with providers in their networks to focus on prevention and other proven strategies that keep patients healthier. While the insurers generally include some description of their efforts in their rate proposals, these descriptions are vague and do not generally provide enough detail to enable an independent evaluation of the adequacy of an insurer’s cost containment strategy.
In future years, we hope that information about insurers’ cost containment efforts is integrated with enhanced cost and quality metrics to ensure that the data is presented in detail sufficient to create meaningful accountability. In evaluating performance in this area, comparing trend lines year-over-year will be critical. Some insurers may serve a less healthy customer base than others, and this may be reflected in their performance on some of these metrics, but if insurers implement adequate, comprehensive cost containment and quality improvement efforts, consumers should be able to expect continuous improvement on these metrics as insurers work to cut waste and improve care.
Now that insurers cannot discriminate against individuals with pre-existing medical conditions, insurers can no longer base their business models on managing risk and exposure to potentially unhealthy members. Instead, insurers must redouble their efforts to help their members manage their health. These efforts are especially important in light of unexpectedly high costs in 2014. Oregonians will be expecting progress in bending the cost curve in coming years, and state regulators should take steps to hold insurers accountable for this.
The Oregon Insurance Division will be making decisions on these rate proposals by July 1. Watch this space, and the Insurance Division’s rate review website, for updates. We’ll be sure to keep you in the loop.