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Health insurance premiums

Regulators have new approaches in evaluating proposed increases
By
Betsy Q. Cliff

Oregon health insurers are having a harder time raising premiums now than they have in the past.

Bolstered by state and federal health reform laws, the Oregon Insurance Division is taking a closer look at premium increases, and rejecting a considerable number.

The division has long had the power to review rate increases, but, until recently, it's been somewhat of a pass-through. In 2008, for example, just two of the 14 premium increases proposed by insurers were reduced, and not by much.

That's changed.

So far in 2011, just 12 of 33 proposed rate increases have gotten through the division unchanged. Recently, one of the state's largest insurers, Regence BlueCross BlueShield of Oregon, had a proposed 22 percent rate hike reduced to just under 13 percent.

“We have the ability and the authority we need to get in there and scrutinize these rate filings pretty closely,” said Teresa Miller, administrator of the Insurance Division, “and really push back when we need to.”

Effect on consumers

The more stringent review is good for consumers, said Laura Etherton, a health care advocate at the Oregon State Public Interest Research Group, which analyzes and comments on health insurance rate decisions.

“The foremost piece is it's always better for health insurance consumers not to pay excessive prices,” said Etherton. “More money in consumers' pockets means more money to spend on food, housing and other things.”

Etherton said keeping premiums low can also help more people retain their insurance coverage. That can, overall, stabilize the insurance market.

When prices rise, she said, those who can't afford coverage or have no major medical problems drop it. That means sicker people are a larger percentage of those with insurance, inflating costs for all those insured.

That second point is debated by at least some health insurers.

In a prepared statement after the recent reduction of its rate request, Regence CEO Jared Short said “our experience suggests this will hurt members' health security over the long term. Limiting rates to levels below the anticipated medical spending of our members simply isn't sustainable.”

The company also referred to a white paper, authored by Regence, that discussed the hemorrhaging of money by health insurers and subsequent destabilization of the insurance market after Washington state severely curtailed rate increases.

New authority

Several events precipitated the tightening of the review process, said Miller.

The most significant was the passage of Oregon's health reform law in 2009, which increased the division's power and scope.

In particular, the new law allows the division to look at a company's overall profitability rather than just whether a particular line of business is making money. “We can still approve a request that forces them to lose money (on a particular product) if they are making a profit as a whole,” Miller said.

For example, many insurers made large investment profits in 2010, said Miller, so that now many have large surpluses. The division can now consider that kind of information in rate decisions.

The new law also allows the division to consider public comments as well as an insurer's efforts to contain its costs.

Miller said the division's decisions have also changed in response to changes in the state's economic climate over the past few years.

In 2008, she said, “we had a lot of major companies in the U.S. going bankrupt. We wanted to make sure insurance companies stayed solvent.”

But, she said, in the past couple of years, health insurers have made more money while the number of uninsured has been on the rise. That's led to a pendulum swing in the other direction, with the division looking more at restricting rate increases to help consumers keep health insurance.

Regulating health costs

Miller said that in the future, the division wants to employ even more regulatory tools to scrutinize rate increase proposals. So far, the division has not been able to address the largest causes of health insurance premium increases, medical cost increases.

As part of federal health legislation, the state got a $1 million grant to try to figure out ways to do just that.

One thing the division is looking at, Miller said, is clauses in insurance contracts with hospitals that would prohibit the insurer from being billed for some serious medical mistakes.

“Traditionally, insurance regulations haven't taken on a role that would try to address the underlying drivers of rates,” Miller said. “It's the exciting next thing.”

Betsy Q. Cliff can be reached at 541-383-0375 or bcliff@bendbulletin.com.

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