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The Oregon Insurance Division will allow the state's largest health insurer to raise rates on individual premiums an average 12.8 percent, far lower than the 22.1 percent the company had requested.
The division announced its decision Tuesday after a public hearing in June on the request by Regence BlueCross BlueShield of Oregon, the first such hearing in more than two decades. The reduced rate increase will affect about 59,000 residents who buy from Regence individually or for their families rather than through employers.
One of them is Jack Turteltaub, 56, a self-employed Portland psychologist who has seen his rates double in the last four years.
"Considering how well I take care of my health, I think it is excessive what I pay now," he said, "so it is going to be more excessive. This illustrates how few choices people have."
The insurance division concluded that Regence was estimating its future costs too high, including predictions for the price of the federal health reform law passed last year, said Teresa Miller, division administrator. The nonprofit company also has a healthy surplus of $570 million and didn't need the 1.1 percent profit included in its request, she said.
In addition, individual enrollment in Regence has dropped from 100,000 people to less than 60,000 since 2007, and the state was concerned a 22 percent rate hike would drive even more people away, creating instability, Miller said.
The division agrees Regence will come up 3 percent short of costs even with a 12.8 rate hike, but that is less than the 5.3 percent loss Regence predicts and is a loss the company can absorb with its surplus, she said. The rate increase, scheduled to take effect Aug. 1, is an average and will vary among individual customers according to their ages and circumstances.
The insurance division regulates rates only on individual, small business and portability premiums. The state does not regulate health insurers for large employers.
In a prepared statement, Jared Short, president of Regence of Oregon, said the state's analysis "overlooks future costs and utilizes overly optimistic assumptions." He said limiting the rate increase to levels below anticipated medical spending by members is not sustainable.
"Regence has developed a consistent track record of setting rates which has limited our overall underwriting (profit), on average, to virtually zero percent over the past 10 years," he said.
Laura Etherton, health policy advocate for the Oregon State Public Interest Research Group, said the state's approval of a lower rate increase will save customers about $12.5 million
"It is a really important decision," she said. "It essentially says 'the buck stops here,' and rate increases are going to be scrutinized and excessive rate hikes are not going to be allowed."
The state's public hearing and subsequent decision was a "good first step," said Sen. Chip Shields, D-Portland.
"A 12.8 percent increase is still clearly unaffordable," he said, "but Regence also couldn't justify a 22 percent premium increase. The more sunlight we put on rates, the lower they will be."
He introduced several bills in the Legislature this year to bring more scrutiny to insurance rate requests, including one to require more public hearings, but all died in committees.
Miller said she's seeking federal money that will allow her to conduct public hearings on most rate requests beginning in October.
The Regence public hearing in Portland helped people see how the state analyzes rate requests, she said.
"I do want to give people the opportunity to see the kind of scrutiny we apply," she said.
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