Providence’s proposed double-digit rate hike merits close scrutiny, may overcharge consumers

New OSPIRG Foundation analysis of Providence Health Plan’s 2019 rate proposal identifies areas where the company’s proposed rates may be excessive.

OSPIRG Foundation

Health Insurance Rate Watch RATE ANALYSIS: June 26, 2018
Contact:  Jesse O’Brien, OSPIRG Foundation, 503-231-4181x307 (office), 503-504-8627 (cell)

Providence Health Plan has proposed a rate hike of 13.6% on average—as high as 24.1% for some—on over 90,000 Oregonians. According to a new OSPIRG Foundation analysis released today, this rate hike proposal may overstate costs and overcharge consumers for health coverage.

“This is the third year in a row Providence has proposed a double-digit rate hike on tens of thousands of Oregonians, and their rates have nearly doubled since 2015,” said Jesse O’Brien, OSPIRG Foundation Policy Director. “This simply cannot continue.”

“The more we dig into Providence’s justification, the more concerned we are that the proposed rates may overcharge consumers by overstating the impact of medical cost inflation and federal policy changes. While many Providence members will be able to avoid paying the full premium price by taking advantage of the Affordable Care Act’s tax credits, or may find a lower-cost option by switching coverage, such a large increase will still be disruptive for many Oregon families,” said O’Brien.

Providence’s rate filing, all supporting documents and correspondence between the insurer and state regulators can be found at the Oregon Department of Consumer and Business Services (DCBS) rate review website, www.oregonhealthrates.org

Key findings of OSPIRG Foundation’s analysis:

• Providence’s estimate of a 10% increase due to federal policy changes will likely result in inappropriately overcharging consumers. Although the repeal of the Affordable Care Act’s (ACA) individual mandate is disruptive for consumers as well as health insurers, this rate hike proposal may be overstating the impact. Providence also incorporates an increase due to a new federal rule expanding so-called association health plans that was just finalized, despite the fact that Oregon policymakers have the opportunity to take action to protect consumers from the potential negative effects.

• Providence’s financial position is improving. Providence was able to add to its surplus last year, which grew by $33 million to reach nearly half a billion dollars. In this context, we question the justification for Providence’s proposal to add a 4% margin to its surplus while also proposing a double-digit rate hike for the third year in a row.

• Providence’s large medical and prescription drug cost trend projections may be excessive. Providence projects an 8% increase in the cost of health care services and prescription drugs, which is larger than many of their competitors and may be overstated. Providence’s projected 19.4% prescription drug cost trend is by far the highest in the market. While rising prescription drug costs are legitimately troubling, this may be significantly higher than necessary.

• A 13.6% increase would have a significant negative impact on affected Oregonians. Yet another double-digit rate increase for Providence members would be disruptive and does not seem consistent with Providence’s stated intent to “maintain reasonable rate stability”—a goal the company has reiterated in its filings despite nearly doubling its rates since 2015.

Background on Oregon’s health insurance rate review program

In 2010, new rules went into effect strengthening the standards that health insurance companies must meet before raising premiums. Insurers must justify rate hikes in writing, showing that they are not excessive and explaining how the insurer is working to reduce costs. All rate filings are public information, available online, and open to public comment. DCBS evaluates these justifications, and must take public input into consideration. In 2011, DCBS began to hold public hearings on significant rate increases. See here for a schedule of public hearings for the 2018 rate proposals.

Since these changes have taken effect, DCBS has significantly stepped up their scrutiny of health insurers’ rate hike requests. Since 2010, it has cut back many proposed rate hikes, cutting over $280 million in waste and unjustified costs from consumers’ and small businesses’ premiums. 

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OSPIRG Foundation is a non-profit, non-partisan statewide consumer organization. Please visit us at www.ospirgfoundation.org