OSPIRG FOUNDATION COMMENTS ON THE PROVIDENCE HEALTH PLAN PROPOSAL FOR INDIVIDUAL HEALTH RATES EFFECTIVE JANUARY 2019

OSPIRG Foundation

Executive Summary 

Providence Health Plan’s 91,425 members with individual health insurance plans will see rate hikes of 13.6% on average, and as high as 24.1%, if the premium increase proposed by Providence goes forward. If this rate hike is approved as filed, Providence’s rates will have nearly doubled for many families since 2015.

Providence’s reasons for the rate hike include an 8% increase due to the rising cost of health care—including an increase of nearly 20% in prescription drug costs. The insurer also predicts that federal policy changes including the elimination of the Affordable Care Act’s (ACA) individual mandate and proposed policies to loosen regulation of non-ACA compliant plans will increase costs across the market.

After analysis of Providence’s filing, we acknowledge some of the factors that prompted the rate hike proposal. Oregon consumers are deeply concerned about the rising cost of prescription drugs, and we hope that recent efforts to create transparency and accountability for the pharmaceutical industry will be a first step toward containing these costs. Providence’s concerns about disruptive federal changes are also understandable, and we urge Oregon policymakers to take all necessary proactive steps to keep the state’s health insurance markets stable and competitive.

We are deeply concerned about the impact of this large increase on Oregon consumers, and on the Oregon Individual market—especially coming as it does after multiple years of double-digit rate hikes from Providence and other Oregon insurers. We urge the Oregon Department of Consumer and Business Services (DCBS) to scrutinize this filing closely. We are especially concerned that Providence may be inflating the impact of actual and possible federal changes, and may wind up overcharging Oregon consumers as a result.

At the same time, we urge DCBS and Oregon policymakers to take stronger steps to address the underlying drivers of health care and prescription drug costs. For too long, Oregon consumers have been asked to foot the bill for waste, estimated to represent a third or more of every dollar we spend on health care.[1]

Key Findings:

• 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 and the ongoing uncertainty about the future of the ACA are disruptive for consumers as well as health insurers, we are concerned that this rate hike proposal may be overstating the impact. Providence also appears to be incorporating 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. While it is not inappropriate for Providence to seek to maintain a healthy financial position, it may also be appropriate for its margin to be reduced or removed to provide some premium relief for Providence members.
• 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, we are concerned that 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. 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.

[1] See, for example, Health Affairs, “Reducing Waste in Health Care”