Competition and Transparency Bring Down Health Insurance Costs—Here’s the Proof

Something remarkable just happened to health insurance costs here in Oregon. Last week, after the state’s health insurers posted their proposed premium rates for next year, two insurers publicly reversed course and moved to cut their prices.

Why? Because thanks to Oregon’s new health insurance exchange, Cover Oregon, insurers will be competing head to head for customers, and those customers will be able to make true apples-to-apples comparisons between plans for the first time. And thanks to an OSPIRG-backed law, the state’s insurance regulators now post proposed rates and all supporting documents online, enabling the public to compare rates—and insurers’ justifications for their rates—before they go into effect.

For example, see here for a price comparison of proposed rates for individual and family plans in the Portland area. (For information on proposed rates for plans available in your area, see here.)

Looking at these proposed rates, it is easy to see why insurers like Providence and FamilyCare would backtrack. To bring in customers, their rates must be competitive, and the rates they proposed are more expensive than the competition.

Why is this exciting? Because in our fragmented health insurance market, this kind of competition is new, and now we have concrete evidence that competition on a health insurance exchange can help bring down premium costs.

The events of the past week have shown that Oregon’s approach—advancing transparency and fostering head-to-head competition between insurers—can lead to real gains for consumers. But as experts warn that a third or more of health care spending wasted on things that do not improve health, we know we can do better. See OSPIRG Foundation’s recent report, Advancing Accountability, Cutting Health Care Waste, for ideas about how Oregon can take the next steps to tackle this waste and bring down the cost of care for all Oregonians.