The Whole Shebang at a Glance: Proposed Health Insurance Rates for 2015

Here’s the skinny on OSPIRG Foundation’s new analysis of 2015 rates proposed by four Oregon insurers—Moda, PacificSource, United and Health Net. There’s some good news, some concerning news, and some very concerning news, but the best news of all is that thanks to Oregon’s health insurance rate review process, the insurers don’t get the last word.

Jesse Ellis O'Brien

Here’s the skinny on OSPIRG Foundation’s new analysis of 2015 rates proposed by four Oregon insurers—Moda, PacificSource, United and Health Net. There’s some good news, some concerning news, and some very concerning news, but the best news of all is that thanks to Oregon’s health insurance rate review process, the insurers don’t get the last word.

Oregon’s health insurers must get permission from state officials before they can raise premiums on individuals and small businesses. For several years, OSPIRG Foundation has put a magnifying glass to premium hike proposals, and thousands of OSPIRG members have emailed and called the state’s Insurance Division. All this additional scrutiny has helped cut over $155 million in waste from health insurance premiums since 2010.

Here’s what our investigation found this year.

The Good News

  • Many Oregon insurers are proposing big rate decreases for next year. Providence, LifeWise and Oregon’s Health CO-OP and ATRIO are all proposing double-digit rate cuts. Some other insurers are proposing to keep rates pretty much the same as this year.
  • After changes won with the support of over 30,000 OSPIRG members, for the first time this year, every Oregon insurer submitted hard data on health care quality, cost and utilization as part of the rate filing process. These metrics represent a step forward for transparency and provide some helpful information to form a baseline to evaluate insurers’ efforts to contain costs and improve quality of care.

The Concerning News

  • Moda is proposing a 12.5% rate hike on over 95,000 Oregonians, but has not done enough to justify its projections of increased costs in several areas. The insurer is projecting that its commission payments to insurance agents will go up by over 50%, without providing sufficient explanation for this large increase. The insurer is also projecting that its so-called “variable” administrative costs—which go up at the same high rate as its premiums—will go up sharply, without explaining why this would be the case.
  • Many Oregon insurers appear to be overstating medical cost trends. With a number of national studies demonstrating a slowdown in health care cost growth in recent years, projections as high as 8.1% (from United) merit close scrutiny.
  • Many insurers are projecting increased costs due to a sicker and more expensive customer base without adequate justification, and in contrast to the view of the country’s leading association of health actuaries. For example, PacificSource projects an 8.3% increase in costs, while other insurers like LifeWise project cost decreases.
  • PacificSource is projecting that their prescription drug costs will rise by 12.3%—much more than most of their competitors and nearly twice as much as last year. The insurer provides no justification for this projection, which appears to have been based on a proprietary model that the insurer did not provide.
  • United may have included a so-called margin or fluctuation factor in their projections of increasing medical costs, also known as a hidden profit margin, in violation of Oregon’s rate filing rules.
  • The new cost, quality and utilization metrics submitted for the first time this year raise some important questions for some insurers that have yet to be fully answered. For example, Health Net and United are paying more for emergency room visits than many other insurers, yet they are both proposing big rate increases without demonstrating that they are doing all they can to reduce these costs and help keep their members out of the ER.

The Very Concerning News

(1) As near as we can tell, none of Oregon’s insurers has a workable plan to pass along the savings from reductions in uncompensated care for the uninsured due to the expansion of access to health coverage under the Affordable Care Act (ACA). In the past year, 400,000 Oregonians have signed up for coverage under the ACA, and we have already started to see rates of uncompensated care go down. Since commercial insurers wind up footing the bill for uncompensated care, this reduction should be reflected in reduced premium rates, but no Oregon insurer has a clear plan for realizing these savings.

Some insurer’s comments in their rate proposals (PacificSource in particular) suggest that, while they recognize the opportunity, they have not yet been successful in incorporating these reductions into their rates.  In a state like Oregon that has many insurance carriers competing against each other, provider networks often have more leverage in contract negotiations. Carriers may lose access to provider networks to their competitors if they push too hard, and lose customers as a result. In some situations, this limits the ability of individual insurance companies to drive a hard bargain on cost issues including reductions in uncompensated care.

By using the rate review process to ensure that premium rates accurately reflect reductions in uncompensated care across the board, Oregon policymakers can push the market to respond. If no health insurer in Oregon is able to raise rates without incorporating savings from reductions in uncompensated care, no providers or provider networks in the state can continue to expect reimbursement rates that fail to reflect the changes underway in health care in Oregon.

(2) Oregon’s insurers are still not doing enough to demonstrate that they are doing all they can to keep down costs. Rising medical and prescription drug costs are far and away the most significant driver of rising health insurance costs. Health insurance companies have a significant role to play to help lower these underlying costs—not by cutting access to needed care—but by cutting waste and working with providers in their networks to focus on prevention and other proven strategies that keep patients healthier. While the insurers generally include some description of their efforts in their rate proposals, these descriptions are vague and do not generally provide enough detail to enable an independent evaluation of the adequacy of an insurer’s cost containment strategy.

In future years, we hope that information about insurers’ cost containment efforts is integrated with enhanced cost and quality metrics to ensure that the data is presented in detail sufficient to create meaningful accountability. In evaluating performance in this area, comparing trend lines year-over-year will be critical. Some insurers may serve a less healthy customer base than others, and this may be reflected in their performance on some of these metrics, but if insurers implement adequate, comprehensive cost containment and quality improvement efforts, consumers should be able to expect continuous improvement on these metrics as insurers work to cut waste and improve care.

The Oregon Insurance Division will be making decisions on these rate proposals in August. Watch this space, and the Insurance Division’s rate review website, for updates. We’ll be sure to keep you in the loop.


Jesse Ellis O'Brien