Officials at the Oregon Department of Consumer and Business Services (DCBS) announced approval of an of an 8.94% rate increase on ODS individual policies, down one percentage point from the proposed 9.94% average rate hike.
In DCBS’s written decision, the primary reasons given for reducing the increase included finding ODS’s medical and administrative cost estimates too high:
• DCBS agreed with OSPIRG Foundation that ODS had somewhat overestimated medical and drug costs, and reduced projected increases from 11.4% to 10.6%; and
• DCBS reduced ODS’s projected 4.1% increase in administrative costs down to a 3.9% increase to keep it in line with a key benchmark figure. ODS is predicting about 20% of the premium will got to administrative costs.
“Of course, as any ODS individual policyholder can tell you, a nearly 9% average rate hike in this economy is tough to swallow,” said Laura Etherton, OSPIRG Foundation’s health care advocate. “More needs to be done across the entire health system to reduce costs. Not by cutting care, but by cutting waste and focusing on best practices – such as preventive care.”
Etherton applauded the fact that as part of the decision, DCBS announced they are now working to create a process that will allow them to better evaluate insurers’ cost containment efforts.
OSPIRG Foundation encouraged ODS to continue efforts to reduce the rise in medical costs, and to do more to reduce unnecessary administrative costs.
For example, Etherton urged ODS to decouple rising premiums from broker commissions. This would allow ODS to pay agents a flat fee — instead of their current practice of paying 8% of the premium as commission — and pass the savings onto consumers.
“That’s especially important because it appears ODS will barely squeak by the federal requirement to spend at least 80% of the consumer’s premium on health care. Reducing administrative costs will leave more dollars for needed medical care, and help ODS meet that test.”