Health Net Health Plan of Oregon is proposing an average 8.27% rate increase on small business plans impacting 37,872 Oregonians, effective April 1, 2011.
While this overall rate increase is in line with overall market trends, this increase is likely to be unaffordable for a wide range of small businesses and their employees, and there are significant areas where the rate increase request does not appear to be adequately supported by the information in the filing.
1. We are concerned that the insurer’s anticipated increase in medical costs of 11.2% is not fully explained in the filing. Health Net’s recent third quarter filing with the Securities and Exchange Commission suggests a lower value, 7.5%, for the insurer’s expected medical trend across in the West.
2. Health Net estimates a higher-than-expected impact on premium for adding benefits required by the federal health reform law, such as covering preventive services without a co-pay, and allowing parents to keep their children on the family plan until age 26. Independent estimates of the premium impact of the benefit changes required by the federal health reform law cluster in the 1-3% range. Health Net estimates the impact at two to three times this range.
3. Health Net appears to assume that its administrative costs will increase at roughly the same rate as its claims costs. This assumption does not appear to be supported by Health Net’s historical data for small group plans, and does not correspond to its company-wide administrative cost trends.
4. The filing states that enrollees will see rate changes ranging from -9% to 30%, but the information in the filing seems to suggest that the maximum reduction an enrollee could experience would be less than 2.5%.
5. There is insufficient information about the efforts of Health Net to reduce health care costs while improving health outcomes.
There may be reasons for the higher costs that Health Net proposes in this rate filing in each of these areas above, and an explanation for how the stated possible 9% premium rate reduction is calculated.
Likewise, it would be important to know whether Health Net is conducting robust efforts to reduce costs and improve quality.
We respectfully urge the Insurance Division of the Department of Consumer and Business Services to request more information from Health Net in these areas so that it may be evaluated as part of this rate filing.