Regence Blue Cross Blue Shield (Regence) is proposing a rate increase on small business plans, with an average increase of 10.8%, impacting 54,299 Oregonians, effective July 1, 2011.
While this average rate increase is lower than some of the historical double-digit increases Regence has had approved in the small group market, we are concerned that this rate increase is based on questionable assumptions about medical trend. We are also concerned that due to conflicting numbers provided in the filing, the impact of the rate increase on these 54,299 consumers is unclear.
Further, we are concerned that this rate increase will make it increasingly difficult for Oregonians to afford the premiums for these health insurance plans, and the result will be detrimental to Oregon small businesses, and may pose problems for the long term viability of Regence’s small group risk pool.
1. Regence says they expect medical and prescription drug costs to rise at a rate that is higher than their actual claims experience supports, and higher than the medical trend values used by other Oregon insurers. We are particularly concerned that Regence appears to be increasing its medical trend estimation to account for cost variation that could as easily produce lower costs as higher ones.
2. The filing lists many programs Regence is pursuing to lower costs and improve quality, but in many areas, the information provided is extremely cursory, making it difficult to tell whether certain cost-saving measures are living up to their potential, and being pursued in a manner that protects patient health.
3. It is unclear what the true minimum and maximum rate increases consumers will face if this rate increase is approved. The filing lists contradictory numbers in different areas of the filing for range of rate impacts consumers will experience.
4. Regence’s projections of administrative costs suggest that Regence may be artificially lowering the administrative portion of premium, while not actually reducing administrative costs. While consumers may benefit in the short run, they could experience price spikes down the road if this practice is not sustainable. We encourage DCBS to inquire further in this area, and work with Regence to achieve a level of administrative expenses that both track with the Producer Price Index (PPI) for Direct Health and Medical Insurance Carriers Industry, and remain sustainable over time.
5. Certain elements of the filing raise questions about the stability of Regence’s risk pool in this market segment. Regence has imposed double-digit rate increases every year since 2007, and has recently seen lowered enrollment, which typically reflects healthier enrollees dropping their plans. The filing also notes that Regence is introducing new, higher deductible options for certain products, which can encourage healthier enrollees to “buy-down” to products with greater cost-sharing, reducing revenues from healthy enrollees within the risk pool. We encourage DCBS to work with Regence to assess this potential issue.