We are concerned that Regence BlueCross BlueShield (Regence) has not adequately justified its proposal for a rate increase impacting 47,806 Oregonians with coverage through a small business employer.
Main features of the rate filing:
The filing lists the rate increase as 4.5% on average for 47,806 Oregonians. But supplemental information from Regence indicates that the average increases will be roughly twice as high for businesses that renew after the second quarter of the year. It appears the average annualized rate increase Regence customers will experience under this filing is 8.0%.
Regence is proposing to raise rates an average of 4.5% on the small businesses who renew their policies between April and June 2012. This is good news, as it is less than the previously-approved 6.9% average increase that was about to take effect for these businesses.
For the 34,790 businesses expected to renew later in the year, however, the average increase appears to be significantly higher. Rates will increase on average 9.7% for businesses that renew between July and September, 9.3% for those that renew between October and December, and 8.9% beginning in January 2013.
The insurer is also proposing to change how it varies premiums for businesses depending on geographic location and average employee age.
• The medical and prescription drug trend numbers are not fully explained and may be unreasonably high.
Adjusting down the increase for those that renew in the second quarter of 2012 is a step in the right direction to correct for over-estimated medical costs. But, we are concerned that the proposed increase in medical and prescription drug costs are not fully explained and may remain unreasonably high.
Regence says they expect medical and prescription drug costs to rise at a rate that is significantly higher than their actual claims experience supports. In the filing, Regence says it anticipates a 10.8% increase in medical costs and 12.2% in prescription costs. This is significantly greater than the insurer’s actual historical medical trend of only 3.6%, and is also greater than the medical trends used by other insurers in the small business market. The insurer did not show the full details of the calculations and methodology they say support the proposed trend.
• The maximum possible rate increase is not clear from the filing, leaving many businesses in the dark about the potential impact the filing will have on their costs.
While the filing initially lists 6.6% as the maximum rate increase, it later clarifies this is only the maximum increase on base rates, before adjustments for age, geography and other factors are factored in, and it appears that this is only the maximum for businesses renewing in the second quarter of 2012. Supplemental information provided by Regence shows that some businesses will see rate increases in excess of 15%, but does not list a maximum actual increase that businesses may experience.
• Regence has not explained why it is proposing to have businesses with older employees, and those in certain locations in Oregon, pay even more.
Regence has not explained its rationale for changing how it charges businesses depending on age and location, so it is unclear whether the changes meet the statutory standard of not being unfairly discriminatory.
The insurer proposes lowering rates less than average for businesses with younger employees, while raising rates more than average for business with an older workforce. Simultaneously Regence proposes relatively lower rates for businesses in the Portland metro area, the Salem area, and in Southern Oregon – while raising rates along the coast, in Eastern Oregon, Central Oregon, and in the mid-Willamette Valley. Regence does not explain the strategy behind these changes, whether these changes are intended to help the insurer hold less expensive enrollees and shed more expensive enrollees, or what claims experience supports these rating changes.
• We are troubled by the continuing decline in enrollment in these small business plans, and the impact this will have on the remaining ratepayers.
In the previous filing, Regence anticipated no change in enrollment if the rate increase were approved, but in the months since then, enrollment has dropped from 54,000 to just below 48,000 – a loss of over 10% of their members. Because businesses with healthier employees are generally the most likely to drop coverage, we are concerned Regence’s small business risk pool may be growing less healthy, and less stable, as a result. As in the previous filing, Regence does not predict any change in enrollment if the current increase is approved, but does not support this prediction with evidence.
• We agree with Regence that the key to stabilizing enrollment is to improve affordability, and encourage the insurer to do more in order to succeed in this area.
The filing lists only a few new or changed initiatives aimed at increasing quality and lowering costs. Given Regence’s declining small business enrollment and the potential for a decreasingly healthy risk pool, both the insurer and its members would benefit from more aggressive moves to adopt delivery and payment reforms to lower costs and improve health. We urge the insurer to redouble its efforts to cut waste and reduce the underlying cost of care.