Most of UnitedHealthcare Insurance Company’s almost 17,000 small group members, from over 1,300 small businesses across Oregon, will see rate increases of 11.8% on average, and as high as 19.2%, if the premium rate hike proposed by United is approved. This and the related UnitedHealthcare of Oregon rate filing are the largest rate hike proposals for Oregon’s small group market.
The main reasons given for this increase include the insurer’s projection that medical and prescription drug costs will increase by 8.1% in the upcoming year, and that the worsening health status of the Small Group market will drive up costs.
After analysis of United’s filing and supplemental information provided by United and the Oregon Department of Consumer and Business Services (DCBS), we conclude that the insurer has not justified their proposed rate increase.
- United did not adjust its cost projections to reflect a reduction in “bad debt” from the Affordable Care Act’s expansion of coverage. With over 400,000 Oregonians newly signed up for coverage in 2014, rates of uncompensated care are beginning to decline. This benefit should be passed along to consumers in the form of lower rates.
- United’s medical and prescription drug cost trend projections are higher than many of their competitors, and are insufficiently supported. United’s trend projections are also higher than widely-cited independent projections of marketwide trends.
- United appears to have included a hidden profit margin of 1% in their projection of medical trend. Also known as a margin or fluctuation factor, this practice is not allowed under Oregon’s health insurance rate review rules. If DCBS confirms this analysis, this margin should be removed from the rate for United’s small business members.
- United’s projection of increasing costs due to the worsening health status of its customers is insufficiently supported. Next year, it is widely expected that the mix of customers enrolling in health coverage will be younger and healthier than those who signed up for 2014, which may bring down costs. Especially in a context in which some insurers are projecting decreases in costs due to this factor, United does not provide enough evidence to support their projection.
- When it comes to reducing costs and improving the quality of care, it is not clear that United is doing all it can. New health care quality, cost and utilization metrics submitted for informational purposes show that United has high utilization and costs for emergency room and inpatient care in comparison to most of their competitors. In addition, its performance on a measure of mental health follow-up care is below statewide benchmarks. Further inquiry should be made into the causes of these metrics to ensure United is doing everything possible to cut waste and improve quality of care.
Before deciding to approve or deny this rate request, we urge the Insurance Division to scrutinize the issues raised here, require United to provide all documentation necessary to evaluate their proposal, and to implement a concrete, achievable plan to contain costs for Oregon small businesses and employees.