For many years, Oregon businesses and consumers have been hit with a steady stream of increases in health insurance premiums and out-of-pocket health care costs.
The year 2008 was no exception. In this report, OSPIRG Foundation examines health insurance company requests to raise rates in the individual, small group and portability markets, and the dispositions of those requests using information provided at the website of the Insurance Division of the Oregon Department of Consumer & Business Services for the period January 1, 2008 to December 31, 2008.
Over 400,000 Oregonians received an average rate increase over 4 times the rate of inflation, with 133,000 Oregonians hit with premium increases over 21%.
443,365 Oregonians with individual, small group, or portable insurance plans received an average weighted rate increase of 14.2%, while the Consumer Price index for 2008 for Portland-Salem-Oregon-Washington increased only 3.3% from the average for 2007.
This breaks down as follows:
· Individual market: 184,585 Oregonians with individual insurance plans received an average weighted rate increase of 17.8%. The largest single increase in this category was made by Regence BlueCross BlueShield, which increased rates by 21.4% on 90,706 customers.
· Small group market: 241,584 Oregonians with small group insurance plans received an average weighted rate increase of 11.3%. The largest single increase in this category was made by Lifewise of Oregon, which increased rates by 21.2% on 36,066 customers.
· Portability market: 17,196 Oregonians with portable insurance plans received an average weighted rate increase of 15.8%. The largest single increase in this category was made by Regence BlueCross BlueShield, which increased their rate by 28.1% on 6,928 customers.
For all plans studied, administrative costs increased an average of 13.3% — 3.9 times the rate of inflation.
The cost of health insurance premiums are determined by three factors: medical costs, administrative overhead and profits. Although administrative costs should track more closely with general inflation, and decrease as a percentage of premium as premiums rise, health insurance administrative costs climbed in 2008.
Moreover, this number represents the administrative costs of the insurers themselves, which is only a portion of the total health care administrative costs borne by Oregonians in 2008. This does not include any of the administrative costs that health care providers charge. Those additional costs are built into claims, and providers are currently not required to publicly report them.
Recommendations: Tougher Standards for Insurance Rate Increases
Controlling rising costs is essential for sustainable health system reform. There are many explanations for why health care costs are so high, and several strategies to control costs and improve care.
One approach to bringing down costs in a way that would provide almost immediate relief for Oregonians is to implement a more vigorous process for considering proposed health insurance rate increases.
There are currently very few standards in place that protect Oregonians from excessive health insurance rate increases. We recommend making reforms to Oregon’s health insurance rate approval process that would prohibit approval of excessive rate increases, limit increases in administrative expenses to the rate of inflation, and increase public input into the rate approval process.
In addition to improved oversight of health insurance rates, we also recommend a larger set of reforms to address excessive costs in the health care delivery system, including: reducing the amount of unnecessary medical care, reducing administrative costs unrelated to improved health care, and reducing prescription drug costs.