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Jesse Ellis O'Brien,
OSPIRG Foundation

Proposed health insurance rate hikes up to 32.3% merit close scrutiny, raise stakes for containing rising health care costs

New OSPIRG Foundation analysis of 2017 rates proposed by five Oregon insurers identifies problems and gaps in the insurers’ filings, and calls for increased scrutiny of health care industry efforts to cut waste and improve quality of care
For Immediate Release

Health Insurance Rate Watch RATE ANALYSIS: June 8, 2016
Contact:  Jesse O’Brien, OSPIRG Foundation, 503-231-4181x307 (office), 503-504-8627 (cell)

Proposed health insurance rate hikes up to 32.3% merit close scrutiny, raise stakes for containing rising health care costs

New OSPIRG Foundation analysis of 2017 rates proposed by five Oregon insurers—Kaiser, Moda, PacificSource, Providence and Regence—identifies problems and gaps in the insurers’ filings, and calls for increased scrutiny of health care industry efforts to cut waste and improve quality of care.

Many of Oregon’s biggest health insurers have proposed large double-digit rate hikes for 2017, and according to new OSPIRG Foundation analysis released today, these proposals highlight not only the need for close scrutiny of health insurance rates, but also the urgency of action to contain the rising cost of health care services.

Close scrutiny of rate hike proposals is important to make sure consumers are not paying for unnecessary costs. For next year, Oregon’s major insurers are proposing rates ranging from no increase for Health Net to a 32.3% increase from Moda for individuals and families purchasing coverage on their own.

“With Oregon consumers facing a second year in a row of huge double-digit rate hikes, it is more critical than ever to scrutinize the basis for these rates,” said Jesse O’Brien, OSPIRG Foundation Policy Director. “We acknowledge that many Oregon insurers lost money in 2015, and it is not unreasonable for them to seek to avoid large financial losses going forward, but the more we dig into the insurers’ justifications, the more concerned we are that the proposed rates may overcharge consumers.”

“We are also deeply concerned that while insurance companies are proposing double digit rate increases, Oregon's large hospitals and health systems are recording record surpluses,” said O’Brien. “With study after study showing that one-third of health care spending is waste, we can’t afford anything but a full-court press for more effective use of our health care dollars, and we’re calling on state leaders in Salem to take action to hold the health care industry accountable for keeping their prices reasonable and sustainable.”

OSPIRG Foundation conducted an in-depth analysis of rate proposals from five of Oregon’s top insurers: Kaiser, Moda, PacificSource, Providence and Regence.

Key findings of OSPIRG Foundation’s analysis:

  • Oregon insurers do not appear to be achieving savings from reductions in costs to Oregon hospitals, or sharing these savings with their members. Public filings from Oregon hospitals continue to demonstrate that factors including record-low levels of uncompensated care are contributing to large hospital profit margins across the state, yet consumers do not seem to be benefiting in the form of lower premiums. For example, Providence Health & Services, the state's largest hospital chain, is sitting on nearly $6 billion in cash reserves while its insurer affiliate, Providence Health Plan, wants to raise rates by nearly 30%. In light of these surpluses, it seems reasonable for insurers to expect commensurate savings on hospital costs, but few insurers were able to identify any savings in their rate proposals.
  • Some Oregon insurers appear to be overstating medical cost trends. With a number of national studies demonstrating a slowdown in health care cost growth in recent years, projections as high as 8.4% (from Regence) merit close scrutiny. Other insurers, including Providence and PacificSource, have large administrative cost growth projections that may be overstated.
  • Some insurers’ cost projections for covering their current members and future enrollees may be overestimated. The costs of providing health care services to Oregonians who signed up in 2014 and 2015 have been higher than Oregon insurers initially projected, but there are reasons to doubt whether these trends will continue. Many uninsured young Oregonians remain eligible for tax credits under the Affordable Care Act, and may be motivated to enroll by improved outreach efforts and/or increases in the ACA’s tax penalty for going without insurance.
  • Many insurers are proposing to increase their profit margins while also proposing some of the largest rate increases in recent Oregon history. Despite financial losses for many insurers in 2015, the financial position of most of Oregon’s major insurers remains stable. This means that Oregon insurers could take a more moderate approach to increasing rates to avoid large, disruptive rate increases in 2017.
  • Large rate hikes and insurers dropping coverage in many areas of the state could be highly disruptive for Oregon consumers. Although many consumers may be able to mitigate the effect of rate increases by switching coverage and/or using the Affordable Care Act’s tax credits, rate hikes that amount to thousands of additional dollars in premium per year for many Oregon families would be burdensome. In addition, insurers including Moda, PacificSource and Providence are pulling out of large regions of Oregon in 2017, leaving many Oregonians with fewer choices as well as higher costs.
  • Oregon insurers do not appear to be doing all they can to reduce costs and improve quality of care. For the third year in a row, every Oregon insurer submitted hard data on health care quality, cost and utilization as part of the rate filing process. These metrics represent a step forward for transparency, and to date, most Oregon insurers have yet to show significant, quantifiable progress, despite the many cost containment initiatives outlined in the rate filings. For Oregon insurers to fully meet consumers’ needs, they will need to do more to demonstrate the impact of their efforts on cost, utilization and quality of care—and, just as importantly, that the savings are being shared with consumers in the form of lower rates.

The Oregon Department of Consumer and Business Services (DCBS) is expected to make its decision on the pending rate requests by July 1. All rate filing documentation is available on DCBS’s rate review website, www.oregonhealthrates.org  

Background on Oregon’s health insurance rate review program

In 2010, new rules went into effect strengthening the standards that health insurance companies must meet before raising premiums. Insurers must justify rate hikes in writing, showing that they are not excessive and explaining how the insurer is working to reduce costs. All rate filings are public information, available online, and open to public comment. DCBS evaluates these justifications, and must take public input into consideration. In 2011, DCBS began to hold public hearings on significant rate increases. See here for a schedule of public hearings for the 2017 rate proposals.

Since these changes have taken effect, DCBS has significantly stepped up their scrutiny of health insurers’ rate hike requests. Since 2010, it made cuts to a majority of requests, cutting over $179 million in waste and unjustified costs from consumers’ and small businesses’ premiums. 

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OSPIRG Foundation is a non-profit, non-partisan statewide consumer organization. Please visit us at www.ospirgfoundation.org

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