Report: Health Insurance Rate Watch Project

Comments on Health Net's proposal to increase individual health insurance rates

Released by: OSPIRG Foundation

Executive Summary   

Health Net’s individual members will see an increase of 8.3% on average, ranging as high as 10% for some customers, if the premium rate hike proposed by the insurer is approved.

The main reasons given for this increase include the insurer’s projection that medical and prescription drug costs will increase by 7% in the upcoming year and that the worsening health status of its customers will drive up costs by 4.6%.

After analysis of Health Net’s filing and supplemental information provided by Health Net and the Oregon Department of Consumer and Business Services (DCBS), we conclude that the insurer has not provided sufficient information to justify their proposed rate increase.

Key Findings:

  • Health Net 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.
  • Health Net’s projection of a 7% trend for medical and prescription drug costs is high and has not been supported by sufficient data. Health Net’s projection is higher than many of their competitors, and higher than widely-cited independent projections of marketwide trends. 
  • Health Net’s projection of a 4.6% increase due to the worsening health status of their 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, Health Net does not provide enough evidence to support their projection.
  • Health Net includes a 4.6% increase to its calculations for a “Market Risk Adjustment.”  However, adequate justification for this value was not provided.  
  • When it comes to reducing costs and improving the quality of care, it is not clear that Health Net is doing all it can. New health care quality, cost and utilization metrics submitted for informational purposes show that Health Net has high utilization and costs for emergency room visits, as well as high specialty care costs, in comparison to most of their competitors. Health Net also failed to supply data for one key metric required in the filing process, developmental screening. Further inquiry should be made into the causes of these metrics to ensure Health Net 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 Health Net to provide all documentation necessary to evaluate their proposal, and to implement a concrete, achievable plan to contain costs for Oregon individuals and families.

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