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Comments on PacificSource's Small Business Rate Hike Proposal
Main features of the rate filing:
PacificSource is proposing to increase rates 5.56% on average, affecting 35,224 Oregonians enrolled in small business plans. If approved, this rate increase will have wide ranging impacts. Most enrollees will see increases of between 6% and 10%. Some will see increases of up to 11.2%. Over 27% will see increases of between 8% and 14%.
The main reason given for this increase is the insurer’s prediction that medical costs will increase 8.8% in the year ahead, and prescription drug costs will go up 7.0%.
Given the increasing unaffordability of small business health insurance coverage, and given the fact that most enrollees are in employer plans that will see increases greater than the average increase, it is particularly important for the insurer to thoroughly justify this rate increase.
• The prescription drug trend numbers are not fully explained in the initial filing. PacificSource expects drug costs to rise 7% in the year ahead, despite the fact that prescription drug costs fell by almost 1% last year. The insurer did not show the calculations it used to obtain the 7% figure.
• PacficSource does not show the detail needed to support its medical trend numbers. In the initial filing, PacificSource did not follow current product standards to explain how it used actual claims data to determine the underlying medical trend for the last year. Supplemental information included only a brief summary of this information, and did not include calculations. The insurer also did not show sufficient support for how it developed anticipated medical trend to enable us to evaluate its reasonableness.
• PacificSource does not show sufficient support for changing how it varies premiums for different businesses. The insurer proposes reducing the rating factor for businesses in the Portland metro area, the Salem area, and in the mid-Willamette Valley, while raising the rating factor for those in Eastern Oregon. It is proposing to charge relatively less for businesses that have at least 90% employee participation in the plan, and more for those that fall below that level. It is also changing how much more and less each plan costs relative to each other. PacificSource does not sufficiently detail the support for these rating changes.
• Premiums and out-of-pocket costs are unaffordable for businesses and employees. This is true across the board, but particularly notable for businesses with older employees in certain geographic areas of the state. PacificSource plans are not unique in this respect. But with deductibles and other out-of-pocket costs considered in addition to high premiums, it is understandable that the cost of coverage has become untenable for so many of Oregon’s small employers and their employees.
• PacificSource reports making efforts to reduce costs and improve care. The insurer lists a set of encouraging initiatives to better coordinate care, improve quality and reduce waste in a variety of areas, and indicates some promising results in some areas. It is not clear from the filing whether the insurer is doing everything it can to lower costs. We encourage the insurer to expand its efforts, and share its overall approach in this area as part of its future rate filings.
Many aspects of the filing appear reasonable, such as stable administrative costs, a medical loss ratio above federal requirements, and a moderate proposed average rate increase.
However, there is not sufficient information in the filing to assess the reasonableness of the medical trend projections and the changes to rating factors. This is of particular concern given the high premiums, and the fact that many enrollees are in employer plans that will see rate increases of 8%-14%.
We recommend that DCBS require PacificSource to provide additional information to fully justify this rate increase proposal.
In addition, in the spirit of DCBS’s ongoing improvements to the transparency of the rate review process, we recommend DCBS take steps to ensure rate filings include more of the necessary information at the time they are filed initially, to allow transparency of this information for the full 30 days of the public comment period.
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