Report: Health Insurance Rate Watch Project

Comments on Regence BlueCross BlueShield of Oregon's proposal to raise individual health insurance rates

Released by: OSPIRG Foundation

Executive Summary                                                                                             

Regence BlueCross BlueShield’s membership of more than 24,000 Oregonians with individual health insurance plans will see rate hikes of 12.3% on average, if the premium rate hike proposed by Regence goes forward. Some Regence members in transitional plans that will be discontinued at the end of the current year, which do not include the consumer protections of the federal health reform law, may see increases of up to 235% if they stick with Regence.[1]

The main reason given for this increase is the insurer’s claim that the health status of the customers it enrolled in 2014 was worse than anticipated, leading to higher costs for the insurer. The insurer also projects that medical and prescription drug costs will rise by 8.8%.

After analysis of Regence’s initial filing and the supplemental information provided, we acknowledge some of the factors that concern Regence and that have prompted the rate hike proposal. However, the insurer has, in some instances, not provided sufficient evidence to justify elements of the case for a rate hike, making us concerned that the proposed increase is not entirely justified.

Key Findings:

  • Regence did not adjust its cost projections to reflect a reduction in “bad debt” from the Affordable Care Act’s expansion of coverage. Recent public filings from Oregon hospitals demonstrate record-low levels of uncompensated care resulting in large hospital profit margins across the state, and these cost savings should be shared with consumers through lower hospital costs and lower premiums. Regence has not included these savings in its proposed rates.
  • Regence’s projections of trends in medical costs are higher than many of their competitors, as well as trends reported by independent sources, and may be overstated. With studies continuing to show slow healthcare cost growth, Regence’s projections merit close scrutiny.
  • Regence’s cost projections for covering their current members and future enrollees may be overestimated. While the cost of covering the new members that enrolled in health coverage in 2014 may be higher than Regence initially projected, there are many reasons to believe that these costs will go down in future years. Regence acknowledges this to some degree, but it is possible that Regence is prematurely overcorrecting before it is widely understood how the market will develop. Many of the Oregonians who signed up for coverage in 2014 had been unable to access coverage in prior years due to pre-existing medical conditions. The cost of providing medical services to individuals who have been blocked from coverage for many years is likely to go down in future years as those conditions require fewer acute interventions and become more manageable with ongoing treatment. Regence’s rate hike does not clearly account for these reductions.
  • Regence may be overestimating the cost of new health benefits. The insurer’s projection that a new Applied Behavioral Analysis (ABA) therapy benefit will cost $3.00 per member per month is significantly higher than estimates from competitors and inadequately supported. The insurer also includes costs for a new telehealth benefit without including any potential savings.
  • Regence’s financial position improved from 2013 to 2014 despite unexpectedly high claims costs, which should mitigate the need for a large rate increase. The insurer grew its surplus by $7.9 million in 2014, to over $635 million total. In this context, Regence has not provided adequate support for their claim that a 12.3% rate increase is “necessary to maintain rate stability and guard against excessive increases for the line of business in the future.”
  • When it comes to reducing costs and improving the quality of care, it is not clear that Regence is doing all it can. Health care quality, cost and utilization metrics submitted in the rate filing show that Regence’s costs and utilization for some expensive health services such as emergency room visit and inpatient hospital stays are up from last year. Regence has also failed, for the second year, to provide data for a key measure of developmental screening. Further inquiry should be made into the causes of these metrics to ensure Regence is doing everything possible to cut waste and improve quality of care.

Before deciding to approve, deny or modify this rate request, we urge the Oregon Department of Consumer and Business Services (DCBS) to scrutinize the issues raised here, require Regence to provide all documentation necessary to evaluate their proposal, and to implement a concrete, achievable plan to contain costs for Oregon individuals and families.
 
NOTES

[1] According to Regence’s response to DCBS questions posted on May 22.

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