Report: Health Insurance Rate Watch Project

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

Released by: OSPIRG Foundation

Executive Summary[1]

Regence BlueCross BlueShield’s 14,811 members with individual health insurance plans will see rate hikes of 17.9% on average, and as high as 36.1%, if the premium rate hike proposed by Regence goes forward. 

Regence’s reasons for the increase include a projected 8.4% annual increase in the cost of providing medical services and 6.5% due to the end of federal and state reinsurance programs. In addition, Regence is proposing to increase the target profit included in the rates, from 2% to 3%.[2]

After analysis of Regence’s initial filing and the supplemental information provided, we acknowledge some of the factors that concern Regence and that prompted the rate hike proposal. Regence projects it will sustain a 12.2% loss on its Individual market business for 2015. In such a situation, it is not unreasonable for an insurer to seek a rate increase. 

However, we are concerned about the impact of this increase on Oregon consumers, and on the Oregon Individual market. While ongoing insurer financial losses are not sustainable for the long term, it is also unsustainable to continue hiking rates without addressing the drivers of health care cost growth.

We urge the Oregon Department of Consumer and Business Services (DCBS) to scrutinize the filing closely. We are concerned that, in some areas, Regence has not provided enough information to justify some elements of their case for a rate hike. 

At the same time, we urge DCBS and Oregon policymakers to take stronger steps to address the underlying drivers of health care costs and instability in the Individual market. Action is urgently needed to ensure that Oregon consumers are not subjected to unreasonable and unsustainable rate increases going forward, and that they are not being asked to foot the bill for waste, estimated to represent a third or more of every dollar we spend on health care.[3]

Key Findings: 

  • Regence’s medical cost trend projection appears to be excessive.  An 8.4% medical cost trend is higher than any of Regence’s competitors, and insufficiently supported in its filing. Regence’s own data suggests that their medical costs have increased 5.5% in the past year, and it is unclear why they are projecting that costs will increase much faster next year.
  • Despite financial losses in 2015, Regence’s financial position remains strong. Regence is seeking a higher profit margin than in prior filings, while also proposing a large rate increase. While it is appropriate for Regence to take steps to avoid additional large losses next year, it may also be appropriate for its margin to be reduced or removed to provide some premium relief for Regence members. 
  • A 17.9% increase would have a significant negative impact on affected Oregonians, representing more than $1,500 in additional premium costs per year for many Regence members. While some Regence members can avoid or mitigate this impact by switching plans and enrolling through the Health Insurance Marketplace at healthcare.gov , where they can access tax credits to help pay for coverage, such a large increase will still be disruptive for many Oregon families.[4]
  • It is unclear from the information provided whether Regence is sufficiently adjusting its cost projections to reflect reductions in costs to Oregon hospitals. 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.[5] In light of these surpluses, it seems reasonable for insurers to expect commensurate savings on hospital costs. Regence claims that savings from reductions in uncompensated care are incorporated into its medical cost trend projections, and that the impact is “less than 0.5%,” but it seems unlikely that this is sufficient to the scale of the impact on Oregon hospital margins.
  • When it comes to reducing costs and improving the quality of care, it is unclear whether Regence is doing all it can. Regence claims that its cost containment and quality improvement efforts have led to a reduction of 0.2% in medical cost trends and an unspecified reduction in member out-of-pocket costs. But with its overall projected medical cost trend significantly higher than its competitors, these reductions seem insufficient to protect Regence members from unreasonable increases in the cost of medical services.


[1] OSPIRG Foundation’s analysis is based upon the information currently available.  OSPIRG Foundation reserves the right to submit further comments if additional relevant information becomes available. 

[2] Regence characterizes this 3% figure as a “risk and contingency margin” instead of identifying the value as a profit provision.

[3] See, for example, Health Affairs, “Reducing Waste in Health Care

[4] Since Regence does not offer its plans through the Marketplace, this option would also require its members to switch to another carrier. Regence’s “sister company” BridgeSpan, which is available through the Marketplace, offers similar plans and networks, but is seeking an even larger rate hike for next year.

[5] See, e.g., http://www.wweek.com/news/2016/04/13/the-five-things-hospitals-dont-want-you-to-know-about-obamacare/

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