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Comments on LifeWise Health Plan of Oregon's proposal to raise individual health insurance rates
LifeWise Health Plan of Oregon’s 26,405 members with individual health insurance plans will see rate hikes of 37.2% on average, and as high as 45%, if the premium rate hike proposed by LifeWise goes forward.
The main reason given for this increase is the insurer’s claim that the health status of the customers it enrolled in 2014 was much worse than anticipated, leading to higher costs and financial losses for the insurer. The insurer also projects that medical costs will increase annually by 6.0%, comprised of a 4.9% increase in unit costs and a 1% increase in utilization.
After analysis of LifeWise’s initial filing and the supplemental information provided, we acknowledge some of the factors that concern the insurer and that have prompted the rate hike proposal. However, on balance, we are concerned that the insurer’s specific proposal may be overreacting to short-term market fluctuations that are still playing themselves out, while also underestimating the company’s ability to take a longer term approach, at significant cost for many Oregon families and individuals. This, plus our finding that the insurer has not provided sufficient evidence to justify some elements of the case for a rate hike, makes us concerned that the proposed rate increase is not entirely justified.
- A 37.2% increase would have a significant negative impact on affected Oregonians, representing thousands of dollars in additional premium costs per year for many LifeWise members and their families. Such a large increase would be highly disruptive for consumers. Despite LifeWise’s reported financial losses in 2014, the company’s financial position remains strong enough to enable the company to moderate any rate increase to mitigate disruption for members and promote rate stability.
- LifeWise has not adjusted its cost projections to reflect reductions 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. LifeWise claims that health care providers in their networks deny that decreases in uncompensated care are occurring, but the contrary evidence is overwhelming. With many Oregon hospitals posting margins of 10% or more, the potential savings are dramatic, but consumers will not benefit unless the savings are appropriately incorporated into premium rates.
- LifeWise’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 LifeWise initially projected, there are many reasons to believe that these costs will go down in future years. 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. Instead of accounting for these potential reductions, LifeWise’s filing includes a projection of a 1% annual cost increase due to projected increased utilization.
- LifeWise does not adjust its rates to reflect the impact of Oregon’s supplemental reinsurance program, which was meant to keep premium costs in check by lowering costs for insurers. If this important program is not adequately reflected in LifeWise’s rates, consumers will not reap the intended benefits.
- When it comes to reducing costs and improving the quality of care, it is not clear that LifeWise is doing all it can. Metrics submitted in the filing indicate that LifeWise’s ER costs and utilization for 2014 are much higher than the previous year, and inpatient hospital utilization nearly quadrupled. While this is consistent with the insurer’s claim that 2014 costs were higher than expected, it is unclear from the information submitted in the filing whether LifeWise is doing enough to keep its members healthy and out hospitals and emergency departments. Further inquiry should be made to ensure LifeWise 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 LifeWise to provide all documentation necessary to evaluate their proposal, and to implement a concrete, achievable plan to contain costs for Oregon individuals and families.
 In its initial filing, the insurer requested a 38.5% increase, but this was later revised to reflect the lower figure.
 Since LifeWise is replacing its current plans with new plans, their proposed rates are not technically an increase; the increase amount discussed throughout the current analysis is the additional amount that customers will pay if they continue coverage with a comparable LifeWise plan.
 The unit cost trends are 6.0% for hospital, 3.6% for professional and 9.2% for pharmacy. (Exhibit 4 – Rating Trend Breakout)
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