Report: Health Insurance Rate Watch Project

Comments on Moda Health Plan's proposal to raise individual health insurance rates

Released by: OSPIRG Foundation

Executive Summary                                                                                     

Moda Health Plan’s membership of more than 102,000 Oregonians with individual health insurance plans will see rate hikes of 25.6% on average, and as high as 54.12%, if the premium rate hike proposed by Moda goes forward.

Moda currently has the largest market share in Oregon’s Individual market. Moda’s increase is the largest proposed by the dominant carrier in the individual market since 2010, when new rules heightening scrutiny of health insurance rates were implemented.

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 rise by 4.6%, and that prescription drug costs will rise by 10.5%, for a combined annual trend of 5.2%.[1]

After analysis of Moda’s initial filing and the supplemental information provided, we acknowledge some of the factors that concern Moda and that have prompted the rate hike proposal. However, on balance, we are concerned that the insurer’s specific proposal may be overcorrecting for market trends 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.

Key Findings:

  • A 25.6% rate hike from the dominant carrier in the individual market could have serious deleterious consequences for Oregon individuals and families. The tens of thousands of Moda members currently receiving tax credits to help pay premiums will likely see increases far in excess of 25.6% due to the way tax credit levels are determined. While Moda members will likely have lower-cost options available due to Oregon’s highly competitive health insurance market, these increases will create significant disruption for many Oregon families.
  • Despite financial losses in 2014, Moda’s financial position remains sound. Moda is also proposing to add to its surplus while proposing the largest increase by the market leader in Oregon’s individual market since 2010. Moda’s surplus remains well above the required risk-based capital level.[2] This means that the insurer could take a more moderate approach to increasing rates to avoid a large, disruptive rate increase in 2016.
  • Moda’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 Moda initially projected, there are many reasons to believe that these costs will go down in future years. Moda acknowledges this to some degree, but it is possible that the insurer 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. Moda’s rate hike does not appear to account for these reductions adequately.
  • It is unclear from the information provided whether Moda is sufficiently adjusting 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. Moda has adjusted its rate 2% lower to reflect these reductions, but this may be insufficient. 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.
  • When it comes to reducing costs and improving the quality of care, it is not clear that Moda is doing all it can. According to metrics submitted with the filing, Moda’s utilization and cost for expensive emergency department visits and inpatient hospitalizations are up substantially, and prescription drug costs have more than doubled on a per member, per month basis. 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 the insurer is doing enough to keep its members healthy and out of hospitals and emergency departments. While Moda has a number of constructive cost containment and quality improvement initiatives underway, many of these remain unavailable to Moda’s large individual market membership. Further inquiry should be made to ensure Moda is doing everything possible to cut waste and improve quality of care, and pass the savings on to their members.

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 Moda to provide all documentation necessary to evaluate their proposal, and to implement a concrete, achievable plan to contain costs for Oregon individuals and families.

[1] These values reflect both unit cost and utilization trends.  The unit cost trend for medical and pharmacy are 4.5% and 10.0%, respectively, for an overall value of 5.0%.  The utilization trend for medical and pharmacy are 0.1% and 0.5%, respectively, for an overall value of 0.2%. (see Exhibit 4.1 of Moda’s filing)

[2] At year end 2014 Moda had an RBC ratio of 454%.

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