Close scrutiny of proposed health insurance premiums for 2015 has cut over $24 million in waste and unjustified costs from premiums for Oregon consumers and small businesses, according to an OSPIRG Foundation report released in September. The cuts come after OSPIRG Foundation’s analysis questioned the justifications of four major rate proposals. Taken together with cuts made since new standards were implemented, state officials have required insurers to cut $179 million in waste since 2010.
“We all know that health care still costs too much, and that there is too much waste in the health care system,” said Jesse O’Brien, OSPIRG Foundation Health Care Advocate. “Health insurance rate review is a key backstop to protect Oregon consumers and small businesses from paying too much for health care.”
Under the Oregon Insurance Division’s (OID) health insurance rate review program, health insurers seeking to increase their rates on small businesses or people purchasing coverage on their own must submit a written justification. The OID then evaluates whether the proposal is reasonable and goes on to approve, disapprove or cut back the proposed rate. OSPIRG Foundation’s analysis focuses on the OID’s recent decisions for health insurance rates for 2015.
Key findings of OSPIRG Foundation’s report:
- The Oregon Insurance Division took action to make sure Oregon’s insurers pass along the savings from reductions in uncompensated care for the uninsured due to the expansion of access to health coverage under the Affordable Care Act (ACA). In the past year, 400,000 Oregonians have signed up for coverage under the ACA, and we have already started to see rates of uncompensated care go down. Since commercial insurers wind up footing the bill for uncompensated care, this reduction should be reflected in reduced premium rates, but few Oregon insurers incorporated these savings into their rate proposals. The OID took corrective action and cut many insurers’ proposed rates by 2% to ensure that they accurately reflected the changes underway in health care in Oregon.
- One Oregon’s biggest insurers, PacificSource, made a major error in its initial filing. After admitting to this error, the insurer suggested a sizable cut to their proposed rates, and the final decisions cut rates back even further. All together, the cuts applied to PacificSource’s rates amount to over $14 million.
- Some insurers overstated trends in medical costs. A number of national studies have demonstrated a slowdown in health care cost growth, yet several insurers projected accelerating cost growth in the year ahead. In some cases, the OID questioned these projections, and cut back those proposals accordingly.
“Without Oregon’s robust rate review program, consumers and small businesses would be paying millions more for coverage,” said O’Brien. “But with study after study demonstrating that a third or more of health care spending is waste, we know we can do better.”
With direction from Governor John Kitzhaber, the state has begun implementing a plan to strengthen Oregon’s health insurance rate review program, including new cost, quality and utilization metrics to help regulators evaluate insurers’ efforts to contain costs and improve quality of care. The report highlights a number of opportunities to learn from the recent review process to continue improving the program.
Key recommendations of the report:
- Insurers should be required to reveal more information to justify their projections of increases in medical costs.
- Insurers should be required to provide more information to justify the cost differences between their plans to protect consumers from price discrimination and other unjustified pricing practices.
- New data on cost, utilization and quality should be expanded, improved and used to inform decisions on health insurance rates
Prior to the recent rate decisions, OSPIRG Foundation conducted an in-depth analysis of rate proposals from four of Oregon’s top insurers: Moda, PacificSource, United and Health Net. All rate filing documentation, including the OID’s decisions, is available on the OID’s rate review website, www.oregonhealthrates.org
Background on Oregon’s health insurance rate review program
In 2010, new rules went into effect strengthening the standards that health insurance companies must meet before raising premiums. Insurers must justify rate hikes in writing, showing that they are not excessive and explaining how the insurer is working to reduce costs. All rate filings are public information, available online, and open to public comment. The Oregon Insurance Division evaluates these justifications, and must take public input into consideration. In 2011, the Insurance Division began to hold public hearings on significant rate increases.
Since these changes have taken effect, the Oregon Insurance Division has significantly stepped up their scrutiny of health insurers’ rate hike requests. Since 2010, it made cuts to a majority of requests, cutting over $80 million in waste and unjustified costs from consumers’ and small businesses’ premiums from 2010-2013. Last year’s review of rates for 2014 cut over $69 million.
OSPIRG Foundation is a non-profit, non-partisan statewide consumer organization. You can visit them at www.ospirgfoundation.org
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