Sept. 11, 2013 — Gov. John Kitzhaber tasked the Oregon Health Policy Board with four areas to hold down healthcare costs, including greater oversight of rate requests by insurance companies. But the state health director, Dr. Bruce Goldberg, downplayed rate review as a way of bringing down costs at Tuesday’s meeting of the policy board.
Instead Goldberg emphasized switching to global budgets when insurers sign new contracts with hospitals and physicians similar to what coordinated care organizations are doing with the state’s Medicaid program, the Oregon Health Plan.
The proposed Public Employee Benefit Board contract is being drafted to implement many of the care model changes and payment methods used by CCOs, and the Oregon Educators Benefit Board is likely to follow.
“A contract is a more binding document than a regulation,” Goldberg said.
It was less clear how the state could bring about these changes in the private sector, although some people are talking about relying on the health insurance exchange, Cover Oregon, rather than the Insurance Division.
“The elephant in the room is … how do you get to a fixed rate of growth? How do you get to the global budget that allows for innovation?” said Mike Bonetto, healthcare policy advisor to Gov. John Kitzhaber.
Health economist Larry Kirsch and OSPIRG health advocate Jesse O’Brien countered Goldberg’s remarks when it came to public comment, calling the prior approval process of health insurance premium hikes the clearest way for the state to ensure innovative payment models are being implemented for insurance in the private sector.
“People want to call it robust, but … rate review has not been doing all the things it can do,” Kirsch told the board. He and O’Brien said the Insurance Division’s success makes it the state’s best tool to hold down private health insurance costs.
Since the Insurance Divisions’ rate review has worked to hold health insurers accountable for administrative costs — countering a national trend that has seen increasing waste — the Division could bring that same weight to bear on insurers’ strategies to prod providers to keep down medical inflation, such as implementing primary care homes, global budgets and metrics for chronic condition management, O’Brien said.
The Oregon State Public Interest Group has reported that Oregon consumers have saved $155 million on insurance costs since 2009 legislation bolstered the process in the individual and small business health insurance markets.
But those savings have come entirely from eliminating waste in insurers’ administrative costs, which make up no more than 15 percent of health insurance premiums. The balance is spent on hospitals, physicians, pharmaceuticals and other providers. The Insurance Division has the authority to require cost containment strategies, but O’Brien has said that insurers have been allowed to submit written narratives rather than show their work through quantifiable data.
Kirsch suggested the health policy board consider creating metrics and require insurers to enforce evidence-based medicine where practical.
After former Oregon and Pennsylvania Insurance Commissioner Joel Ario spoke to the board last month, the policy committee invited Christopher Koller, former Rhode Island Insurance Commissioner, to speak at September’s meeting.
“You can’t find a high-performing system internationally that doesn’t spend more on primary care than our system,” Koller said.
The nation’s smallest state has had success in keeping costs relatively lower through greater price transparency and by laying out its principles for insurers to meet up front, such as payment reform and an increased investment in primary care.
The Rhode Island Office of the Health Insurance Commissioner can then determine if health insurers complied with these principles during prior review of premium rate hikes.
Much of this was accomplished without the need for extensive new legislation: “Leadership involves understanding the levers you have rather than asking for new ones,” Koller said.
Rhode Island has the ability to review large fully insured employers as well as individual and small business markets. Oregon’s review is limited to the latter two groups, a discrepancy Felisa Hagins, a board member from the Service Employees International Union, said was worth exploring.
Koller said rate review was a secondary lever that Rhode Island used to hold down costs, but admitted that Oregon has had more success with its system than about any other state.
The similarities between Rhode Island and Oregon also end in many ways at progressive insurance regulation.
It only takes an hour to drive across the entire state of Rhode Island, whose health providers are highly concentrated in the capital, Providence. And, about 70 percent of Rhode Island consumers are insured by just one company, BlueCross BlueShield.
Oregon’s healthcare landscape is the opposite — the individual insurance market is competitive, divided among seven insurers. But these insurers often have little leverage outside the Portland metro area, as single health systems dominate outlying cities and towns.
The policy board members made no immediate decisions, but directed a consultant to return in October with some straw proposals to approve, based on their comments.
Sen. Chip Shields, D-Portland, will chair a discussion of rate review at a hearing of the interim Senate General Government, Small Business and Consumer Protection Committee next Tuesday afternoon at the state Capitol. Goldberg, Ario and Insurance Commissioner Laura Cali are scheduled to testify.
