Attorney in the case says he'll appeal the decision further
June 29, 2009 -- Charlie Ringo, attorney and former Oregon Senator, says he will appeal the decision to uphold a 26 percent rate increase on Regence individual health plans that took effect last year.
"We’re pretty convinced there was a failure to follow the basic statutory guidelines," said Ringo, referring to the Oregon Insurance Division. "We learned a lot during the hearing in February about how sketchy the review process was, about really what a lack of detailed analysis was performed. It was rather shocking."
Ringo, who will continue working on the case without pay, said the issues have direct relevance to the overall debate over healthcare reform.
"The healthcare debate is getting so much attention in our country," Ringo said. "A lot of the focus is on the uninsured. But also, attention should go to people who pay for their own premiums or those in small group policies. They are totally at the whim of insurance companies. That’s why government regulation has to be reasonable."
ORIGINAL ARTICLE: June 26, 2009 -- A full year after a 26 percent rate increase on Regence individual health plans took effect, an administrative law judge has upheld the decision by state regulators to grant the rate hike.
Since that time, the Oregon Insurance Division approved another 14.7 percent increase on the same plan holders, which takes effect next month. Roughly 90,000 people carry Regence Blue Cross Blue Shield of Oregon individual coverage, the state’s largest pool of individual plan holders.
Last year’s increase was opposed by Regence plan holder Karen Kirsch, who enlisted attorney and former state senator Charlie Ringo to argue the case before administrative law judge Alison Greene Webster in February.
At the time, Ringo called the OID approval of the 26 percent rate increase, “an outrageous breach of public trust.”
Ringo alleged political pressure influenced the decision and pointed to a single page of handwritten notes supplied by the Insurance Division as the only documentation to justify the 26 percent increase. Actuaries within the division had originally recommended approving a much lower rate.
The case brought increased scrutiny to the OID’s rate review process leading to some improvements in terms of what factors actuaries can use to analyze the rates. Based on language in House Bill 2009, state regulators will be able to look closer at administrative costs, overall profit margin, investment income and surplus.
“We know it will strengthen the process by clarifying the factors we can use,” said Cheryl Martinis, spokeswoman for the OID. “And it also requires insurers separately to report and justify administrative expenses.”
Between 2003 and 2008, Oregon insurers have generally kept administrative costs at around 10 percent of every premium dollar earned. Regence has been slightly higher, spending an average 13 percent of premiums each year for the past five years on administration, according to a
report by state regulators.
At the same time, however, premium rates have skyrocketed. For individuals,
rates have more than doubled in five years. For Regence alone, rates will increase nearly 50 percent in two years, while administrative costs by percentage have stayed relatively even. In 2009, Regence spent 10 percent of premiums on administration.
There’s something wrong with this picture, said Ellen Pinney, founder of Oregon Health Action Campaign.
“If in fact the reason your rates are going up is an increase in health care costs, and the administrative costs just continue to balloon along with it, the administrative costs at some point have become extraordinarily over priced,” Pinney said.
Following the judge’s decision there is a 30-day period where any adversely affected party can file an exception. Corey Streisinger, director of the Department of Consumer and Business Services, then makes the final decision. And following that, there is a 60-day period where the decision can be challenged in a Judicial Court of Appeals.
To see the judge's decision click here.
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Submitted by Ruppert Reinstadler on June 29, 2009
So the always brilliant Ellen Phinney says “If in fact the reason your rates are going up is an increase in health care costs, and the administrative costs just continue to balloon along with it, the administrative costs at some point have become extraordinarily over priced.” How does that jive with your statement that Regence has averaged 13% admin costs over the last 5 years but for 2009 they were 10%. Seems like that’s a smaller number. Also, it’s not reasonable to expect that percentage to drop just because medical costs increase and they have to increase rates. Does she not realize that admin costs go up if you have to process more claims for more people?
The 13 percent and 10 percent administrative costs are in relation to premium revenue. Yes it's a smaller number, but not nearly small enough as it should be over the past several years. The point is that these numbers should not really be linked. Your last question makes the point. There are not more claims for more people. There are actually less people insured and insurers are processing about the same amount of claims if not fewer because there are less elective procedures these days. So in fact, the percent of premiums spent on administration should actually go down steadily and quickly over time as premium revenue skyrockets (based on medical costs), if and only if administrative costs themselves were only rising with inflation and reasonable work load.
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