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Despite Spending $39 Million on Advertising, Oregon Insurers Gain Very Few New Members

Oregon’s largest health insurance companies spent more than $39 million on ads and marketing campaigns in the past two years– but they seemed to find it increasingly difficult to recruit new members, according to a Lund Report review of financial records.
March 18, 2014

Oregon’s largest health insurance companies spent more than $39 million on ads and marketing campaigns in the past two years– but they seemed to find it increasingly difficult to recruit new members, according to a Lund Report review of financial records.

Despite all their marketing spending, the seven multi-million-dollar companies that have long dominated Oregon’s health insurance landscape only signed up 8,789 new members last year, while a handful of upstarts and smaller insurers enrolled nearly as many people – 8,389 – largely through Medicare and Medicaid programs. These figures, obtained from annual statements filed with the National Association of Insurance Commissioners, only hint at the vast overhaul of health insurance that’s currently under way in Oregon.

Since Jan. 1, more than 145,000 people have obtained health insurance through the state’s Cover Oregon exchange, with about 45,000 signing up for private plans. But figures about Cover Oregon enrollments are incomplete so far, and also don’t show the whole picture. Some people who went through Cover Oregon already had health insurance obtained elsewhere in 2013; others found themselves covered for the first time. And, some people who were able to buy health insurance for the first time because of the Affordable Care Act didn’t go through Cover Oregon at all.

The documents obtained by The Lund Report paint the best available picture of 2013, and even they are incomplete. Health insurers must disclose information about traditionally underwritten plans. However, many large employers are self-insured, including the state of Oregon – which covers more than 130,000 employees and their dependents – and also big businesses like Nike, Intel and Oregon Health & Science University. Details of those plans are not open to public scrutiny.

When financial and membership figures for the first three months of 2014 become available, we’ll revisit the topic and compare Cover Oregon’s press releases with the actual profits and enrollment numbers insurers must disclose. The Lund Report also intends to reveal the executive salaries of insurance executives when that information is released by the Oregon Insurance Division in April.

As of Dec. 31, here’s how the state’s health insurers ranked, by size:

  • Regence BlueCross BlueShield of Oregon, 497,891 members, up 5.3 percent from 2012.

  • Kaiser Permanente, 472,701 members, up 1.7 percent.

  • PacificSource Health Plans, 206,975 members, down 7.8 percent.

  • Providence Health Plan, 183,805 members, down 1 percent.

  • Moda Health Plan, 86,289 members, up 15.2 percent.

  • Health Net Health Plan of Oregon, 69,793 members, down 16.9 percent.

  • LifeWise Health Plans of Oregon, 50,907 members, down 3.7 percent.

  • Trillium Health Plans, 57,894 members, up 8.2 percent.

  • United Healthcare of Oregon, 19,584 members, up 22 percent.

  • ATRIO Health Plan, 13,038 members, up 5.4 percent.

  • Samaritan Health, 5,413 members, down 3.4 percent.

Wisconsin-based Time Insurance Co. had 419 Oregon members in 2013, as well. Because it’s headquartered out of state and sells relatively few policies here, Time reported less about its Oregon business than most other health insurers.

Two other insurers were already spending money on office space and overhead last year even though they had not enrolled a single person: Health Republic and Oregon’s Health Co-Op, startup plans that were both born in response to healthcare reform.

Health Republic, an offshoot of the New York-based Freelancers Union that, reported a net loss of $7.4 million, presumably reflecting start-up costs. Oregon’s Health Co-Op was created out of a provision of the Affordable Care Act aimed at boosting market competition; its 2013 net loss was even higher, reaching $9.4 million.

BridgeSpan, which started offering Oregon health insurance in January, was not born directly out of healthcare reform, but was re-shaped in response to changes in the law. A subsidiary of Cambia Health Solutions and a sister-company to Regence BlueCross BlueShield, BridgeSpan has become Cambia’s individual health insurance brand. The company’s enrollment as of Dec. 31 was 325 members, all from Utah. Its new plans are listed on the Cover Oregon exchange. Like other insurers gearing up for health reform changes, BridgeSpan reported a net loss last year, $1.8 million.

Only two other companies reported net losses in 2013: tiny Samaritan Health and giant Kaiser Permanente.

Samaritan provides Medicare Advantage plans in Linn, Benton and Lincoln counties. It reported a $514,421 loss last year, after finishing 2012 with a $1.3 million profit. The nonprofit’s biggest spending increase from 2012 to 2013: Its general and administrative expenses climbed by $1.2 million, to $4 million.

Kaiser, the second largest insurer in Oregon, reported a much larger loss, $14.9 million. The company’s underwriting loss was actually $29.5 million, meaning that Kaiser charged less for insurance than it paid to take care of its members, although its investments did well enough to cut its losses. Often, insurers have been known to eschew underwriting gains to expand their market share, and that may be the case here as well, given Kaiser’s success at recruiting new members.

Marketing investments

Gaining market share is central to the long-term strategies of many of Oregon’s largest health insurers. But they seem divided on the importance of promoting their brands. The state’s seven dominant insurers each spent more than $1 million on marketing and advertising last year, but some were boosting spending while others cut back. And it’s not clear that spending more necessarily translates to higher enrollments.

Kaiser Permanente reported spending $6.6 million on marketing and advertising in 2013, a 44 percent boost from the $4.5 million it spent a year earlier. Ranked No. 2 for ad spending was Regence BlueCross BlueShield, at $4.1 million in 2013 – a 6 percent cut from the year before. Yet as Regence cut back, its member ranks actually grew faster than deep-spending Kaiser.

Moda reported spending $1.76 million on marketing and ads in 2013 – a more than twofold climb. The company only spent $888,521 in these categories the previous year.

These figures may provide insight into the insurer’s decision last year to buy naming rights to the Trail Blazers basketball arena. Moda and the Blazers did not disclose the value of that 10-year arrangement, but industry experts say it could be as much as $4 million per year.

If that’s the case, the full value of the naming rights deal is not reflected in Moda’s 2013 advertising and marketing disclosures. That could mean that Moda made partial payment in 2013 – the announcement came in August, and additional payments could have been made this year. It’s also possible that the “marketing and advertising” line item does not include stadium-related payments.

Next year’s marketing disclosures could ultimately reveal even more than the 2013 numbers. Since this January, Providence has acquired naming rights to its own stadium – the home of the Timbers soccer team – and has purchased local broadcast ads that ran during the Olympics. Providence actually cut its marketing and advertising budget in half year – the insurer reported $2.6 million in marketing expenses in 2013, down from $5.96 million in 2012.

See the spreadsheet linked to this story for more details on health insurance companies spending on ads and marketing.

Premium rebates

Also of note from health insurance companies’ 2013 annual financial reports: Two Oregon insurers will be writing checks to members, because of the provision of the Affordable Care Act that requires a high level of spending on medical services.

LifeWise Health Plan of Oregon estimates it will refund $1.48 million toward people enrolled in its individual and small group plans in 2013; it also owes $545,687 in rebates related to small group insurance plans from 2012.

Regence BlueCross BlueShield of Oregon estimates it will pay back $1 million in rebates to people enrolled in individual health insurance plans in 2013; it also owes $894,546 in small group and large group health plan rebates from 2012.

The health reform law requires insurance companies that don’t spend at least 80 percent of premium dollars on medical care to send some of the money back. Checks are likely to go out in the summer, according to a White House website explaining the law. Last year, an estimated 8.5 million people received insurance rebates nationwide.

In addition to these rebates, a new fee that will be levied on insurance companies starting this year is expected to take a big bite out of Oregon insurers. Regence BlueCross BlueShield expects to have to pay $26 million; Kaiser forecasts a $20 million assessment; PacificSource thinks it will be out $10.8 million; Providence expects a $6.3 million charge; Moda will be charged $2.3 million.

Other disclosures

Kaiser Permanente has made costly retirement promises to its workforce – and those promises are under-funded according to federal accounting rules, the insurer disclosed in its annual report.

Kaiser ended 2013 with $772.6 million in under-funded pension obligations – a significant improvement over the $829.7 million obligation on its books at the start of the year. The company also offers postretirement non-pension benefits, primarily healthcare, to its workers. These benefits were under-funded by $436.5 million at the end of 2013, up from $414.2 million at the start of the year.

New accounting rules required Kaiser to add $39.4 million in retirement benefit liabilities to its balance sheets, according to Kaiser’s annual filing.

In another disclosure, Regence said its parent company, Cambia, successfully sold two buildings that had been actively marketed. The buildings, at 100 S.W. Market St. and 1621 S.W. First Ave. in downtown Portland, were bought by an unrelated real estate investment business. Regence said the sale price was $46.3 million, and the insurer is leasing back a portion of that space for its administrative offices.

Courtney can be reached at [email protected].