Health Co-Op Leads Market in Low Rates, but Hospitals Appear to Be Pocketing Savings

The Insurance Division has wrapped up its public hearings for proposed health insurance plan changes, with the last ones on Monday. The hearings and a review are required for all individual and fully insured small business health plans sold in Oregon. Insurance Commissioner Laura Cali will approve or order changes to the rates, with an announcement on Aug. 1.

This year’s filings had two key points -- Moda Health, which has dominated Cover Oregon, has asked to jack up its rates 12.5 percent. And most of Moda’s competitors have kept their rates flat or asked for significant decreases, several of which would price them lower than Moda’s premium rates from last year.

A common theme has appeared among the insurance filings that the Oregon State Public Interest Research Group has put under its microscope: None of them are accounting for the savings that they should see as a result of a reduction in hospital charity care -- and each of the plans that OSPIRG examined have higher estimates of medical inflation than their competitors.

The Lund Report looked at Moda’s filing at the end of last month. After interviews with OSPIRG’s Jesse O’Brien and Dr. Ralph Prows, the CEO of Oregon’s Health Co-Op, this article will give a closer overview of the rest of the individual and small business marketplace.

OSPIRG closely reviewed filings for three additional plans -- PacificSource Health Plans, Health Net Health Plan and UnitedHealthCare.

PacificSource’s rate filing was notable primarily because they have tried to back down from their 15.9 percent rate increase. But they are still asking for a 10.8 percent rate increase, which is among the highest in the market.

O’Brien said that a close look at UnitedHealthCare’s filing in particular relied on an actuarial trick to calculate medical costs increases -- one internal number and a higher public estimate that gives it a cushion -- something that Regence BlueCross BlueShield tried in the past, but the Insurance Division discarded as a hidden profit margin. “I’d be surprised if the Division didn’t cut United substantially for that,” O’Brien said.

United’s 11.8 percent increase on small business health plans was by far the highest for that market -- nearly 5 percentage points higher than its closest competitor, Health Net.

Health Net essentially argued that even as hospitals are lobbying for Medicaid expansion across the country, any reduction in cost shifting that might result from fewer people uninsured will be wiped out by underpayments from Medicare and Medicaid.

“I just don’t buy that argument,” O’Brien said, adding that Health Net was not calculating the successful cost-saving reforms of the coordinated care organizations and that the Medicare population has been largely unimpacted by Obamacare.

Health Net is pulling out of the Cover Oregon marketplace and won’t be found on the federal exchange this fall. Consumers will only be able to purchase coverage through a broker or directly from the company.

Curiously, Regence BlueCross BlueShield -- which catalyzed the close scrutiny of the health insurance rate review process and spurred legislative reforms with its epic 22 percent hike a few years ago -- has asked for just a 3.2 percent increase for its qualified individual health plans. Regence sold 9,000 of these plans, which comply with the Affordable Care Act but are not sold through Cover Oregon, since the leading insurer also opted out of the public marketplace and has since created its own private exchange.

But Regence has a larger pool who may see a bigger, 9.8 percent spike -- the people with pre-ACA plans that were set to be canceled last fall before a last-minute reprieve from President Obama and Insurance Commissioner Laura Cali extended the plans for up to a year. Legislation this spring enabled Cali to extend these plans again for 2015 and as far out as 2017 if the federal government gives permission.

O’Brien was puzzled that Regence would ask for such a high increase for these plans, since it had been able to screen these 23,000 people for pre-existing conditions before approving them for coverage. Regence is also off the hook for a number of the ACA’s essential health benefits and limits on out-of-pocket expenses for many of these plans. “Regence has by far the largest population in these plans,” O’Brien said.

Oregon’s Health Co-Op

Meanwhile, Oregon’s Health Co-Op, which struggled in its first year due to its lower brand recognition and relatively high premium rates, has pitched a 21 percent decrease to the Insurance Division for its 2015 individual plans and an average of 20 percent cutback to its small-business plans. CEO Dr. Ralph Prows said the decreases to the small group plans come on top of a 14 percent cut that took effect this spring.

The new rates, if approved, will put the Co-Op at the low price end of plans for 2015, and are currently priced lower than the health plans from Moda Health for 2014, which have been the lowest on Cover Oregon.

“For this year, we scoured every nook and cranny to find any savings,” Prows said. “We have more information than a year ago … This is a much more accurate rate reflection of what the cost of care will be.”

Prows said last year he tried to scale back the Co-Op’s initial offering after its competitors like Providence Health Plan and Kaiser Permanente did the same. But while those companies’ “mistakes” in filing uncompetitively high rates were considered by the Insurance Division, the state agency did not consider the Co-Op’s adjustments, ruling them miscalculations, not errors, he added.

The Co-Op was able to get a cut in place in March for its small business plans because those plans are reviewed quarterly and not subject to the tight open enrollment window on the individual market.

Prows said last year they predicted a much sicker population than what they actually ended up with. The Co-Op will also likely benefit in the second year of the Affordable Care Act since more younger, healthier people are expected to sign up than they did last year, now that Oregon will be using the working federal website and consumers will be more aware of tax penalties.

Medical inflation has also come in at historic lows for three straight years, even if cautious actuaries at Milliman and other firms have predicted it will rebound from less than 3 percent to 7 percent in a few years.

The Health Co-Op also has plans to further simplify its so-called Simple Plan, charting a course in contrast to traditional insurance companies that sounds a bit like Southwest Airlines to the traditional airlines.

The Simple Plan has eliminated coinsurance -- which like hidden bag fees and surcharges, always ends up a mystery bill for consumers. Starting with 2015, the plan will also have no deductible. Instead, Prows said all post-premium cost-sharing will take the form of clearly defined copayments, which will cost progressively more based on complexity.

While it’s always difficult to get other insurance companies to comment -- Moda Health ignored an email from The Lund Report -- Prows did push back on O’Brien’s central claim that insurance companies should be held accountable for the savings from uncompensated care.

While for years Oregon’s nonprofit hospitals have passed on this cost to consumers despite making their facilities more hotel-like and paying executives salaries in the high six- and seven-figures, the hospitals are now pocketing that savings, which the hospital association has reported has fallen 2.6 percentage points. OHSU’s percentage of charity care has fallen from 5 percent to 1 percent.

“The hospitals have not passed on anything to us. Our contracts have not changed because of their reduced costs from free care,” Prows said. “The carriers have not seen any savings.”

Prows said it would certainly be a talking point at their next contract discussions, but Oregon’s Health Co-Op and other insurance companies have little leverage with hospitals, which have localized monopolies in most of the state outside the Portland Metro area.

Prows also announced a special relationship with OHSU, Tuality and Adventist that will allow his co-op to offer a special, lower rate to Portland metro residents who are comfortable with a limited, select network of providers.

Chris can be reached at [email protected].