Health Co-Op Wants More Transparency from Insurance Division

Oregon’s Health Co-Op, which has struggled to get a foothold in the Oregon insurance market, has proposed legislation to provide insurers a better appeal process while requiring the Insurance Division to better explain its rate-setting decisions for plans sold on the individual and small business markets.

The Oregon Health Co-Op wants significant changes to the state’s health insurance rate review program, which its president says will provide more transparency to the review process and a better chance for due process than currently exists.

House Bill 2605 requires the Oregon Insurance Division to give a more detailed explanation of its rate decisions as well as offer insurance companies a right for a timely appeal to the Department of Consumer & Business Services director.

The Insurance Division’s thorough rate review process for the individual and small business health insurance markets has been credited with saving millions of dollars for consumers over the years, but HB 2605 comes after the Co-Op tried to lower its rates for 2015 but was told by the Insurance Division that its proposed rates were too low, and fixed the price of its plans at about $25 higher a month than what the Co-Op had asked for.

Co-Op President Ralph Prows publicly decried the Insurance Division’s ruling, but was left either to accept the higher prices set by the Division or pull his plan from the insurance exchange. The only appeal process currently open to insurers through an administrative law judge would have taken an estimated nine months -- meaning the open enrollment period would have long come and gone before Prows could get a decision.

“It really was a false choice,” Prows told the House Health Committee on Friday. HB 2605 requires a decision on this new appeal process to be made 90 days before the beginning of the open enrollment period set by the federal government.

At the time, Insurance Commissioner Laura Cali said her division increased the rates proposed by the Co-Op and a handful of other insurers because it wanted to bring them in line with the mean actuarial projections of their competitors and that the first duty of the Insurance Division is to ensure that health plans can be both sustainable and solvent.

If an insurer prices its rates too low, it may at minimum ask for a huge rate increase the following next year. In a worse-case scenario, the insurance company will default on its clients and go out of business. In Iowa, the state was compelled to intervene with a struggling health insurance co-operative that was quickly facing insolvency.

Prows denied his company had any such concerns, and that the low rates the Co-Op offered were put forward only after it produced the savings with the advice of two high-priced actuaries from the Milliman Company.

He said HB 2605 would simply require the Insurance Division’s actuaries to provide as detailed an analysis as his actuaries gave the government.

“Your math professor would not be satisfied with you just giving the answer. He’d say, ‘Well, show your work,’” Prows said. “That’s essentially what we’re asking for here.”

The bill also requires the Insurance Division to give an insurance company an additional chance to weigh in on a preliminary decision if the Division seeks to change the proposed rates.

Such transparency, Prows said, would help his company improve its plan designs to save consumers money, which he said the Co-Op is set up to do by design, with strict limits on executive pay and profit.

“We can’t brand health arenas,” Prows quipped. “We can’t do fancy things like that.”

Moda Health, the for-profit insurance company whose name is now emblazoned on the arena of the Portland Trail Blazers basketball team, supported the main thrust of HB 2605, while asking for some changes around filing deadlines which Prows agreed to take out.

The Oregon Insurance Division’s representatives did not appear particularly excited by the prospect of legislation and new statutory requirements, but deputy administrator T.K. Keen said his agency was interested in improving the process administratively while avoiding new opportunities for insurance companies to game the system by counting on getting their way on appeal.

Keen also said that Oregon was limited in its flexibility by the federal administration of the Affordable Care Act, which led to the development of the state insurance exchange.

Prows and other observers such as Jesse O’Brien of the Oregon State Public Interest Research Group have questioned whether some other insurers have already been allowed to game the system by filing their rates and then asking for a rate change after rates become public and theirs looked uncompetitive. After the 2014 rates were filed and Kaiser Permanente and Providence Health Plan’s rates were priced uncompetitively, the companies claimed they found errors in their filings, which the Insurance Division considered when reducing their rates.

Prows said the Insurance Division wouldn’t consider similar miscalculations that his company may have made.

O’Brien was cautious to support Prows’ bill, saying he much preferred the amendments that were submitted after discussions about Moda Health’s concerns. He essentially testified that Oregon must be careful not to fix a system that isn’t broken, even if it could be improved.

“Oregon’s rate review program is really delivering for Oregon consumers and it’s seen as a national model,” O’Brien said.

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