Health Insurance Regulators Under Fire
April 3, 2009 -- Attorney and former Oregon Senator Charlie Ringo accused government watchdogs who oversee the Oregon health insurance industry of an “outrageous breach of public trust.”
The statement came during an administrative hearing in February in which Karen Kirsch, who has individual coverage with Regence Blue Cross Blue Shield of Oregon, contested a 26 percent rate increase approved by state regulators that took effect last July. The move earned Regence an additional $30 million.
“Those are averages. Some families were hit with 47 percent rate increases (from Regence),” said Steve Dixon, policy director for Oregonians for Health Security. “Regence didn’t even have the largest rate increase. LifeWise had an average 38 percent increase at the same time. It’s got to stop.”
On average, individual market rates in 2008 increased by 17.7 percent. Roughly 200,000 Oregonians have individual coverage, based on enrollment reports by the Oregon Insurance Division.
Now, before the law judge has issued a ruling, Regence has submitted another wallet-busting rate hike, this time a 19 percent average on its roughly 90,000 individual members -- down from nearly 100,000 in 2007.
At issue during the hearing in February was not the Regence rate increase, according to Ringo, but the process that allowed Regence to allegedly sidestep actuaries in the Insurance Division. Those actuaries recommended a much lower rate.
Political pressure took place between Regence executives and Cory Streisinger, director of the Insurance Division’s overseer, the Department of Consumer and Business Services, Ringo said.
“I’m unsure why Mr. Ringo is characterizing this as political pressure,” said Mike Becker, director of public policy and community affairs for Regence. “I’m aware of nothing that would lead to that conclusion.”
Ringo cited a top-level meeting after which state actuaries were told to figure out how to justify the 26 percent increase. The division pointed to just one page of hand-written notes as the only documentation to justify its approval.
Becker defended what happened as a normal give and take between the insurance division and insurers. Even with last year’s increase, Regence still expects to lose $15 million on its individual plans, he said. Over the past 10 years, Regence maintained an average 2 percent profitability (net income compared to premiums earned) and accrued $486 million in surplus, according to reports filed with DCBS.
Teresa Miller, acting administrator of the Oregon Insurance Division, defended the division’s handling of the rate request as a typical negotiating process.
“There are really two questions we are trying to answer,” Miller said. “Is the average rate request justified, and is that request fairly allocated among the rate payers?”
To reform the rate review process, the Insurance Division has proposed two bills (HB 2432 and 2433). In essence, they would provide greater transparency for rate filings and strengthen the arguments that regulators can use in approving or denying a rate request. For instance, there is a discrepancy about whether the division can consider surplus funds to justify a rate increase, Miller said.
(UPDATE: Both bills were combined into HB 3145)
“We may very well get challenged if we tell an insurance carrier that they need to dip into their surplus,” Miller said. “I want to be sure we have the ability to look at surplus, investment income and insurer profit when we’re doing the review. We want to take a broader look at the company.”
If enacted, this legislation would create the most stringent rate review process in the country, Becker said.
Miller defended the legislation. “It wouldn’t put us past what other states are doing, but would put us on the forefront of what states are doing.” Already the division has enacted a public comment period before rates are approved. House Bill 2433 would make that mandatory.
Another bill (HB 3145), sponsored by Rep. Chip Shields (D-Portland), would strengthen the authority of the administrative law judge in contested rate review hearings similar to the one in February.
Now the director of DCBS doesn’t have to follow the judge’s recommendation and can ignore a subpoena. Despite a subpoena issued by the judge for Streisinger’s testimony, Streisinger didn’t have to testify.
And that, said Ringo, makes the whole process a “kangaroo court.” Streisinger turned down a request to be interviewed for this story.
The February hearing was the first time in at least 20 years when anyone challenged an insurer’s rate increase. “They (the Insurance Division) have been a rubber stamp for the industry for far too long,” Dixon said.
Miller disagreed. “We don’t do formal denials, but we don’t necessarily approve what the industry requested. I don’t think we’re at all a rubber stamp. We’re looking out for consumers.”
See our related stories on rate regulation.
To view the most recent Regence rate increase request click here.
To comment on the rate increase, send an email to [email protected]
Or write to:
Oregon Department of Consumer and Business Services
Attn: Sue Munson
P.O. Box 14480
Salem, OR 97309-0405
To search for any Oregon health insurance rate filing click here.