Insurance Division Prevents Insurance Companies from Making Big Cutbacks

Oregon’s Health Co-Op asked for a 21 percent decrease to its rates, but was allowed to cut rates only about 10 percent. The Insurance Division looked to cull aggressive rate decreases with an eye toward ensuring the companies can maintain solvency. LifeWise Health Plan has the cheapest standard silver plan at $222 a month.

Insurance companies tried to lower their rates on the individual and small business market for 2015, but the Insurance Division set rates higher than the companies asked, arguing that their proposed low premium rates were unrealistic and could undermine the companies’ ability to remain solvent while still honoring claims.

“Insurance companies need to be able to cover their claim costs,” Laura Cali, the Oregon insurance commissioner, told The Lund Report. “We want consumers to have premiums that are as affordable as possible, but you want to also be assured that your insurance company is going to be around tomorrow.”

The insurance companies, including Oregon’s Health Co-Op, Lifewise Health Plan and Providence Health Plan, had been burnt by substantially lower rates from Moda Health for 2014, and were attempting to make themselves more competitive on the 2015 marketplace.

Oregon’s Health Co-Op proposed rates that would have made it a cost-leader this year after selling only 1 percent of plans last year. The company proposed rates for 2015 that were even lower than Moda’s rates for 2014.

But the Co-Op’s aggressive rate decrease was pulled back from a requested $202 a month to $230 a month for a 40-year-old Portlander. Those rates will price the Co-Op just above LifeWise Health Plan, which was approved at $222 a month for the same client. Providence Health Plan was just ahead of them at $233 a month.

“We take the position that insolvency is the worst thing that can happen for a consumer,” said Cali. Limiting the ability of insurers to drastically cut rates is one key way to prevent the companies from coming anywhere near insolvency, she said.

Oregon’s Health Co-Op, Lifewise and Providence were still granted lower rates than Moda Health for 2015, but their new rates will be slightly higher than Moda’s 2014 rates. At $222 a month, LifeWise’s approved standard silver plan is $1 more than Moda’s standard plan price for the same age group for 2014. 

All rates are based upon the companies’ standard “silver” mid-range plan price for a 40-year-old non-smoker. Overall, the Insurance Division noted that the average premium rate for someone in this demographic has decreased from $262 a month to $250 a month as the insurers merge closer to a consensus rate. In the small group market, average rates fell from $327 to $308.

Cali said the insurance companies are trying to guess the overall health of the individual market while the market remains quite volatile, leaving them with a wide range of forecasts. The Insurance Division worked to rein in both the most conservative and most liberal estimates.

Moda Health still won approval for a huge rate increase for its 2015 plans, which will rise 10.6 percent over 2014. The Insurance Division cut their rate increase only slightly from the insurer’s proposed 12.5 percent increase.

Technically, Health Net had the cheapest standard plan last year. But that fact is somewhat deceiving, reflecting the challenges of making an apples-to-apples comparison between health plans. Moda offered a cheaper standard bronze (high-deductible) plan and sold other nonstandard silver plans that were cheaper than Health Net for consumers -- which allowed Moda Health to scoop up 73 percent of the market in the first year of Cover Oregon.

While Moda ran away with the market last year, this year’s competition does appear to be much closer. Seven insurers were approved for rates on the individual market within $30 of the cheapest insurance company, LifeWise Health Plan. Moda will be near the high end of those seven.

Cali said that the Oregon State Public Interest Research Group also made a convincing argument that the insurance companies weren’t doing enough to account for the reduction in uncompensated care at Oregon hospitals.

Traditionally, hospitals have passed along the costs of treating uninsured patients to their paying customers. Thanks to the Affordable Care Act, far fewer people are uninsured, but the hospitals have reportedly just been pocketing this savings.

The Insurance Division cut rate for all but two of the insurers by 2 percentage points to reflect the savings that consumers should be enjoying. If the insurance companies did not share in the savings from the hospitals, they will have to eat this cutback or demand that they get their fair share during negotiations with hospitals.

Jesse O’Brien of OSPIRG said the collective action by the Insurance Division should provide the insurers with the ammo and leverage they need to make the hospitals share the savings with insurers and, by extension, consumers. “It puts pressure on the whole market to get rates that reflect actual costs,” he said. “It changes the dynamic of negotiations between insurers and providers.”

Ironically, despite asking for lower rates than they received, the Health Co-Op was one of two companies whose rates were not cut back because of a failure to account for a reduction in uncompensated care. Co-Op CEO Ralph Prows told The Lund Report last month that there was no way for his company could force the hospitals to share their savings, but Insurance Division spokeswoman Lisa Morawski said that the division only made cuts in this area for insurers who made no effort to collect the savings, which was apparently not true of the Health Co-Op or PacificSource, which had asked the state to revise its rate proposal downward because of better contract negotiations.

“We made bad debt reductions when there was no evidence that [an] insurer was working on addressing bad debt,” Morawski explained. “We looked for things like current contracting activity or new networks that would signal to us that the insurer was addressing the issue.”

Prows did not return a call on Friday for comment by press time.

Chris can be reached at [email protected].
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