Leaders of the insurers serving the Oregon Health Plan on Wednesday defended their hefty profits reaped from the government program during the pandemic, telling lawmakers the funds will help keep the low-income health insurance system stable for potentially lean times ahead.
The Oregon House Committee on Behavioral Health and Health Care held the hearing after an analysis by The Lund Report that showed that the insurers reaped record profits of nearly $440 million from 2020 through early 2023. State Rep. Rob Nosse, the committee’s chair, referenced The Lund Report’s reporting at the beginning of the hearing.
Oregon last year paid the insurers $7 billion in state and federal Medicaid funds to provide care to 1.5 million Oregonians through 16 regional coordinated care organizations around the state — making the Oregon Health Plan the largest service that the state contracts out to private companies.
The profits the insurers generated during the pandemic — which Oregon Health Authority officials called a “windfall” — were driven by increased payments to the insurers during the pandemic. The increase was due to rising member enrollment combined with reduced spending, as many providers and people postponed care to reduce risk of COVID-19 infection.
Citing the profits, Gov. Tina Kotek has been pressing the Oregon Health Plan insurers to spend more on their communities, as The Lund Report has reported. Recently, they proposed a plan to spend an additional $25 million on behavioral health staffing and facilities across the state.
In Wednesday’s hearing, insurance officials defended the profits, telling lawmakers they will provide stability and meet state requirements for a higher level of reserves.
“It looks like, ‘Oh, we're sitting on a boatload of dollars and, here we go, we’ve got all these profits,’” Josh Balloch, vice president of government affairs for the southern Oregon-based AllCare Health coordinated care organization, told the committee. “That’s not what’s going on here.”
Instead, he said the profits fueled large reserves that amount to “static capital” that AllCare would like to invest in community health but can’t because of state requirements.
To illustrate the importance of reserves, Balloch noted that the Oregon Health Authority in 2019 denied a contract to PrimaryHealth to provide services to Oregon Health Plan members in Josephine County, questioning its finances.
He said that a law passed in 2019 means that the amount of reserves required of Oregon Health Plan insurers can “wildly swing.”
The state wants the insurers to hold substantial reserves to cover expenses in case they go out of business. Collectively, fed by the profits of the last three years, the 16 insurers at the end of 2022 held $833 million in net capital and retained profits, state calculations show. That’s nearly double the pre-pandemic amount.
But just how much of that they can dip into without running afoul of state reserve requirements varies from insurer to insurer. Some coordinated care organizations appear to have investment portfolios that far exceed reserve requirements, while others have barely enough to meet mandated levels.
Oregon Health Authority interim Director Dave Baden said he welcomed the hearing and hoped similar discussions would happen on an annual basis. He noted that profit margins came in well above the system's expected range of 1-2%, shooting up to over 4% last year. But he presented numbers showing that revenue reported by the insurers has fluctuated in previous years. In 2017, the OHP insurers lost money and their net operating revenues hovered at just above 1%.
“Bottom line here is that, as an insurance company, we need to be well capitalized to get through problems that may or may not be coming to us here in Oregon,” Rick Blackwell, director of Oregon government relations for coordinate care organization PacificSource Health Plans, told the committee.
Blackwell, and other insurance executives cited millions in recent spending on behavioral health and other community needs.
Bill Bouska, director of government Relations for InterCommunity Health Network, told the committee that his coordinated care organization has spent $30 million on projects to improve the health of its members in Linn, Benton and Lincoln counties.
“That really doesn’t necessarily get captured because it’s considered some different kind of income,” he said.
Jeremiah Rigsby, chief of staff for CareOregon — which operates two of the regional care organizations and participates in a third, Health Share of Oregon — also spoke. He told the committee that his group and Health Share, “put a combined $235 million back into the community over the last two years.” Even when CareOregon was projected to lose $100 million in 2018, he said it was still “putting around 2% of our revenue into the community.”
“I think if there was a takeaway message that I’d like for you all to have here, it’s that, ‘the coordinated care model is, I think, designed to do the right thing in both good times and bad times,” he said.
As far as spending, some lawmakers questioned whether doctors and other providers were being paid enough for serving Oregon Health Plan members, noting that reimbursements are lower than in other types of care.
“We haven't really shored up the critical needs we have in health care, such as has been discussed in primary care. We are having a very difficult time in rural communities to attract primary care providers,” said the committee's vice-chair, Rep. Christine Goodwin, R-Canyonville. “We really need to look strongly at that reimbursement ... We have facilities closing down because they're just losing money.”
Oregon, like other states, paused routine eligibility checks of members of the Medicaid-funded Oregon Health Plan as a pandemic measure. That meant that members who would normally lose eligibility because their income rose above the threshold got to stay on the program, causing Oregon Health Plan rolls to grow from 1.1 million to 1.5 million.
The expanded Medicaid rolls produced bigger state payments to the Oregon Health Plan organizations based on the number of people enrolled each month. But pandemic-era restrictions on elective surgeries and office visits meant fewer people were accessing care.
Baden said there could be “a little bit of choppiness in those waters ahead” for the insurers as the state has resumed routine eligibility checks of its Medicaid rolls. The state is also seeking federal approval for a Basic Health Program that would offer free insurance to people making more than the Medicaid cutoff, all the way up to 200% of poverty level.
“There’s a little bit of unknowns in the future,” he said.
You can reach Jake Thomas at [email protected] or via Twitter @jakethomas2009.
“I think if there was a takeaway message that I’d like for you all to have here, it’s that, ‘the coordinated care model is, I think, designed to do the right thing in both good times and bad times." - Jeremiah Rigsby
Well said. Those of us involved in Oregon Medicaid for decades know that the next budget shortfall and operating losses could be just around the corner, for a variety of reasons. I support the state requiring greater risk reserves for CCOs. Reserves are "insurance" for lean times (an inevitability). The requirements for the first CCOs in 2012 were intended to be much higher, closer to what DCBS requires of commercial insurers, but several CCOs got a waiver of that requirement because they would have not qualified to participate, otherwise.
Oversight by OHA, and holding CCOs accountable to contract terms to deliver on the triple aim promise are good for Oregonians, but so is solvency of CCOs that comprise the entire delivery system for nearly all Medicaid eligible persons. In addition, the nature of the risk-based contracts demands CCO's accept both upside and downside risk. If they do well they do well. If they lose money, that is their own problem to solve. A risk corridor capping their profits or losses at a certain percentage could be considered, but simply clawing back the margins in a windfall year is bad policy, particularly when many of them are non-profits with no commercial products and they only exist to serve this vulnerable population.