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Moda Health’s Double-Digit Rate Increase Faces Scrutiny

Price-conscious consumers would be well advised to do some shopping this fall before signing back up with Moda Health. Several health plans, including Atrio and Oregon’s Health Co-Op, are not only offering cheaper rates than Moda, they’re asking for reductions in price that would set them below Moda’s 2014 rates.
June 30, 2014

Moda Health may have some more explaining to do if it’s going to get the full 12.5 percent rate hike it’s requested from Oregon’s Insurance Division for its 2015 individual health plans.

The Insurance Division heard testimony from Moda and the public Monday morning, the first in a series of hearings over the next month that will determine the cost of health and life insurance for next year.

“If it’s approved as filed, it would have a very significant impact on 95,000 Oregonians,” said Jesse Ellis O’Brien, the consumer health advocate for the Oregon State Public Interest Research Group. O’Brien regularly scrutinizes health insurance filings. Moda, with both the largest share of the individual market and one of the highest requested rate increases, was high on his list.

O’Brien sought relief for consumers by focusing on two areas he thought were missing or needed further explanation from Moda. The insurance company didn’t factor any savings from a reduction in uncompensated care, and he said Moda may have overestimated the impact of a reduced federal reinsurance program that served as a buffer for insurers against the impact of being forced to cover people with pre-existing medical conditions such as cancer or AIDS.

As a result of the Affordable Care Act, the Oregon Health & Science University has reported its share of uninsured care dropped from 5 percent to under 1 percent, while O’Brien said the Oregon Association of Hospitals and Health Systems has reported a decline in charity care of 2.6 percentage points.

The cost of giving that free care has long been passed onto consumers, and O’Brien said that Moda should be helping consumers get it back now that fewer people are uninsured and unable to pay for care.

“It really needs to be something in the negotiations between insurers and providers. And if they’re not [negotiating over the savings], the Insurance Division needs to push them to do so,” O’Brien said. “If the consumers don’t see any of that, it’s just going to be a windfall for the industry.”

Lisa Morawski, a senior policy advisor at the Insurance Division said her agency looks to determine whether the rates are actuarially sound and not excessive, inadequate, or unfairly discriminatory. The division can consider factors such as an insurer’s investment income, surplus, and cost-containment and quality-improvement efforts when reviewing a rate filing. It may also consider an insurer’s overall profitability, rather than just the profitability of a particular line of insurance.

Part of Moda’s increase request was a 7.2 percent increase to offset dwindling federal reinsurance money to help cover those with pre-existing conditions, but O’Brien said other insurers such as Lifewise calculated this would have a much lower impact.

Moda may have experienced more adverse selection -- covering sicker consumers -- but O’Brien said there was a federal risk adjustment program designed specifically for that in mind. Morawski explained that the risk adjustment program redistributes funds from plans with lower-risk enrollees to plans with higher-risk enrollees.

For Moda’s small business group plans, the insurer has asked for a smaller, but still significant 6.2 percent increase for 2015. This rate would also price it above most other insurers in Oregon.

Moda Health’s Jonathan Nicholas did not respond to a request for comment from The Lund Report.

The Insurance Division cut many of insurers’ proposed rate hikes nearly in half in 2014, after it found the companies hadn’t justified much of their costs or considered programs such as reinsurance in their rate filings. OSPIRG has estimated that the division saved consumers as much as $69 million by cutting back on excessive and unjustified health insurance rates.

Sen. Chip Shields, D-Portland, and others have questioned whether the public rate review process really saves that much money. He’s said that the initial offering is merely a bargaining tactic. According to Shields’ logic, an insurance company threatens an excessive increase in order to get the increase it actually wants, knowing that the Insurance Division is likely to knock them down a few pegs.

Consumers Advised to Shop

Moda swallowed up roughly 75 percent of the Cover Oregon market by selling substantially cheaper premium rates across the state. It may have priced itself low to dominate the market, only to drastically increase its rates once it had consumers on board. Given the adverse selection of the troubled Cover Oregon experiment, it could also be getting clobbered by claims.

But even as Moda Health seeks to jack up the rates on these customers by 12.5 percent, many other plans have scaled back their rates to be more competitive.

An April article from The Lund Report accurately predicted the insurance companies’ moves as the Cover Oregon marketplace has forced insurers to be more competitive. Dr. Bob Gluckman, the chief medical officer for Providence Health Plan, criticized that article in the public comment section:

“This article fails to show any understanding of what determines premiums. Insurance company profits in the commercial market is a very small percentage of premiums. The major determinants are the level of illness of patients and the prices charged by providers,” according to Gluckman. “The likelihood that insurers will rush to lower premiums to match MODA and also lose millions is remote.”

But two months later, Providence Health Plan has indeed asked the Insurance Division to lower its rates by 16 percent -- and their health plan is priced lower than Moda’s desired premium rate for 2015.

Customers who bought their plans on Cover Oregon will have to sign up again with the federal website in the fall because the insurance exchange has voted to abandoned its failed web portal. There will be no automatic renewals because of the technology challenges with the transfer.

Price-conscious consumers may be advised to scrap Moda for several lower-cost options for 2015, including Oregon’s Health Co-op, Atrio Health Plans or Lifewise Health Plan. All three of these have not only requested rates lower than Moda, but their 2015 rate requests came in lower than Moda’s prices in 2014.

The health co-op did particularly poor with its 2014 plans, since these were priced well above Moda. This innovative healthcare model has relied on federal cash to get started, but must repay much of that money to the feds and become financially sustainable if it’s going to survive.

The other co-operative plan, Health Republic -- also known as the Freelancers Consumer Operated and Oriented Program of Oregon, Inc. -- has also asked the Insurance Division to set its rates lower than Moda for 2015.

While Moda led the way last year with mid-level silver plans at $221 and high-deductible bronze plans at $166, Oregon’s Health Co-op has asked for average rates of $202 for silver and $157 for bronze for its 2015 plans. Those rates are pending approval and could even be lower.

Oregon’s Insurance Commissioner Laura Cali is expected to rule on the rate changes by early August following a series of public hearings.

Chris can be reached at [email protected].

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