ODS Rate Decision Expected Next Week

ODS Health Insurance has asked for a 9.94 percent increase on its individual policies starting November 1
The Lund Report

This article has been corrected to indicate the compounded rate increase by ODS Health Plan since 2009 was 50.5 percent  

September 21, 2011 – Officials at the Oregon Insurance Division anticipate making a decision on the 9.94 percent rate request by ODS Health Plan next week.

If approved, that increase would impact 28,016 people starting November 1. Statewide, ODS has the second highest number of individual policyholders -- Regence BlueCross BlueShield outranks all of its competitors with 65,359 members.

At a public hearing September 14, people who could be impacted by this rate hike didn’t show up -- unlike a hearing in June when more than 200 people crowded into a meeting room to protest a 22.1 percent increase for Regence BlueCross BlueShield. Instead, at this hearing, the conference room was filled with insurance executives not only from ODS, but also its competitors who were eager to hear the testimony in hopes of preparing for their rate hearing in the future.  

And only a few people took the time to share their concerns about the proposed increase on the Insurance Division’s website.

Had ODS sought a rate hike above 10 percent, new federal rules would have required the insurer to share that information on its own website, said Cheryl Martinis, Insurance Division spokesperson.

At least one person, J. Bond of Maupin, knew about the new rule and questioned whether ODS purposely slid under the 10 percent threshold, asking “Is this a coincidence?” when posting a comment on the Division’s website.

A Medford policyholder, R Walker II, was among those who urged the Division to deny ODS’ request, “These health insurance increases are way beyond the rate of inflation and pay increases,” adding, “If our rate goes up again, we will be forced to jeopardize our family’s well being and cancel. Hopefully we would be able to get our kids on some government assisted health insurance.”

Once the Division rules on the rate request, ODS will give its members a 30-advance notice, said Jonathan Nicholas, spokesman. 

With the announcement of a $4 million federal grant, the Division intends to ramp up its analysis of rate requests and hold public hearings, Martinis said. “We encourage people to sign up for email notifications when insurers file such requests. “That way, they’ll know when we make a decision,” she added.

What Happened at the ODS Hearing

ODS officials believe its 9.94 percent rate request is necessary and justified for long-term stability when testifying at the public hearing last week.

The actual increase to members will vary between 5.6 percent to 11.7 percent depending on a person’s age, family structure and benefit plan. Even with the increase, the insurer expects to enroll more than 7,000 new members in the coming year.  

“We take this market seriously, and our rate increase is significantly lower than the last two years,” David Liebert, individual actuarial and underwriting supervisor, told Insurance Division officials at the public hearing last week. “We’re here for the long term.”

The rate filing represents a small margin for administrative costs – ½ of 1 percent. “Last year we chose to forego the margin, and now feel it’s appropriate so we can increase our surplus and continue writing new business,” said Kraig Anderson, vice president of actuarial and underwriting.

“We do a number of things to keep our costs down” he added. “Such as looking for unwarranted variation in care and partnering with our providers to develop new products to lower costs.”

Speaking on behalf of consumers, Laura Etherton, OSPIRG’s healthcare advocate, reminded officials that ODS had increased its rates by more than 17 percent for each of the past two years. When added together, that represents nearly a 50.5 percent compounded rate increase since 2009.

If approved, the premium and out-of-pocket costs from the proposed increase would exceed the average monthly income of Oregonians by 8 percent, according to an analysis by OSPIRG Foundation’s Health Insurance Rate Watch project.  That analysis also found that a low percentage of the premium dollar was intended for medical costs – 76.4 percent, while 23.10 percent would be spent on administration – including salaries and commissions.

“Especially in the current economic climate, with individuals and families struggling to keep up with rising premiums and out-of-pocket costs, it is critical for rate hikes to be thoroughly justified, and for no excessive costs to be approved,” Etherton said.

The rate request also could run afoul of new federal rules, which require insurers to spend no more than 80 percent of their premiums on administrative expenses.

“ODS expects to come in just barely above 80 percent,” Etherton said. “I’m concerned that if medical costs lower or administrative costs are slightly higher, that would trigger a rebate back to its members. It might be better and more efficient for ODS to simply lower its rate proposal to avoid this outcome.”

ODS also intends to increase its agent and broker commissions by 8.4 percent in November.

Etherton urged ODS to end “this outdated and expensive payment practice” and, instead, follow the lead of its competitors and pay a flat fee based on the number of people who enroll, rather than a percentage of premium costs.

She commended ODS for reducing copayments for some generic drugs to $2 and reducing rates for children because of a new state reinsurance program that will reduce their costs

“ODS enrollment does appear stable and growing which is a good sign for the stability of future rates,” she added.


To read the analysis by OSPIRG Foundation, click here          

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Small mathematical error in this article. The author writes that the effect of a 17% rate increase in each of the past 2 years, in conjunction with this years proposed 10% increase leads to a 44% increase in rates since 2009. I assume that the author simply added all three rate increases together to ascertain that number. In fact the rate increases compound each other, resulting in a rate increase of 50.5% since 2009.