PacificSource Tells Insurance Division It Set Its Rate Hike Too High
PacificSource Health Plan has asked the Oregon Insurance Division to correct the filing from what it first a proposed -- an enormous 15.9 percent hike -- and lower it to a 10.8 percent hike, still several times higher than the rate of inflation.
The notice was discovered in the System for Electronic Rate and Form Filing, an online portal provided by the National Association of Insurance Commissioners.
The move comes a year after Providence Health Plan and Kaiser Permanente asked for one rate and then tried to pull their price down after their rates came in higher than their competitors.
Like PacificSource, Providence and Kaiser told the Insurance Division that such adjustments came about as a result of honest miscalculation. And like Providence and Kaiser, the request from PacificSource comes amid a market where the insurer priced itself at an uncompetitive disadvantage. This year, some insurers have asked the Insurance Division for double-digit decreases to their premium rates -- rather than increases.
“We discovered that the trend projections we used did not include an adjustment for changes in provider contracts in the future,” explained Sujata Sanghvi, PacificSource’s chief operating officer. “This omission was corrected in the revised submission.”
The Oregon Insurance Division reviews proposed premium rate changes each year for health and life insurers in the individual and small business markets. The Division than has the authority to approve the requested rate or demand that it be lowered or raised.
“It seems natural to assume competition had something do with this,” said Jesse O’Brien, a healthcare advocate who closely monitors insurance filings in his work at the Oregon State Public Interest Research Group. “I think it’s fine if companies want to lower their rates. The key question is: What rate is justified?”
The state’s first priority is making sure the state’s health insurers have the ability to pay all promised claims from medical providers and remain financially solvent. The Insurance Division also checks the math to make sure any rate increases are justified and reflect actual cost increases. Last year, the state scaled back rate increases by nearly half from initial proposals, and trimmed the rates of all health insurers for failing to take into account government reinsurance programs, which were set up to offset the cost of insuring people with pre-existing conditions.
Insurance companies are technically not allowed to resubmit their requests -- a revised submission can only be taken under advisement. The right to lower the rate increase, as PacificSource asked, belongs to the Insurance Division at the Oregon Department of Consumer & Business Services.
“We haven’t made any decisions about it,” said Lisa Morawski, a senior policy advisor at the department. “We’ll be reviewing that information as a part of the rate review.”
A public hearing on PacificSource’s rate request will occur in early July. The Insurance Division will announce the new rates for all health insurers in August.
Last year, the Insurance Division not only accepted the reduced rates from Providence and Kaiser, they pared the premium costs for these two insurers down even further, resulting in a $38 million savings for Oregon consumers from that first high offer, according to a report from the Oregon State Public Interest Research Group.
Morawski explained that there was one key difference between PacificSource’s request and the ones that Providence and Kaiser made in 2013. Last year, the changes were made to adjust prices for plans created specifically to comply with the Affordable Care Act. This year, PacificSource’s 2015 rates can be compared with similar plans it offered in 2014.
This time around Providence has asked the Insurance Division to lower its rates an average of 16.9 percent. Oregon’s Health CO-OP, which sold almost no plans last year, asked for a rate cut of 21 percent as it works to become competitive and stay in business.
Moda Health -- which gobbled up three-quarters of the relatively high-risk Cover Oregon market -- has asked the state for permission to raise its rates 12.5 percent, no doubt because it’s getting clobbered by claims for taking on a market that includes a large number of high-risk people who were previously uninsured before Obamacare.
Obamacare, or the Affordable Care Act, ended the dubious and uniquely American business practice of refusing to sell people health insurance because of pre-existing conditions like AIDS, cancer or asthma.