Proposed 2014 Health Insurance Rates Lack Adequate Justification
June 20, 2013 -- Sixteen Oregon health insurance companies have proposed their premium rates for next year, and according to new OSPIRG Foundation analysis released today, many have failed to adequately justify their prices.
Thanks to a new law requiring all Oregon insurers to offer standard plans, it is now possible to compare proposed rates apples-to-apples across Oregon’s insurers for the first time. “With some insurers proposing rates twice as high as others for identical coverage, it is more critical than ever to scrutinize the basis for these rates,” said Jesse O’Brien, OSPIRG Foundation Health Care Advocate.
“The more we dig into these proposals,” said O’Brien, “the more we’re concerned that Oregon’s insurers aren’t doing all they can to cut waste. And with study after study showing that one-third of health care spending is waste, we can’t afford anything but a full-court press for more effective use of our health care dollars.”
Key findings of OSPIRG Foundation’s analysis:
· Two of Oregon’s biggest insurers, Kaiser and Providence, admitted that their proposed rates for the next year were based on errors that would have overcharged their customers. These insurers are now proposing reductions. While their customers would benefit from lower rates, these errors highlight the importance of scrutinizing rate proposals closely.
· Many Oregon insurers appear to be overstating medical cost trends. With a number of national studies demonstrating a slowdown in health care cost growth in recent years, projections as high as 8.2% (from LifeWise and BridgeSpan)—more than twice as high as the national average—merit close scrutiny.
· Many Oregon insurers appear to be overstating the costs of implementing health reform, while ignoring or understating the benefits and cost savings. The exact cost impact of expanding coverage remains unclear, but consumers should not be required to pay more on the basis of the worst-case-scenario projections of insurers—such as BridgeSpan, which projects that this will increase costs by 26.6%. At the same time, many insurers failed to incorporate cost savings due to reductions in uncompensated hospital care that will result from the expansion of coverage to hundreds of thousands of currently uninsured Oregonians.
· Oregon insurers do not appear to be doing all they can to reduce costs and improve quality of care. Many insurers have failed to provide enough information to evaluate their efforts in this key area. Others provided some information about cost containment programs but no specific measures or benchmarks for cost and quality, making it impossible to evaluate the insurer’s overall strategy.
The Insurance Division of the Oregon Department of Consumer and Business Services (DCBS) is expected to make its decision on the pending rate requests soon. All rate filing documentation is available on the Insurance Division’s rate review website,www.oregonhealthrates.org
Background on Oregon’s health insurance rate review program
In 2010, new rules went into effect strengthening the standards that health insurance companies must meet before raising premiums. Insurers must justify rate hikes in writing, showing that they are not excessive and explaining how the insurer is working to reduce costs. All rate filings are public information, available online, and open to public comment. The Oregon Insurance Division evaluates these justifications, and must take public input into consideration. In 2011, the Insurance Division began to hold public hearings on significant rate increases.
Since these changes have taken effect, the Oregon Insurance Division has significantly stepped up their scrutiny of health insurers’ rate hike requests. Since 2010, it made cuts to a majority of requests, cutting over $80 million in waste and unjustified costs from consumers’ and small businesses’ premiums.