Providence Asks for 5.4 Percent Rate Hike for Small Businesses

A public hearing will be held by the Oregon Insurance Division on February 24

February 15, 2012 -- Providence Health Plans is seeking a 5.4 percent average rate increase for small businesses, which would affect 2,645 employers who have 30,869 employees. If approved, the increase would take effect August 1.

The Oregon Insurance Division has scheduled a public hearing for 10 a.m., February 24 at the Public Services Building in Salem. To learn more details and submit a public comment, click here.

Jack Friedman, CEO of Providence Health Plans, calls this rate increase reasonable and necessary because of increased medical claims’ costs.

An analysis conducted by Milliman, an independent actuarial firm, indicates that Providence’s medical costs increased by 7.7 percent from September 2010 through August 2011 while prescription costs grew by 0.8 percent.

During that same time period, Providence received $120,587,738 in group plan premiums and paid $102,472,349 in claims, according to estimates incurred.

Federal health reform changes have also influenced the need for the rate increase, according to that same report:

  • The elimination of pre-existing conditions for existing enrollees under age 19, and

  • The prohibition of rescissions, except for fraud or intentional misrepresentation.

Under the proposed increase, claims’ costs are expected to decrease from 84.98 percent to 83.07 percent, administrative costs increase from 13.73 percent to 15.43 percent (including premium tax and portability expenses), while Providence’s risk/profit margin will change from 1.29 percent to 1.5 percent.

Providence increased rates for small businesses by 1.16 percent in 2010 and 16.99 percent the previous year.

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Judging form the 2010-2012 rates, one might think health care costs swing by huge percentages year over year: 1.16% to 17% to 5.4%. It's difficult to believe.