Regence BlueCross BlueShield Provided Incorrect Information on Rate Filing

Information provided to OSPIRG and the Oregon Insurance Division showed that Regence’s administrative costs and salaries in the individual market had increased significantly, which was untrue upon further analysis

August 3, 2012 -- While advocates and rate payers await the decision by the Oregon Insurance Division on a proposed 9.6 percent increase by Regence BlueCross BlueShield that would impact about 53,000 Oregonians, a significant distortion stands out.

Initially, Regence told the Insurance Division and OSPIRG Foundation that that its salaries had risen by 37 percent while fees paid to insurance brokers had jumped by 84 percent between 2010 and 2011 for the individual market.

Yet, after being asked to explain these huge increases, Regence acknowledged it had made a mistake and had mixed up the data, using numbers from the small employer pool rather than the individual market. Commissions had actually decreased by 44 percent, while salaries had only risen by 8.72 percent.

That error was pointed out to The Lund Report by Scott Burton, media and public relations manager for Regence BlueCross BlueShield, and subsequently corrected.

 This recent disclosure by Regence troubless Jesse Ellis O’Brien, OSPIRG Foundation’s healthcare advocate.

 “How could Regence have had the small group numbers in front of them instead of the individual numbers; it reveals something troubling about the process, and seems like a pretty major error, and means there might be other major errors that aren’t getting noticed; it’s a little worrying,” he said. “An error like this also hampers our ability to evaluate the rate increase. We had to wait a couple of weeks after the filing was announced to learn that a certain piece of important information was based on an error which limited our ability to respond effectively to what’s going on.”

It also bothered Gillian Hearst, an individual policyholder, who testified at the Regence rate hearing on July 30 and questioned why the insurer was using her “hard-earned money” to co-sponsor an event held July 31 with Koch Industries and the Koch-funded Americans for Prosperity put on by Cascade Policy Institute, a Portland-based conservative think tank. That event celebrated the 100th anniversary of Milton Friedman’s birth. As an economist who served as an adviser to President Ronald Reagan, Friedman extolled the virtues of a free market economy, and his monetary theory influenced the Federal Reserve’s response to the global financial crisis.

“What is Regence Oregon’s intention of co-sponsoring a conservative event with the Koch Brothers, paid for with my member dollars?” she asked. “Regence Oregon and its parent company, Cambia Health Solutions, have lost sight of their origin, which was helping people over profits.”

When asked about its involvement with this event, Georganne Benjamin, strategic communications with Cambia provided the following written response,  “Regence BlueCross BlueShield of Oregon sponsors various local events that enhance and support the communities in which our members and employees live and work. We contributed $1,500 to support this event and the conversation of school choice in Oregon.”

Meanwhile, Hearst also pointed out that her husband was denied coverage by Regence after being diagnosed with carpal tunnel syndrome and had been seeing a therapist to deal with the death of his younger brother by a drunk driver.

“My husband didn’t need surgery to alleviate the carpal tunnel,” she said. “I know the Insurance Division is not legally bound to review Regence Oregon’s denial of coverage process. But just because it can be done doesn’t mean it should be.”

Hearst also objected to Regence’s decision to eliminate its $1,000 individual deductible policies in December and reduce benefits, raising that deductible to $2,500. Mental health coverage is among the benefits being eliminated.

Regence faces a dilemma. It needs to either restore those benefits to meet the essential benefit package required by the health insurance exchange or bow out.

“We’re working very hard to figure this out,” Karin Swenson-Moore, director of actuarial pricing for Cambia, said in response to that question from Jim Swenson, an actuary with the Oregon Insurance Division. “We do expect to make changes to our product portfolios.”

Swenson also mentioned that Regence showed losses of $887,000 in the individual market during the fourth quarter of 2011, but rebounded quite successfully the following quarter, earning in excess of $2 million at the end of March.

“That was a remarkable turn around of 5.8 percent,” he told Regence executives Don Antonucci and Swenson-Moore. “The individual business generally does best early in the year, but reviewing your results this year compared to the past, you’ve done much better this year. Perhaps you’ve turned tide with respect to the individual market.”

Regence expects to see its trends (medical costs) increase once again later this year, responded Swenson-Moore.

Despite the proposed rate increase, Regence projects a $6 million loss during 2013, Antonucci said. “We recognize many of our members cannot afford double digit increases. This is a commitment to people while we’re working on initiatives to reduce medical costs and slow rate of premiums. This isn’t sustainable for the long turn. We’re putting our finger in the dam and hope the water stops flowing.”

Regence is attempting to expand access and shift its payment model away from fee for service to pay for more quality outcomes and support its members to help them focus on wellness.

Meanwhile, more questions await Regence on its proposed rate increase from OSPIRG.

“We’re concerned that Regence hasn’t provided sufficient info to justify this increase,” said O’Brien. “It’s not clear to us from the filing that Regence is doing all it can to reduce cost and improve the quality of care for its members. We are also concerned that this rate hike and Regence’s planned product and network changes will continue to drive Regence customers to drop coverage, destabilizing the risk pool and resulting in future rate increases.”

Among the questions being asked of Regence by OSPIRG:

  • A breakdown of the 11,000 members that Regence expects to drop coverage because of this rate hike based on the discontinuation of certain benefits, including mental health coverage, and network changes, requiring people to pay higher costs to use physicians from Legacy and Providence health systems.

  • A detailed list of Regence’s efforts to reduce costs and improve quality by introducing quality pricing, value-based benefit design and reducing errors and adverse events, and .

  • The quantitative data, analysis and calculations used to determine the values of prescription drug rebates, network changes, projected operating expenses and incurred claims.


To review the entire list of questions submitted to Regence by OSPIRG, click here. For a list of administrative expenses provided by Regence, click here.

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"Regence faces a dilemma. It needs to either restore those benefits to meet the essential benefit package required by the health insurance exchange or bow out." This is not a dilemma. Bowing out of the individual market is the end game Regence has been working towards for years. As a side note to Mrs. Hearst, many of us have long felt that Mark harbors political ambitions. Governor isn't quite big enough for him, our bets are on Senator. Support of and by the Koch brothers is not surprising and dovetails with these observations.

As a former employee, it is well-known that they are trying to get their presence in the Individual market down in order to minimize the impact of healthcare reform on the bottom line. That said, mistakes happen and I would be willing to bet that the erroneous numbers are a direct result of not having as many seasoned employees as they used to. Many of us jumped ship after several years because the culture has shifted so much - from a focus on community to a focus on profit. They have hired a lot of former Intel guys and created Director titles for them, and let's face it - healthcare isn't their focus.

I am interested in hearing from people who've worked for Regence and are willing to share their experiences -- and from those of you who've had insurance coverage or are still insured with Regence. Please contact me at [email protected]. I will keep your information confidential. My thanks Diane Lund-Muzikant Editor The Lund