May 3, 2013 – When the dust settled and the insurers announced their proposed rate requests for Oregon’s insurance exchange, the state’s largest health insurer – Regence BlueCross BlueShield of Oregon – decided to back away. That decision came on the heels of Regence having the highest enrollment last year compared to its rivals -- 472,902 members – just slightly ahead of Kaiser Permanente – which had 464,637 members.
Regence’s decision couldn’t have been based on strictly financial reasons. Ending the year with $522 million in capital and surplus, the health plan spent another $277,639 on lobbying elected officials, while paying its executives handsomely – Jared Short, president, took home $597,281 in 2012, while Mark Ganz, president and CEO of Cambia Health Solutions, ended the year with $1.2 million from Oregon, Washington and Utah. His compensation in Idaho is not publicly available.
Onlookers came away stunned. Regence had been at the table all along, testifying in favor of the exchange during legislative hearings and had staff attending work sessions organized by Cover Oregon. Its top executives, including Mark Ganz, Jim Walton and Don Antonucci had appeared in numerous public speaking forums touting their support, giving all indications they’d be a strong player in the exchange. The Oregon Insurance Division had even scheduled a hearing in early June to review Regence’s plans.
“Regence is just trying to game the system and play politics in the hopes that the exchange goes down; it’s quite obvious that they’re setting themselves up to compete by not participating in the exchange and not gamble on a risky population that they can’t predict,” according to people familiar with the marketplace.
In Oregon, Regence will not be among the insurers offering coverage to small employers under the exchange, and its name will not appear among the plans offered to individuals. Instead, its parent company, Cambia Health Solutions created a new entity, known as BridgeSpan, whose name will appear on the exchange for individuals.
Those familiar with Regence believe that decision was made to avoid adverse selection since Regence has been responsible for nearly 11,000 people on the high risk pool, the majority of whom have major health problems and would prefer that those people seek coverage elsewhere. “Regence wants to do everything in its power to avoid having to pay hefty claims and would prefer other insurers take those people on,” said an onlooker.
Meanwhile, in Washington state, Regence is taking similar action, having withdrawn from the small business exchange, known as SHOP, earlier this week. “They didn’t say why, and we haven’t had a chance to have a conversation with them about this situation yet,” said Rich Roesler, public affairs project manager for the Washington state Office of the Insurance Commissioner. “We certainly would like to see as many plans in the SHOP exchange as possible, since it’s in everyone’s interest to have a robust market in the exchange”.
Asked why Regence had decided to take such action, Scott Burton, media spokesman for Cambia, gave the following response. “Across all four of the states we serve, individual consumers have made it overwhelmingly clear that they want access to a consumer-friendly marketplace to shop for health insurance, and so we have created a brand new company in BridgeSpan to respond to that demand on the exchange,” he told The Lund Report. “Similar demand is not expected from small businesses in both Oregon and Washington. As a result, we will continue to offer products to small businesses off the exchange. As we serve our small business customers, we’ll gauge their interest in shopping for our products on the exchange. Given these clearly differing levels of market demand, our exchange focus is currently on meeting the needs of the individual consumer. You will see both Regence and BridgeSpan offering individual plans in all of our markets. As you’re aware, the Affordable Care Act has created a level playing field requiring one carrier to pay another if ‘risk’ is unbalanced among carriers. This eliminates any advantage or disadvantage a carrier could have over another as a result of who they insure.”
Burton also said that Cambia has “supported Cover Oregon’s development and growth since day one, and we continue to do so. Rocky King and his team have done incredible work to get the exchange ready for business.”
Despite Regence’s reluctance, Cover Oregon has no shortage of insurers willing to participate in the individual and small group marketplace.
“I’m very pleased with the carriers that are participating and am especially proud of the small group market,” said Rocky King, executive director. “It reflects the best blend of carriers and co-ops that are involved in both the Medicaid and the commercial market and almost all of them are involved in transforming the delivery system to bring better quality and value to the market. It’s not going to be business as usual.”
Oregon – along with Washington and Maryland – is considered at the top in the country for creating a robust insurance exchange by October 1. This comes at the same time New Mexico announced it can’t make that deadline and is delaying start-up until January 2015.
“It continues to be a very steep climb to get all technology in place prior to October 1,” King said. “We’ve had to build 40 different interfaces with carriers, banks, the federal government and our state partners -- the Oregon Health Authority, Medicaid and the Department of Employment. The website is pretty well done. Now we’re populating it with the appropriate content, and we’re putting the system through rigorous testing procedures; that’s our big challenge now.”
King also said he’s not worried about any significant rate discrepancies among the insurers. “I actually haven’t reviewed all of them but I’m confident the Insurance Division will do a good job reviewing those rates to make certain they’re reasonable and won’t allow any unreasonable rates to be offered.”
Once the rates are approved by the Division, the insurers have an opportunity to back out – before they sign a contract with Cover Oregon. If that occurs, it’s likely to happen by September 1. King doesn’t anticipate calling for another RFP from prospective insurers for two years. And, if the market is robust, that may not actually occur. “We reserve the right to extend enrollment to our current insurers,” he said.
Rate Review Process
On May 10, the Insurance Division plans to announce the rate requests proposed by the insurers and hold public hearings starting in late May.
“Oregon’s rate review process is among the strongest and most transparent in the nation,” according to Lou Savage, insurance commissioner. “As the OSPIRG report just noted, Oregon’s strong rate review process is effective at eliminating excessive overhead. Of course, all documents are posted so anyone can see what we’re doing. We have the expertise to conduct a thorough rate review: We have our own experienced actuaries on staff. One of our actuaries, in fact, is a former insurance commissioner. Federal grants through health reform helped make it possible for us to gear up to drill deep. Rate review team includes three experienced, credentialed health actuaries, and senior management, including me, sign off on each decision.”
To determine if the rate requests are reasonable, the Insurance Division intends to review several key points.
New benefits and cost-sharing structure (less cost sharing for consumers)
The cost of formerly uninsured, high-risk pool and people with portability plans entering the individual market
The impact of changes in age rating and tobacco, along with other rating factors such as geography
State and federal risk-adjustment programs that ensure no one carrier gets a disproportionate amount of super-high claims in the individual market. (This is to help keep premiums down.)
Other considerations are how much medical costs will increase based on provider contracts, new technology and other traditional factors, as well as administrative costs.
FOR MORE INFORMATION
To read an earlier story about Regence and Health Net’s participation in the insurance exchange, click here.
To review Regence’s latest filing in Oregon, click here.
Diane Lund-Muzikant can be reached at [email protected].