Regence Defends Rate Hike in Rare Public Hearing

Close to 200 people showed up to voice their opinion
The Lund Report
June 3, 2011 – Regence BlueCross BlueShield of Oregon President Jared Short defended a proposed 22.1 percent average annual rate increase on individual plan holders Thursday during a rare public hearing that drew close to 200 people. 
Short said the reason for the proposed increase had to do primarily with rising medical costs.
“There’s nothing about this rate increase that I feel good about,” Short said. “The reality is Oregonians are in a place where families are facing increased costs. Despite these pressures, I know this increase to be necessary.”
The public hearing – the first of its kind in 20 years – was held by the Oregon Insurance Division because of the magnitude of the potential increase and the number of people affected.
Sen. Chip Shields (D-Portland) has a bill pending at the state legislature (SB 717) that would make such public hearings mandatory for rate increases that exceed 7 percent. The bill is waiting in the Joint Ways and Means Committee.
The 22.1 percent average annual rate increase by Regence was expected to cover the anticipated medical costs for its 56,000 individual members. Those members have cost the company $100 million more in medical bills than the premiums Regence collected from those same individuals and families over the past five years, Short said. During the same period, Regence said reimbursements to providers increased $34 million up to $184 million in 2010.
Regence, however, has been profitable overall mostly due to investment gains and net income in the large group market, which the state does not regulate. The state only has authority to approve insurance rates for individuals and groups of up to 50 employees. Last year, Regence earned close to $75 million in net income.
If Regence succeeds in getting its latest increase, it plans to spend 79.2 percent on medical claims, 19.7 percent on administration and 1.1 percent toward reserves.
Oregon Insurance Division Administrator Teresa Miller questioned Short about the validity of raising rates so dramatically. She also wondered how the company claims medical costs are rising by 12 percent when reports from physicians say their own reimbursements have not gone up nearly that much.
“It’s going to doctors and hospitals, but that doesn’t mean it’s going into people’s pockets,” Short said. “When you look at expansion, we have new and very expensive facilities (throughout the state). That takes money.”
Laura Etherton, lobbyist with the Oregon State Public Interest Research Group, which was funded by the state to scrutinize proposed rate increases, also questioned assumptions made by Regence.
In particular, Etherton said Regence is failing to account for a continual decrease in enrollment and subsequent instability that would come with a 22.1 percent average rate hike. Since substantial rate increases began in 2007, Regence has lost more than 40,000 individual members.
“We are very concerned that Regence has not provided sufficient information to justify this rate increase,” Etherton said. “We believe their reluctance to face the severity of this issue is troubling, and we recommend DCBS only approve a rate increase that ensures consumers are protected from instability in enrollment.”
In public testimony to the Insurance Division, Vic Baker said he and his wife were stuck as Regence policyholders because they have pre-existing conditions that would cause another insurer to reject them.
“It’s such a flawed business model,” Baker said. “It can’t continue to pass along double-digit price increases to its consumer base. These types of increases can’t continue.”
Several people testified that benefits under Regence individual plans have decreased in recent years including greater cost sharing for prescription drugs and medical procedures.
Dr. Paul Gorman, a physician at Oregon Health & Science University, said it was insurance companies that were making things worse in the healthcare industry.
“In 27 years as an Oregon physician I’ve seen them make it harder and harder to do what’s best for patients while their profits soar and health outcomes fall,” Gorman said. “It’s time to say ‘no’ to the big insurance industry and ‘no’ to Regence on this increase.”
Close to half of the testimony heard Thursday evening came from Regence employees, which briefly sparked an outcry from the audience that Regence had stacked the hearing with its own people.
Short largely blamed medical and prescription drug expenses for the rising costs of health insurance along with shortfalls in government reimbursements for Medicare and Medicaid.
He pointed out several examples, including emergency room visits and outpatient ambulatory care services where utilization went down but costs increased by more than 50 percent in five years. Therefore overall costs went up. Use of prescription drugs, meanwhile, largely increased along with prices that have skyrocketed.
“These are good medical advances but they do cost more,” Short said.
For an audio version of this story in collaboration with KBOO radio click here.

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I find it interesting that 1/5th of their costs are administrative costs. I would love to have the show the books on this and let the members decide. What it sounds like they are wanting to do is increase rates so they have more money to put into the markets to increase overall profit margin yet still slash benefits to the members. But hey I'm just some hack I'm sure they are being up front and fully honest about their business.

Admin cost usually include the following: power, buildings, the employees that process claims, answer member and provider calls, printing duplicate benefit booklets for members, duplicate vouchers for providers. Handling provider and member appeals of claims/benefits.

You also might want to ask you local doctor what they list a 'administraitive' costs on their taxes to lower their gross profit.

I was struck by how often the question of provider reimbursements came up during the hearing: - As an example of cost control, Short described how a service rep helped an insured shop for the cheapest provider for a particular procedure. By calling a number of providers they found someone who could do it for less than half the cost of the first provider considered. - Director Miller cited comments from providers disputing the level of medical cost increases. - OSPIRG criticized a lack of quantification of cost control efforts. Each of those issues could be more effectively addressed if contracts between insurers and providers were opened to the public. Quantifying cost increases and shopping for low cost providers should not and does not have to be a guessing game.

I attended the hearing yesterday, as a current Ombudsman and as a former TRG employee in legal (left in 2005), when I learned of the hearing I felt it my duty to hear what both OSPRIG and Regence present. I was extremely concerned regarding how Regence could possibly justify any rate hike for individuals (or ANY remaining beneficiaries, be they individuals, members of groups insurance, self funded or fully funded). I itemized notations of a number of fact discrepancies, not known or publicly aired during the hearing, particularly in Regence's canned & corporate veiled "testimony" then I will go into here (I am writing to the state-directly). It is clear, that Regence has not justified their request for this, or any future rate increase, their argument was fatally flawed and elusive when asked direct questions by Ms. Miller. The fact that they refused to provide requested information to OSPRIG and others is evidence of their protectionist organizational culture. Concerned community citizens, need to follow up with the Oregon DOI to assure Regence does not succeed and that Individual coverage continues at its, unfortunately already overpriced rates.//

The information to support the rate request is (or should be) contained within the Regence filing with the DOI. It's a matter of public record. If you worked for Regence, you should know this. What fact discrepencies are you talking about? What refusal to provide information to OSPIRG are you talking about? It should all be in the rate filing that OSPIRG was paid to review, but apparently did not complete. I'm really dissapppointed that OSPIRG missed this opportunity to actually present discrepencies, if they exist. Instead, they resorted to hyperbole and unsupported suspicions, just like you.

In theory, big insurance companies like Regence can pool the risks of large groups of people, apply data mining and cost containment processes to manage that risk, and create economies of scale to do it at the lowest possible cost. In practice, Regence has lost their most profitable customers, embraced ineffective data integration and health management products, and have maintained uncompetitive administrative costs per member. They've been the 500 lb gorilla in the Oregon insurance scene for a very long time. Now the smaller local carriers can provide similar (and often superior) products and services at a better price, and the national carriers have gained a foothold. The insurance scene in Oregon has more players now than ever before. Most astonishing, though, is that, despite all these warning signs that something is amiss, Regence still doesn't get it. They are spending millions on marketing and advertising, trying to present a polished, competent image of themselves. They should save that money and simply be more competent.

I was very dissappointed with OSPIRG. The data to support the requested rate increase is (or should be) available in the Regence rate filing with the DOI. OSPIRG should have completed the thorough review they were hired to complete before this hearing, and presented their findings of fact. I was disappointed that they couldn't provide any specifics to support their points of view. This was their opportunity to enlighten the public, but instead, they were only capable of making theoretical arguments about shrinking enrollment and rising costs - exactly what Regence is saying.

Without any analysis of the data submitted to the state, OSPIRG looked like they were in the same camp with Regence. No one is arguing whether healthcare costs are rising, of course it costs more and more to treat everything. Broccoli costs more than it did last year as well. The issue should have been: What are costs/utilization for this specific market between 2009 and 2010? Why didn't OSPIRG analyze whether the costs for this group have gone down recently? In comparable groups, costs have gone down because people are using less healthcare and paying more out of pocket. If the cost of care for the Regence group went down from 2009 to 2010, would a 22.1% increase be justified? That is the question that no one asked and no one from Regence had to answer. OSPIRG, what gives??

People need to understand that as potentially problematic as this is for a commercial carrier - it is virtually and at times potentially criminal when considered in the context of a contractor for Medicaid and/or Medicare. In other words when you are contracted and charged with the appropriate use of PUBLIC money. When expected benefits and support infrastructure take a back seat to other interests - i.e. the public trust and contract is not honored - that's a BIG problem. What we are witnessing relative to Regence, Providence, et al. is merely the tip of a much bigger iceberg. The next two years will be very interesting as it all comes to light.

I'm not sure what you are inferring here - are you saying there is criminal conduct? Have you contacted the Feds about this? The feds do conduct audits each year of the Medicare/Medicaid health plans. The other problem you allude to and is very real is the cost shift from the Medicare and Medicaid programs to the insured people. The government programs pay doctors and hospitals less than cost, and they make up the difference from the rest of us who have regular insurance. I've read that the cost shift alone accounts for 30% of the medical cost for insurance, but I don't know if that's for real.

Everyones rates are going to go up and up. I am at the point I don't care anymore. I can't afford health insurance anyway. We are all going to be crushed by the expense except for the rich. Only when the wealthy start objecting will anything substantial be done.

Well, Regence may lose more if my company is like most other small companies in Oregon. Ww just performed our annual review of our employee health insurance plan. We currently have Regence but simply cannot afford the rate hike. All the insurers had rate increases and we will still have to raise employee deductibles but have decided to change over to Lifewise since there rates are far more competitive.

To those criticizing OSPIRG for lack of analysis, I disagree. I don’t buy all of their arguments, but the trend factor issue is pretty clear cut. Regence showed a single page of on-level claim costs with no technical detail about how the claims were on-leveled. Maybe Regence did it right, maybe not. Checking the math is the purpose of review, and if Regence isn’t confident enough in the adjustments to show them in public that is a problem.

Do a little research. Go to the DCBS website and review the 59 page Regence rate filing....this is the filing that discloses their justification for their rate proposal. It's public. It is what OSPIRG was supposed to have reviewed, but didn't.

I’m referring to page 20 of the filing, that page is the only specific backup for the trend factor. It doesn't matter if the filing is 59 pages or 59,000, what matters is whether the backup justifies the selection.

Interesting the providers are pointing the finger at the insurance companies but not showing their records of profit/loss to the public. I have worked on both sides and was disgusted when a Doctor stated to another in the office "If we add this cpt to the billing they will pay us another $45 for doing nothing more!" They were discussing a 'How to maximize your healthcare billing" seminar. We need to look at some basic things going on here. For-Profit vs. Not For Profit. Who is pointing the finger?

It's interesting to note that Vic Baker states Regence is his only option. If he and his wife are rejected by an insurance carrier they can qualify for OMIP... OMIP....look it up!