I wanted to reach out to you in response to yesterday’s “PacificSource denies its for sale” story in The Lund Report, to express my personal and PacificSource’s general disappointment in your decision to run a story based on rumor, innuendo, and inaccuracies, without conducting your full due diligence and before gathering all of the facts. In order to uphold your mission of being the most vital source of health news in Oregon, and to remain committed to helping create a more accountable and transparent system as your mission states, it is imperative that you report on news rather than rumors and innuendo, and that you also hold yourself accountable to the same high standards to which you hold Oregon’s healthcare organizations. It is unfortunate that the publication allowed itself to be manipulated by an individual or organization that I believe was clearly motivated to discredit and raise questions about PacificSource in the marketplace. To set the record straight, I would offer the following:
1. While PacificSource has and will always explore potential affiliations and partnerships (our explorations have resulted in four acquisitions since 2009), we have no interest in being acquired. We believe that we occupy an important position in the marketplace as a not-for-profit and independent health plan and we are committed to maintaining and growing that presence.
2. The article contains false information and incorrect characterizations about our financial results, our financial position and our membership. First, we did report a moderate loss in 2014 in an extremely disruptive market in which most health plans lost money. Careful examination will show that our results did not include a receivable for risk corridor payments (a government program designed to offset losses in individual and small group that we believe should pay us more than $7 million, and which we believe has questions about collectability) and did include a “premium deficiency reserve” of approximately $5 million to account for expected losses in the individual market in 2015. Without those two conservative treatments, we would have operated near breakeven in 2014. In addition, in the first quarter of 2015, we did operate at a net profit, which was offset by the fact that all health plans are required to report the total annual projected Health Insurance Industry Tax in that quarter. Second, our financial position remains sound, as can be seen in our annual and quarterly reports to the Insurance Division. In fact, our risk based capital (one measure of capital strength) increased in 2014 and is expected to increase again in 2015. Finally, our membership did indeed decline, but that was due to our deliberate conservative position in the individual market (see below). In 2015, we are on target to grow by nearly 10%, driven by increases in large group and Medicaid business.
3. The article suggests that our 42% rate increase request was in reaction to our financial position. In fact, we have grave concerns about the state of the individual market and believe that our assumptions reflect the true underlying claims experience of that market.
Like most health plans, we lost money in the individual market in 2014 and expect to continue to do so in 2015. Like most health plans, we would prefer to offer lower rates and grow market share, but believe that rates should be reliably based on expected claims costs.
While I continue to respect the role that The Lund Report plays with regard to news reporting, and in maximizing transparency and accountability in Oregon’s healthcare industry, we at PacificSource believe that sound research, fair reporting, and thorough fact checking should trump rumors and innuendo every time, regardless of whether it relates to PacificSource, another health insurance provider, or any healthcare organization in Oregon.
