September 19, 2013 -- Sen. Chip Shields, D-Portland, latched into a novel idea at a legislative hearing earlier this week to help bring down health insurance costs — limiting rate increases to companies that have excess surplus from premiums carried over to their reserves.
“We have a lot of non-profit [health insurance] companies here in Oregon,” Shields said. “A for-profit company will take any profit and pay out dividends to its shareholders. Surplus is like profit to the non-profit ones.”
The idea, based on a law found only in Pennsylvania, was presented by former Oregon Insurance Commissioner Joel Ario to the Senate Consumer and Small Business Protection Committee.
Culling excess surplus from insurers could be pursued, noted Laura Cali, Oregon’s current insurance commissioner, but she cautioned that the state needs to be careful defining “excess surplus,” because insurance companies must have enough cash reserves to pay out claims and remain solvent.
The Pennsylvania law about excess surpluses only applies to the state’s largest insurers – four BlueCross BlueShield companies, said Ario, who became the Pennsylvania insurance commissioner after leaving Oregon.
Ario repeated a presentation he gave in August to the Oregon Health Policy Board, which has hired his current firm, Manatt Health Solutions, to consult on ways the Insurance Division can control costs when reviewing insurance rates for the individual and small employer markets. Oregon, he said, had a lot it could build upon.
He said Oregon was unique for a small state in having so many insurers competing in its individual and small employer markets. Cover Oregon hosts 11 insurers and Oregon residents can also purchase individual coverage from Regence BlueCross BlueShield, which created a separate company, BridgeSpan, to compete in the individual exchange marketplace but is staying away from the small business exchange, while offering such coverage outside the exchange.
“I’m not blowing smoke, Oregon really is a national leader in rate transparency,” Ario said.
Most small states are dominated by just one or two insurance companies, making Oregon’s competitive playing field more similar to large states like California, New York and Pennsylvania.
“I like that about Oregon, that we have more of a competitive insurance market,” said Sen. Laurie Monnes Anderson, D-Gresham.
But Shields challenged talk of complacency, noting that while Washington has fewer insurance carriers than Oregon, the Washington Health Benefit Exchange offers lower rates to small businesses than Cover Oregon.
“It is great we have a competitive market, but we do not have the lowest premiums, so we still have room to do more,” Shields said.
Jesse Ellis O’Brien, the health advocate for the Oregon State Public Interest Research Group, later told The Lund Report that Oregon’s small business rates have historically been higher than other states. He said it was unclear why Oregon’s rates are higher, but noted that many parts of Oregon outside the Portland metro area suffer from health system monopolies, reducing leverage for Oregon’s insurance companies to set reasonable payment levels.
OSPIRG has been circulating a petition this summer to gather grassroots support for improvements to the Insurance Division’s rate review process, including better assessments of cost controls and more notification to consumers.
O’Brien intends to present the petitions to the next Oregon Policy Board meeting on Oct. 1. Earlier this month, the Policy Board featured former Rhode Island Commissioner Christopher Koller, who advised policymakers to make careful use of the available levers to bring down costs.
UTPA Reform
At Shields’ direction, committee administrator Channa Newell analyzed Unfair Trade Practices Acts in other states to determine the extent that insurance companies were shielded from such laws.
Newell found 20 states, including Oregon, that exempted insurance companies from their unlawful trade acts.
Shields and Rep. Paul Holvey, D-Eugene, had pushed for a change to the UTPA law to remove exemptions for insurers in Oregon. House Bill 3160 passed the House but failed to reach the Senate floor.
Fourteen states and the District of Columbia allow insurers to be sued, some explicitly and others through case law, most notably California, while Anthem BlueCross BlueShield, a subsidiary of Wellpoint, was successfully sued for arbitrarily canceling coverage of cancer patients.
After its members were diagnosed with cancer, the suit alleged Anthem searched for technical errors and retroactively canceled coverage for 6,000 policies. The insurer never admitted guilt, but paid out $10 million to the canceled policyholders.
Eight states including Tennessee, New York and Wyoming had a mixed record, meaning insurers could be sued in some circumstances but not others, while Newell was unable to find any clear information from the remaining eight states, including Nevada and Utah.
Christopher David Gray can be reached at [email protected].
