ZOOM+ Encourages Insurance Division to Consider Innovation When Setting Rates

Early next week, the Oregon Insurance Division is expected to announce the final rates for the individual and small group market.

Oregon’s insurance market is crippled by waste, marred by friction and overpriced – that’s the conclusion reached by Dr. Dave Sanders, CEO of ZOOM+, who urged the Oregon Insurance Division to lower its individual rates at a hearing in Salem yesterday.

ZOOM+ is among six insurers whose rates were bumped up when the Division issued its preliminary decisions – along with Health Net, Kaiser, Oregon Health CO-OP, Providence Health Plan and Trillium Community Health Plan.

Early next week, the Division is expected to announce the final rates in the individual and small group market for 2016. Enrollment begins Nov. 1.

The higher rates proposed for ZOOM+ do not recognize innovation in the marketplace, Sanders told the Division. Unlike traditional insurers, Zoom+ delivers over 95 percent of its service encounters through its owned and operated delivery system. All of its hospital services and subspecialty care is coordinated by ZOOM+ -- which recently announced that specialists from Oregon Health & Science University will provide such services starting this fall. Its team of specialists provides services at less than 50 percent of market costs and maximizes telemedicine delivery and specially trained mid-level providers, Sanders said.

Rather than stifle innovation with insurers such as ZOOM+, Jesse O’Brien, public health advocate for OSPIRG Foundation, encouraged the Division to take a more flexible approach. For example, he said, Kaiser and Providence have uniquely close relationships with their delivery systems that may alter their exposure to the cost of market average risk, while ZOOM+ is proposing a new model specifically intended to manage utilization and contain costs.

“It is important to recognize that not all insurers provide care to their members in the same way, and different delivery systems and provider payment structures may reduce those insurers’ exposure to costs, either through more effectively managing utilization or through simply providing the same services at a lower price point,” he told the Division.

OSPIRG’s Role

With the double-digit rate increases proposed for the individual market by many insurers, OSPIRG Foundation analyzed those rate requests under a long-standing contract with the Insurance Division to represent consumer interests.

Because of financial losses by insurers, the Division estimates that the 2016 proposed rates could represent a 6.2 percent shortfall below the cost of providing health services.

But, O'Brien suggested the Division and some insurers might have gone too far. “We acknowledge that it’s not unreasonable for insurers to seek some kind of rate increase given higher than expected costs in 2014,” O’Brien told The Lund Report. “But we’re concerned that some of the increases are out of whack with what’s necessary with insurers hitting the panic button. If there is a need for such a big increase to correct the market overall, then consumers would benefit if it was implemented gradually in stages over the next few years rather than all at once. The market is so uncertain that we don’t really know what costs are going to look like next years, but if insurers take a more measured gradual approach, there’s less chance consumers will get overcharged.”

PacificSource Rates the Highest

PacificSource requested a 42.7 percent increase, which was lowered to 37.1 percent in the Division’s preliminary decision.

Even with that slight modification, consumers could pay the highest rates for health coverage, O’Brien said. Its projection that prescription drug costs will increase by 16 percent is higher than many of its competitors, which merits close scrutiny because such drug cost projections are often overstated.

A Look at LifeWise

The rates by LifeWise would jump by 38.5 percent next year, but the insurer has not adjusted its cost projections to reflect reductions in “bad debt” from the Affordable Care Act’s expansion of coverage, O’Brien found.

“Recent public filings from Oregon hospitals demonstrate record-low levels of uncompensated care resulting in large hospital profit margins across the state, and these cost savings should be shared with consumers through lower hospital costs and lower premiums,” he said. “A number of LifeWise’s competitors have reduced rates to reflect this impact, and LifeWise’s members deserve to share in these savings as well.”

LIfeWise’s filing also includes a 1 percent annual cost increase due to projected increased utilization, which is out-of-step with a broad industry consensus that pent-up demand for healthcare services is likely to decrease in the coming years, and has not adjusted its rates to reflect the impact of Oregon’s supplemental reinsurance program, which was meant to keep premium costs in check by lowering costs for insurers, O’Brien said. In its preliminary decisions, the Division adjusted rate proposals from ZOOM+ and Kaiser to accurately reflect this program, but not LifeWise.

Regence May Overestimate Costs

Although Regence’s rate request is among the lowest – 12.3 percent – its 8.8 percent projection of medical cost trends is higher than many of its competitors and many independent estimates, O’Brien said.

Similar to LifeWise, Regence did not adjust its cost projections to reflect a reduction in “bad debt” from the Affordable Care Act’s expansion of coverage or take into consideration the higher profit margins by Oregon hospitals as a result of fewer uncompensated care patients, and should lower its rates accordingly, O’Brien said.

Regence also may be overestimating the cost of new health benefits. The insurer’s projection that a new Applied Behavioral Analysis benefit will cost $3.00 per member per month is significantly higher than independent estimates and estimates from other Oregon insurers and inadequately supported. The insurer also includes costs for a new tele-health benefit without including any potential savings.

To review the preliminary rate decisions, click here.

Diane can be reached at [email protected].

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