Report: Health Insurance Rate Watch Project

Comments on Regence BlueCross BlueShield's Proposal to Increase Individual Health Insurance Rates

OSPIRG Foundation analysis finds problems, gaps in insurer’s rate filing
Released by: OSPIRG Foundation

EXECUTIVE SUMMARY

More than 52,000 Oregonians with individual health insurance plans will see rate hikes of 9.6% on average, and as high as 16.4%, if the premium rate hike proposed by Regence BlueCross BlueShield of Oregon goes forward.

This rate increase comes at the same time that Regence is eliminating its $1000-deductible plans, meaning that customers will face out-of-pocket costs of at least $2500 before coverage kicks in. In addition, proposed network changes mean that customers in the Portland metro area may need to change providers or be required to pay a higher premium.

If approved, the increase would go into effect on December 1, 2012.1 The main reason given for this increase is the insurer’s projection that the combined medical and prescription drug costs will increase at an annual rate of 10.1%.

OSPIRG Foundation worked with the actuarial firm AIS Risk Consultants to analyze the rate filing. We examined the insurance company’s justification for the increase, the financial position of the insurer, and how the rate increase would impact Oregonians if it were approved. Our staff and consulting actuary also reviewed additional information made available by DCBS and Regence.2

After careful analysis of Regence’s filing and this additional information, we are concerned that Regence has not provided sufficient information to justify this rate increase. This is troubling, given the significant impact this rate increase would have on tens of thousands of enrollees if approved.

Key Findings:

1. Regence’s Justification for Rate Increase

  • Regence has not provided enough data to determine the validity of its trend projection. Regence’s projection of combined medical and prescription drug trend, 10.1%, is higher than their corporate trend rate of 8.8%, and Regence has not provided the quantitative data and calculations it used to establish its projections for the primary components of its medical and prescription drug trend. This information is critical in order for DCBS and the public to evaluate Regence’s justification for this rate increase.
  • Regence does not adequately justify its proposal to set limited Portland-area provider networks. Leaner networks can be associated with reduced costs and increased coordination of care, and we support insurers sharing these savings with consumers who choose lower-cost providers. However, Regence has not provided enough information in the current filing to justify the differences in premiums associated with each of the network options. In addition, the insurer has not shown its proposal will produce sufficient gains to justify the disruption these changes will mean for consumers.
  • When it comes to reducing costs and improving the quality of care, it is not clear that Regence is doing all it can. With rising costs making health insurance unaffordable for many Oregonians, Oregon needs all insurance companies to redouble their efforts to contain costs – not by raising deductibles and cutting care – but by cutting waste and focusing on prevention and other proven strategies that keep patients healthier.

2. Impact of Rate Increase

  • Regence estimates that about 70% of enrollees – about 37,000 people – would see double-digit rate increases. Of those 37,000 people, about 10% would see hikes of 15% or more. This concentration of increases in the double digits was not revealed in Regence’s original filing, and was obtained in response to questions from OSPIRG Foundation researchers and from DCBS.
  • On top of rising premium costs, many Regence customers would face increased financial risk in case of illness. According to our analysis, a family of four could face as much as $56,520 or more in out of pocket costs in addition to premium in case of significant illness.3 That represents almost 90% of the median income for such a family in Oregon.

3. Impact on the health insurance market

  • Regence projects that it will lose 11,577 members by the end of 2013, a loss of 22% of its customers in the individual market. Coming after multiple years of significant membership losses corresponding with large premium increases, we are gravely concerned about the ongoing stability of Regence’s risk pool and its ability to insure its remaining customers in the future.
  • As Regence continues to hike premiums, cut coverage and lose membership, its activities have an effect on the stability of the entire individual market. Regence is the largest single insurer in the individual market in Oregon. Starting in 2014, insurers in the individual market will be required to incorporate essential health benefits and other critical consumer protections. But instead of getting ready to implement these changes to ensure a smooth transition, the strategies Regence appears to be pursuing—hiking premiums, reducing benefits and shrinking the risk pool—seem to be moving in the other direction.

After careful analysis of Regence’s filing, we are concerned that Regence has not provided sufficient information to justify this rate increase. We are also concerned that this rate hike and Regence’s planned product and network changes will continue to drive Regence customers to drop coverage, destabilizing the risk pool and resulting in future rate increases.

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