|Health Insurance Rates Soar as Oregon Regulators Nod|
Nov 17, 2009
The Oregon Insurance Division has created a Web page to allow members of the public to comment on rate requests and to get e-mail alerts when health insurance companies file for rate changes.
By Bill Graves / The Oregonian / November 17, 2009 / OregonLive.com. All rights reserved
State regulators have approved every rate increase by Oregon's largest health insurance companies over the past three years, trimming the requests in only seven of 40 cases, records obtained by The Oregonian show.
The Oregon Insurance Division approved every other request without changes from the seven companies seeking to raise individual and small-business premiums. The state reduced only two requested increases this year -- each for 20 percent from the state's largest insurer, Regence BlueCross BlueShield of Oregon. Those increases were both shaved to 16 percent.
The result of Oregon's regulatory oversight: Average premiums for individuals and small businesses have climbed by more than 140 percent in seven years.
"The current method of rate review is a pass-through," says Sean Moriarty, who serves on a state advisory panel that seeks to revise the way the state regulates insurers.
Moriarty is operations manager for a Portland construction equipment firm. He recently learned that his company's monthly insurance rates are going up 30 percent, from $351 to $456 per individual.
Rocketing medical costs and insurance premiums combined with their impact on consumers and the economy is at the center of the fierce congressional debate on how to overhaul the nation's health care system.
In Oregon, insurance premium increases are forcing small businesses and individuals to join the growing ranks of the uninsured. The number of Oregonians covered by commercial insurance dropped by 88,000 between early 2008 and last summer, many of whom joined the estimated 614,000 residents already without insurance.
The Oregon Insurance Division administrator, Teresa Miller, says the increases are justified by rising medical costs, adding that her agency has been "very aggressive" in regulating insurers. But consumer advocates scoff at that, pointing to its record of approving rate increases.
Moreover, records show that top executives for Oregon health insurance companies have won big pay raises and bonuses the past year as they blame hospitals and doctors for the increase in health care costs.
The CEO at Oregon's Regence BlueCross got a $365,912 bonus last year on top of his $368,149 salary. Kaiser's CEO in Oregon got a 59.2 percent boost in compensation last year, including a $142,049 bonus and $69,825 in other pay on top of his $479,956 salary. A company spokesman said the money was justified to bring his pay more in line with peers.
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Larry Kirsch, a health economist in Portland who specializes in state insurance rate review methods, says Oregon needs a more rigorous hearings process similar to what public utilities go through. With the current system, state regulators use a "paper review" process that evaluates rate increases based on trends in medical costs and other factors.
"The net effect of (Oregon's) system is that rate payers are often times paying vastly more than they should," Kirsch says.
Pat Hutchins, 59, and her sister, Mary Anne Huseby, 61, worry they may have to give up insurance as they struggle to pay their premiums to keep their 25-year-old flower shop in business
"Every month, we think, 'We seriously can't afford this,'" Huseby says. Their Flowers in Flight shop in downtown Portland is their chief source of income. The sisters each pay about $400 a month for insurance, but with a $1,500 deductible, they pay nearly all of their health care costs out of pocket.
Track insurance rate requests
The recession has cut deeply into their business, which once employed as many as six people. Sometimes, the sisters skip paychecks to cover health insurance, which now gobbles up about a fourth of their income.
"It just seems like money down the drain," Hutchins says.
The state regulates health insurance only for small groups, individuals and a small number of plans for individuals leaving group coverage. Neither the state nor the federal government regulates group health insurance plans offered by large employers.
Insurance rate increases have outpaced the rise in hospital costs. Between 2004 and 2008, Oregon hospital operating expenses collectively climbed 40 percent. During that period, individual insurance rates shot up 48 percent, and small business rates rose 59 percent.
Michael Becker, director of legislative and regulatory affairs for Regence BlueCross BlueShield of Oregon, says insurance companies are being buffeted by an aging population, increasing costs of prescription drugs and new medical technology and procedures. All those forces drive up insurance costs, he says. So do hospital charges to insurers to recover charity care and underpayments from Medicare and Medicaid patients, he says.
Insurers say they operate on a narrow profit margin that averaged 1 percent in 2008. However, their income pays for high salaries and bonuses for executives and large cash surpluses they hold in reserve.
For example, last year Regence paid its president $765,161 and three vice presidents more than $300,000 each while keeping a $466 million surplus. Though the number of people that Regence insured dropped during the past five years by 209,000 members, its revenue climbed $864 million, to $2.6 billion.
Response from regulators
Miller, the state's chief insurance regulator, says state actuaries do not independently verify the numbers insurers file with them but they scrutinize assumptions carriers make about future hospital and prescription costs and check those against industry trends. She says state actuaries are familiar with company finances and will spot conflicts in their rate filings.
The Legislature this year included revisions for the state's rate regulation process as part of its health reform bill. The insurance division is making the review process more public. It will require a 30-day public comment period for each rate filing and is putting more information on its Web site with explanations of rate requests and approvals or changes in plain English.
Miller says the state is standardizing how companies report their information, particularly what they include under administrative costs. It is also looking more closely at investment income, profits, surplus levels, cost controls and benefits. She says the state also has proposed to make all rate request data public, ending the right of companies to conceal some information as a trade secret.
"We're trying to open up this process and make it a process everyone can understand," Miller says.
Insurers have misgivings about the state's proposal to end trade secrets. LifeWise spokeswoman Deana Strunk says it could lead to unintended consequences in which a company will use another company's justification for rate increases to raise its own rates higher than it needs to.
But Becker of Regence says insurers generally support the state's proposed regulatory changes because they would help the public see more clearly that insurers operate efficiently.
"It will allow us to focus on what is directly driving health care premiums, which is medical costs," he says.
–- Bill Graves