As the cost of health care continues to rise in Oregon and across the nation, many insurance companies are raising premium rates. The Department of Consumer and Business Services' Insurance Division reviews health insurance rates for individual, small group, and "portability" coverage before these rates can take effect in Oregon. Below are frequently asked questions about how health insurance rates are set as well as some new initiatives under way to strengthen the rate review process and make it more transparent.
How do Oregon's health insurance rates compare to other
states?
Premium rates are going up across the country. In 2008, Oregon
ranked 20th among states in the annual amount paid by a family for health insurance premiums
involving employers of all sizes, according to the federal government's Medical Expenditure
Panel Survey (MEPS). (That means families in 19 states paid higher premiums.) Oregon ranked
25th among states in premiums for family coverage for those working for small employers.
The average monthly premium for an Oregon family getting coverage through an employer was
$1,049 in 2008, compared to $738 five years earlier. The average monthly premium for a single
employee was $365 in 2008, compared to $280 five years earlier.
Unlike some states, Oregon has a very competitive health
insurance market - eight insurers account for about 90 percent of the market – so Oregon
consumers have many choices of companies and plans. Oregon also has a number of protections
for consumers who buy individual insurance plans. For example, individual insurance rates
cannot be based on the health or gender of the person insured. Individual health benefit
plans in Oregon also are "guaranteed renewable," meaning policies cannot be cancelled
due to the health condition or claims of the person insured. However, rates for the whole
market continue to rise as the cost of medical services goes up.
How does the Insurance Division decide whether to approve a requested
rate increase?
When an insurer requests a rate increase, the division looks at many factors,
including the cost of medical care and prescription drugs, the company's past history of
rate changes, the financial strength of the company, actual and projected claims, premiums,
administrative costs, and profit. The division approves the request if the insurer can show
that the new rate is reasonable in relation to the benefits provided. If the company's data
does not fully support the increase, the division can ask for more information, approve a
lesser rate, or reject an increase.
Why do rates continue to increase in double digits?
Rates are driven by medical costs, which are growing because of many factors
including increased use of health care services, new technologies, prescription drugs, aging,
and unhealthy lifestyles. Rate changes can vary depending on a company's financial situation
and whether its existing premiums cover its costs. Here are a few examples of recent rate
increases:
A 10.57 percent annual increase for small employer plans offered by PacificSource. Medical
claim costs increased 13 percent the past year and prescription drug costs were up 11.5
percent. The company made several changes to contain claims costs, including a new contract
for pharmacy benefits.
A 22.8 percent annual increase for Health Net individual health plans. The company lost
money on the plans for the four prior years. By maintaining lower premiums in recent years,
Health Net anticipated more policies would be sold; however, since the company hasn't realized
the expected growth of this line of business, it is necessary to increase premiums to break
even.
A 16 percent annual increase for Regence BlueCross BlueShield small employer plans. The
company had requested a 19.4 percent increase, but the division felt a 16 percent increase
was more appropriate, to cover the projected rise in health care costs (13.3 percent),
an increase in outpatient mental health and chemical dependency benefits, and a new 1 percent
tax on health insurance premiums.
Are Oregon health insurance companies profitable?
During a 10-year period ending in 2007, the average profit for the eight
largest health insurers in Oregon was 2 percent. For 2008, it was 1 percent and for 2009,
as of mid-year, the average profit was 1.3 percent.
What is the state doing to make health insurance more affordable?
While health insurance rates mostly reflect the increased costs of health
care, House Bill 2009 makes several changes to the state's insurance rate review process
to help better protect consumers. The new law, effective April 2010, does the following:
Provides consumers with 30 days to comment on insurance company rate requests in individual,
small group, and portability markets.
Requires insurance companies to separately report and justify increases or decreases
in administrative expenses.
Allows the department to consider an insurance company's overall finances, including
profits, investment income, and surplus, when reviewing a proposed rate. Under current
law, the review focuses only on the particular type of insurance (such as small group health
insurance) rather than more broadly on the insurer's entire business.
The changes to the rate review process are part of a larger effort by Oregon to address
the rising cost of health care. House Bill 2009 includes many other steps to lay the foundation
for meaningful health reform in Oregon, including giving consumers the tools to make better
health care decisions, requiring transparency and accountability of health care dollars,
and increasing the focus on prevention and disease management. Major changes to health care
also are being discussed at the federal level. National health reform would have a significant
impact on how insurance is structured in Oregon.
For more information:
Insurance Division Consumer Advocacy: 503-947-7984 or toll-free
1-888-877-4894
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