Health Insurance Rate Increase of 22 Percent: Will Public Hearings Matter?

Should Regence Blue Cross Blue Shield be allowed to raise their health insurance rates 22 percent? Next month the Oregon Insurance Division plans a public hearing on the proposed hike, which would affect nearly 60,000 Oregonians.

It's the only public meeting in recent memory that the Insurance Division has held for a rate hike, according to Laura Etherton, of the consumer group OSPIRG.

Public hearings on big rate hikes could become the rule if the Oregon Senate passes bill 717, which would require the Insurance Division to hold such meetings when insurance companies request rate increases.

The bill, sponsored by state Sen. Chip Shields, N/NE Portland, as well as the Committee on General Government and Consumer and Small Business Protection, would mandate public hearings on rate increases bigger than 7 percent and those that affect 1,000 or more policy holders.

"A public meetings process would precede a public hearing to allow questions to be asked of insurers in a public forum," said Shields.

OSPIRG, a group that is contracted by the state to analyze rate increase requests, says they are currently going through Regence's bid for more money to determine if the increase is supported by the company's needs. The public hearing is June 2 from 4:30 to 7 p.m., at University Place at Portland State, 310 SW Lincoln St. in Portland

"What's clear on the face of it is that a 22 percent rate increase will make it very difficult for Oregonians to afford," said Etherton, who is part of OSPIRG's Health Insurance Rate Watch project. "That raises flags for not only affordability for Oregonians, but whether or not Blue Cross Blue Shield will be able to maintain enrollment levels."

This will be the fifth year that Regence Blue Cross Blue Shield has increased rates by double digits. Every year since 2007, the non-profit health insurance company increased rates by 17 percent, 24 percent, 17 percent and 16 percent, respectively. 

According to Regence spokesperson Scott Burton, the company is doing it all it can to contain costs.

"Health care costs for our individual pool are increasing, while the number of people sharing the burden of those costs is shrinking," according to Regence. "As a result, rates continue to rise. The rates we have requested in this filing are a direct reflection of these costs."

The Oregon Insurance Division – which operates out of the Division of Consumer and Business Services -- does take into account the effect a premium increase will have on consumers, although they rarely deny a rate increase request outright. More often, according to the agency, a rate request will be reduced, from, say, 22 percent to 15 percent.

Most recently, the division downgraded a request by the for-profit company HealthNet of Oregon.

Last year, the division reduced rate requests in about half of all cases, on average by about 4 percent. Changes in state law that went into effect in April 2010 now allow the division to take into account a company's overall profitability when determining whether a rate increase would be appropriate.

"The division has new tools available and we are using them to carefully scrutinize each and every rate filing to achieve the maximum savings for consumers," said Teresa Miller, Insurance Division administrator in a statement. "Having said that, rates must still cover medical claims, which continue to increase and make insurance that much harder for individual and small businesses to afford."

Take the case of Regence, a non-profit health insurer, like many of the large health insurers in the state. According to the company's filing, they are now operating at a 2.1 percent loss. If the rate increase goes through, they would operate at a 1.1 percent profit. Claims costs would change from 80.3 percent to 79.2 percent. Much of the increase in costs, according to Regence's filing, comes from increased medical and prescription costs.

"We share our members concern about rising health care costs," Regence officials told The Skanner News in response to emailed questions. "Premium increases are difficult for the entire community, but especially those members who must bear the cost of individual policies. At Regence we are focused on increasing efficiency, reducing administrative costs and holding true to our nonprofit mission as part of a larger strategy to reduce costs to members."

Since OSPIRG began its Health Insurance Rate Watch project in the fall of 2010, they've looked exclusively at rate increases that fall under the purview of the Insurance Division – those policies affecting small employers and individual plans.

"In each of those cases, we didn't find that the rate increase has been adequately justified," Etherton said. "Sometimes it's a matter of missing information or the information provided not making the case adequately. So far the insurance division has agreed with us and pushed back on the insurer and gotten more information, and in two cases reduced the rate quite significantly. That said, these rate increases are still really high and we need to ensure that Oregon regulators are doing whatever they can to protect the public."

It's unclear how a system of mandatory public meetings and hearings would change the way health insurance companies file for rate increases.

Regence welcomes the change.

"The regulatory and political process around rates, as well as the economy of health care in general, is complicated," according to Regence. "As a result, Regence remains dedicated to transparency throughout our filing process. We encourage the public and our members to ask questions and learn about how rates are set, and what we are doing at Regence to address the challenge of affordability for everyone."

OSPIRG also supports a more robust public involvement in the rate process.

"It's absolutely critical for the public to turn out to the public hearing and have their voices heard on what rate increases like this one mean for their families, for the affordability of health care," Etherton said. "Are they going to have to buy down the rates, get a bigger deductible … what kind of impact will that have on family finances? I think it's really important for the insurance division to hear very specifically what the impact will be, so they can make a determination."

Currently Senate Bill 717 is moving its way through the Oregon Senate and is currently assigned to the Ways and Means Subcommittee on Transportation and Economic Development. To read a complete filing of Regence Blue Cross Blue Shield of Oregon's rate request, visit http://insurance.oregon.gov/ and click on the FAQ's of Regence's Rate Request link.

To see a breakdown of all proposed, disapproved and approved rate increases visit the Insurance Division's filings pages at http://www4.cbs.state.or.us/ex/ins/filing/index.cfm?fuseaction=home.show_filings