August 12, 2011
OREGON'S HEALTH INSURANCE RATE REVIEW PROCESS
By: Janet L. Kaminski Leduc, Senior Legislative Attorney
You asked for a description of Oregon's health insurance rate review process and whether state law requires public hearings as part of the process.
The Insurance Division of the Oregon Department of Consumer and Business Services must review and approve rates for individual and small employer (50 or fewer employees) health insurance policies. The department must consider a variety of information when reviewing an insurance company's rate filing, including the company's financial strength and history of rate changes, cost of medical care, actual and projected claim costs, enrollment trends, premiums, administrative costs, and profit.
Upon receiving a complete rate filing, the Insurance Division posts the filing on its website and opens a 30-day public comment period. The division must issue a decision on the rate filing within 10 days after the close of the public comment period. It may approve a request, approve a lesser rate, or reject an increase. The division posts its decision on its website.
Oregon law does not require a public hearing as part of the rate review process. However, the insurance administrator may hold hearings at her discretion. On August 2, 2011, Teresa Miller, the Oregon Insurance Division's administrator, testified before Congress on federal health care reform and Oregon's rate review process. She indicated that she recently held Oregon's first public hearing on a rate filing in over 20 years. She also said she plans to apply for federal funding that would help cover the cost of holding up to 20 public hearings per year in the future.
HEALTH INSURANCE RATE REVIEW IN OREGON
Oregon law and regulation require insurers to receive approval from the Department of Consumer and Business Services for individual and small employer health insurance policy rates (Or. Rev. Stat. §§ 743.018 - .020 and Or. Admin. R. 836-053-0471).
An insurer's rate filing must include:
1. a cover letter that includes a filing description;
2. a rate filing summary, which must explain the filing in a way consumers can understand the rate change;
3. an actuarial memorandum, which must include the assumptions, factors, calculations, and other information pertinent to the proposed rate;
4. rate tables and factors, including base and geographic average rate tables;
5. plan relativities, which must explain the rates for each benefit plan and demonstrate the comparison and reasonableness of benefits and costs between plans;
6. a description of the development of the proposed rate, which must explain how the rate was calculated using generally accepted actuarial rating principles;
7. trend information and projection, which (a) describes how the assumed future growth of medical claims was developed and (b) includes historical monthly average claims costs;
8. a description of premium retention, which is the amount to be retained by the insurer to cover non-claim costs, including expected profit or surplus;
9. a worksheet for individual health benefit plan rates, if applicable, which includes earned premiums, incurred claims, and membership totals for the past five years and projected for the next three years;
10. covered benefit or plan design changes, which must explain any benefit and administrative changes with rating impact, such as member cost-sharing changes, provider network changes, or new prior authorization programs;
11. changes in the insurer's health care cost containment and quality improvement efforts since the last rate filing;
12. information about the insurer's financial position, including profitability, surplus, reserves, and investment earnings;
13. a statement of administrative expenses and five-year trend of administrative costs, including salaries, employment taxes and benefits, commissions, marketing and advertising, general office expenses, legal expenses, and other similar administrative costs; and
14. a certification that the filing complies with Oregon statutes, rules, product standards, and filing requirements.
Within 10 days after receiving a rate filing, the department's director must determine if the filing is complete. If it is not complete, the director must notify the insurer in writing that the filing is deficient and give the insurer an opportunity to submit the missing information.
If the filing is complete, the director posts the filing on the department's website and opens a 30-day public comment period on the rate filing. The director must post all comments on the department's website.
The director must undertake a review of the rate filing to determine if the proposed rates are (1) actuarially sound; (2) reasonable and not excessive, inadequate, or unfairly discriminatory; and (3) based upon reasonable administrative expenses. If the filing meets these criteria, the director may approve the proposed rate.
In determining if the rates are reasonable and not excessive, inadequate, or unfairly discriminatory, the director may consider:
1. the insurer's financial position,
2. historical and projected administrative costs and medical expenses,
3. historical and projected loss ratio (the ratio between amounts spent on medical care and earned premiums),
4. any anticipated change in the number of enrollees if the proposed rate is approved,
5. changes to covered benefits or health benefit plan design,
6. changes in the insurer's health care cost containment and quality improvement efforts since the insurer's last rate filing,
7. whether the proposed change in the premium rate is needed to maintain the insurer's solvency or rate stability and prevent excessive rate increases in the future, and
8. public comments received during the public comment period.
Oregon law does not require the director to hold a public hearing as part of the rate review process. But, on August 2, 2011, Teresa Miller, administrator of the Insurance Division of the Oregon Department of Consumer and Business Services, testified before the U.S. Senate Committee on Health, Education, Labor, and Pensions that the department recently held a public hearing on a rate filing because of the size of the increase requested and the large number of people it would potentially impact (59,000). The division used federal grant money to pay for the hearing costs. (Oregon, like Connecticut and other states, received a $1 million federal grant last year to improve its rate review process.)
Regeance BlueCross BlueShield of Oregon, the largest carrier in Oregon's insurance markets, requested a 22.1% rate increase for individual health plans. More than 150 people attended the public hearing, at which (1) the company detailed its request and answered questions from the department and (2) a consumer group outlined its concerns.
After considering all the information, including the information from the public hearing, the department approved a 12.8% rate increase, instead of the requested 22.1%. Miller testified that part of the department's decision rested on the fact that Regeance is financially sound with substantial surplus, which could help offset any losses incurred from the plans for which the increase was requested.
Miller also testified that the department plans to apply for future federal grants to further improve its rate review process. Among other things, the department plans to use future grant money to pay for approximately 20 public hearings per year.