Oregon’s health care reforms may improve the quality of care and save the state billions over the next 10 years. But there’s a piece of these reforms that’s delirious with foolish expectations. And the Legislature may make it worse.
The White House and others single out Oregon as a model when it comes to strong regulation of health insurance premiums. After legislation passed in 2009, the Oregon Insurance Division began regulating premium increases for individual and small group plans much more intensely.
It works like this: Health insurers apply for rate changes. The state has had a contract with the consumer group OSPIRG to review rate requests and fight them. The state then decides what price the insurer can charge for premiums.
It’s similar to what the state does to create a debate over utility increases at the Public Utility Commission. The important distinction, though, is that for utilities there is a monopoly. In health care in Oregon, individuals can choose among plans.
OSPIRG and others claim the increased review process has “cut over $80 million in waste and unjustified costs from premiums.”
$80,000,000 sounds fantastic. Only a good helping of Cheerios has that many Os.
But should the state be requiring insurers to charge less for health insurance than it costs?
The state has ordered insurers to do so.
For instance, Regence BlueCross BlueShield of Oregon asked for a 22 percent rate hike. The state fixed the rate hike at 12.8 percent. The state knew its decision meant Regence must charge customers who buy individual health plans less than it costs to provide that service. The state considered Regence’s reserves and overall financial health.
We don’t know what the right premium price is. But if Regence is compelled to dig into reserves or raise prices on other rates, such as group plans, what the state has done is shift costs, not cut costs.
Now in the Legislature, there’s a proposal to fortify the rate review process. Senate Bill 413 currently has two main components.
First, it requires insurers to provide more notification about rate increases and the review process to consumers. Regence argued that provision may sound incidental but carries with it a cost. It means that Regence would be spending more dollars that could otherwise go to direct health care or lower premiums.
Second, the bill requires the state to set up metrics to evaluate cost containment strategies and to develop its own model of an appropriate level of medical inflation that insurers can charge.
In other words, Oregon may develop better data for its price fixing. That could mean the state does a better job of price fixing. It could also just as easily mean that the state will be compelling insurers to shift costs to other consumers based on better data. That’s not a win for health care reform.
The solution is not to stop rate reviews. Oregon can’t do that or the federal government will take over.
But the solution is not to plunge ever deeper in a quest to set the right price.
Oregon is already doing so many better things in health care reform. It’s shifting the incentives so providers and insurers get something when they keep people healthy — not just by providing more care. It’s fashioning a competitive, Web-based marketplace so consumers can make better choices on understandable health plans based on price and quality.
Gov. John Kitzhaber has called on the Oregon Health Policy Board to come up with more recommendations to control costs and improve care. And he specifically said he wants to reduce cost shifting, not create more.