Regulators Offer Little Backstop for Premium Hikes
High paid executives and skyrocketing premiums from coast to coast
In the letter, Rockefeller asked a simple, bread-and-butter question that launched the nation into a debate about healthcare in the first place: Why are health insurance costs going up each year?
“Health insurance companies claim to be good corporate citizens,” Rockefeller wrote. “If this is true then they need to tell us how they are spending their customers’ money. Are they spending it to make people well when they are sick and keep them healthy? Or is the money they charge going to profits, to executive salaries, and to figuring out how to deny care to people when they really need it.”
Rockefeller took aim against CIGNA with data from an investigation by the Senate Committee on Commerce, Science, and Transportation, which he chairs.
The investigation revealed that CIGNA in its filings with state insurance commissioners apparently failed to accurately account for up to $5 billion worth of health insurance it sold in the commercial market in 2008.
“The data released in this letter reveals that while health care costs are spiraling upwards, consumers are paying more and getting less, and the health insurance industry doesn’t want anyone to know what they are up to,” Rockefeller wrote. “The American people deserve to hear the truth. CIGNA’s apparent failure to accurately report its business activities is just another disturbing example of why we need more transparency and accountability in the health insurance industry.”
Issues Germane to Oregon
CIGNA doesn’t sell health plans in Oregon, but the situation Rockefeller describes – high paid executives, large profit surpluses, expensive marketing campaigns and strict underwriting – certainly exist in Oregon even where non-profit health plans dominate the market.For one reason, up until this year the last time state regulators denied a health insurance rate increase request occured in the 1980s.
A review of premium trends in Oregon shows that insurance regulators at the Oregon Insurance Division approved 14 percent average annual increases for the past seven years for individuals and small group health plans – those markets the state has authority to regulate.
Individual rates have gone up on average 16.5 percent annually, while small group plans have gone up on average 12.3 percent each year, based on a report by the division and the latest rate approvals posted on the division’s Web site. This year was no exception with regulators granting overall 14.2 percent increases.The one denial went to Regence BlueCross BlueShield of Oregon, which requested a 19.9 percent increase on close to 80,000 individual plans and a 12.6 percent increase for 58,000 small group members. The division approved 15.9 percent and 11.2 percent increases instead.
A case contesting a 26 percent increase on Regence individual plans in 2008 is headed for appeals court.
Insurers say premiums increase with costs of medical care, the true culprit in skyrocketing insurance rates. The argument justly puts a large share of the blame on hospitals and the widely dysfunctional system of setting charges.
Kaiser CFO Karen Schartman said the health plan tries to lower costs for insurance without compromising access to care.
"Historically Kaiser has been more of a community rated HMO without high deductibles," Schartman said. "We are working very hard at leveraging the value that we bring with integration to improve quality and affordability. We believe we are doing that and are delivering that today."
In justifying a 22 percent increase on more than 5,000 individual plan holders in October, HealthNet of Oregon showed state regulators the trend in claims costs. For several years, premium increases lagged behind claims costs until over compensating for those losses in the past few years.Executive Compensation
High paid CEOs are also common to Oregon, though not close to rivaling CIGNA CEO Edward Hanway's $11 million salary in 2008.
Regence paid CEO Mark Ganz at least $1.8 million in 2008 in combined salary from Oregon and Washington, not to mention what Ganz might earn from Alaska Utah and Idaho where salary information is not made public.
Most of Oregon’s other insurance executives earn in the upper six figures, The Lund Report reported in April.
Tackling Medical Loss Ratio
The Senate investigation also made note of health insurance medical loss ratios, the percentage of premium dollars insurers spend on actual medical services. Rockefeller pointed at that insurers maintain far lower loss ratios on individual health plans, as low as 66 percent reported by Coventry, than small and large group markets.
Oregon insurers largely maintain they lose money on individual health plans, paying more in claims than they receive in premiums, which would result in a loss ratio of more than 100 percent.
As we explored in a previous article, Oregon is taking a fresh look at how it regulates insurance company’s administrative costs by separating it from the overall medical loss ratios.
For Oregonians deciding whether to pay for health insurance or put food on the table, relief can’t come fast enough. A public hearing for proposed rules to tighten the state’s health insurance rate regulation is scheduled for December 2 in Salem.
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I read the Oregonian article and went online to subscribe to information regarding insurance rates. I was given this link: https://service.govdelivery.com/service/multi_subscribe.html?code=ORDCBS...
and signed up. I checked off home insurance as well as health because my rate went up 14% this year! It turns out the State of Oregon rubber stamps these rates as well! 10% was due to the base rate that Oregon approved. We need an expose on this as well as have more citizens monitoring this industry.
FYI regarding the following statement: "Regence paid CEO Mark Ganz at least $1.8 million in 2008 in combined salary from Oregon and Washington, not to mention what Ganz might earn from Alaska and Idaho where salary information is not made public." Regence doesn't do business in Alaska - it's Utah, Oregon, Idaho and Washington. I'm not sure where you are getting your facts but you should check them out before publishing.
Also, I agree that Mr. Ganz makes a hefty salary, but I happen to think that both the nature of his position and the marketplace for executives (not just in health insurance) make this salary reasonable. Let's face it - it's not just the healthcare industry that has outrageous executive salaries (look at our local Goodwill). Executives in our country are overpaid across all industries. If the healthcare industry is forced to lower executive salaries and other industries aren't, then that just means healthcare companies will lose talent to those other industries. The most ironic thing I've seen yet was a video made by Will Ferrell about ridiculous healthcare executive pay - pretty interesting coming from a man who earns $30 million per film to tell fart jokes.....