Docstoc

Health Insurance in Oregon - January 2011_ Publication 440-3258.pdf

Document Sample
Health Insurance in Oregon - January 2011_ Publication 440-3258.pdf Powered By Docstoc
					Health Insurance
      in Oregon
      January 2011
Department of Consumer & Business Services
   Scott Harra, Acting Director
Insurance Division
   Teresa Miller, Administrator
   Suzanne Kailey, Deputy Administrator
Staff                         Editors
   David Ball                     Lisa Morawski
   Anthony Behrens                Mark Peterson
   Annette Boyce
                              Design
   Elizabeth Klicker
                                  Shonnie Emerson
   Russell Latham
                                  Kiki Hammond
   Cheryl Martinis
   Rachel Oh
   Andrea Schoby
   Gayle Woods
January 2011


I am pleased to present the Department of Consumer and Business Services’ fifth-annual “Health
Insurance in Oregon” report. We produce this report each year to provide Oregonians with an
overview of how commercial health insurance is regulated in Oregon and a look at how Oregon’s
largest insurers are performing financially.
This year’s report reflects significant changes to the regulation of health insurance. The federal
Affordable Care Act has brought many new consumer protections and benefits, aimed at increasing
access to health care. Our department is working to ensure Oregon policies and laws reflect these
changes and that any rate increases attributed to federal reform are reasonable. The reforms also
have given us the opportunity to use federal grant money to improve our health insurance rate
review and consumer assistance programs.
In addition to implementing reforms, we also continue to closely monitor the financial performance
of Oregon’s health insurers. Although the economy is showing signs of improvement, health insurers
are still experiencing losses in enrollment and ongoing growth in medical claims, and thus, health
insurance premiums.
We hope this report continues to be a valuable tool as we work with the Oregon Health Authority,
policymakers, and others on making health care more accessible and affordable to all.


Sincerely,




Teresa Miller
Administrator, Oregon Insurance Division
                                                                                               Health Insurance in Oregon

Table of Contents
Executive Summary: Health Insurance in Oregon ................................................................. 1
Section 1: Overview of Health Care Marketplace ................................................................. 3
               Evolution of Employer-Based Health Coverage ................................................................................. 3
               Growth in Health Care Spending ...................................................................................................... 5
               Cost Shifting to Commercial Market ................................................................................................. 6
               Cost Shifting to Employees ............................................................................................................... 6
               Federal Health Care Reform — Affordable Care Act ........................................................................ 8
               Oregon’s Reform Proposals ................................................................................................................ 9
Section 2: Overview of Health Insurance Regulation .......................................................... 11
               Health Insurance Marketplace ......................................................................................................... 11
               Financial Regulation......................................................................................................................... 13
               Form Regulation ............................................................................................................................... 14
               Consumer Protection ........................................................................................................................ 14
               Rate Regulation ................................................................................................................................ 16
               Health Insurance Premiums ............................................................................................................. 20
               Commercial Submarkets .................................................................................................................. 22
                    Individual Market .................................................................................................................... 22
                    Small Group Market ................................................................................................................ 23
                    Associations and trusts ........................................................................................................... 24
                    Large Group Market .................................................................................................................24
Section 3: Financial Status of Largest Health Insurers ......................................................... 25
               Key Financial Indicators................................................................................................................... 27
               Profit Margins — Net Income to Premium Earned ......................................................................... 27
               Capital and Surplus .......................................................................................................................... 28
               Surplus and Rate Review ................................................................................................................. 29
               Medical Loss Ratios ......................................................................................................................... 30
               General Administrative Expenses .................................................................................................... 31
               Claims Adjustment Expenses ........................................................................................................... 32
               Net Underwriting Gain/Loss ............................................................................................................ 33
               Net Investment Gain ......................................................................................................................... 34
Section 4: Comparisons of Seven Largest Insurers by Market Segment ............................... 35
               All markets ...................................................................................................................................... 36
               Individual Market ............................................................................................................................. 39
               Small Group Market ......................................................................................................................... 42
               Large Group Market ......................................................................................................................... 45
               Associations...................................................................................................................................... 48
Section 5: Insurer Profiles................................................................................................... 51
               Kaiser Foundation Health Plan of the Northwest ............................................................................. 52
               Regence BlueCross BlueShield of Oregon ....................................................................................... 55
               Providence Health Plan of Oregon, Inc. ........................................................................................... 58
               PacificSource Health Plan ................................................................................................................ 61
               Health Net Health Plan of Oregon, Inc. ............................................................................................ 64
               LifeWise Health Plan of Oregon, Inc. ............................................................................................... 67
               ODS Health Plan, Inc. ...................................................................................................................... 70
Appendix 1: Key Data Sources ............................................................................................ 73
         2: Glossary...............................................................................................................74
         3: Annual Premiums by State, Small Group Market .................................................76
                                                                  Health Insurance in Oregon


Executive Summary: Health Insurance in Oregon
President Obama signed the Affordable Care Act on March 23, 2010, ushering in greater regulation of insurers
and promising to vastly increase access to health care when fully implemented. Starting in 2014, for example,
most people will be required to have health insurance and government subsidies will help many afford the costs.
The Department of Consumer and Business Services Insurance Division regulates commercial insurance in
Oregon. This report focuses on the state’s regulation of commercial insurance and how is it changing as a result
of both federal and state reforms.
The report addresses many important questions about the commercial insurance market in Oregon, including the
following: Who is insured in the commercial market? How does the state regulate insurers and protect consum-
ers? Who are the major health insurers and how are they doing financially? What are the latest trends for premi-
ums and other key measures in the individual, small group, and other health insurance markets?




Key points made in this report
■	 About 39 percent of Oregonians get coverage in          ■	 Surplus was a topic in the national news in 2010
   insurance markets regulated by the state but only          after a consumer report identified companies that
   about 12 percent are covered in plans where the            had far more surplus than required by regulators
   state regulates rates.                                     but continued to increase premiums significantly.
■	 The recession took a toll on Oregonians’ ability           The Insurance Division has authority to con-
   to remain insured. Enrollment in commercial                sider surplus in deciding rate increases. In some
   health policies through Oregon’s seven largest             cases in 2010, for example, it approved a lesser
   insurers fell 15 percent from 2007 to 2009.                rate increase than was requested, knowing that
                                                              a company had adequate surplus to absorb the
■	 An estimated 17.3 percent of Oregonians lacked             resulting anticipated losses. However, it did this
   health insurance in 2009, up approximately                 carefully because medical costs drive premium
   50,000 people from 2008, according to the                  increases and keeping rates artificially low now
   Oregon Health Authority.                                   will only mean larger increases later.
■	 Despite the economic turbulence, the state’s            ■	 As part of a federal grant to improve rate review,
   seven largest health insurers remain financially           the department is seeking a study of how it might
   stable. As of mid-2010, the seven largest insurers         use rate review to lower medical costs and will
   showed an average 3 percent profit compared to             require insurers to provide more detailed infor-
   1 percent for each of the prior two years. These           mation on medical claims.
   profits were earned primarily in markets other
   than the individual and small group markets             ■	 In 2009, the department began soliciting
   where the department has rate review authority.            public comments on insurer rate requests and,
                                                              in late 2010, with the help of federal grant
■	 Health insurance premiums continued to rise by             money, funded the consumer group OSPIRG
   double digits, corresponding with the ongoing              to offer regular input on key rate requests on
   increases in medical claims costs.
                                                              behalf of consumers.
■	 Many of the provisions of the Affordable Care
   Act implemented thus far have changed the land-
   scape of insurance regulation by providing new
   consumer protections and benefits. These reforms
   have typically accounted for no more than 4 per-
   centage points of the rate increases submitted to
   the division during the fourth quarter of 2010.


                                                                                                                   1
                                                                  Health Insurance in Oregon


Section 1: Overview of Health Care Marketplace
Employer-based health insurance is the cornerstone of the American health care system. Understanding the
evolution of job-based coverage and the impact of ongoing double-digit premium increases — due in part to
those who are uninsured or underinsured — helps explain the federal and state reforms that are changing health
insurance and health care today.
Section 1 briefly discusses the history of employer-based health insurance coverage and key elements of the
Affordable Care Act. It chronicles the growth in health care spending and premiums, cost shifting to the
commercial market and employees, and other factors that helped set the stage for the reforms that are under way.




Evolution of Employer-Based Health Coverage
Medical technology prior to 1920 was extremely             Initially, both the hospital and physician prepaid
limited, and patients were usually treated in their        plans were exempted from taxation and insurance
homes. Not surprisingly, most people had very low          regulation. Many BlueCross/BlueShield plans,
medical expenses. Weak demand by the public,               including plans in Oregon, remain not-for-profits.
together with strong opposition by the insurance           Oregon, like the rest of the states, has gradually
and medical industries, kept health insurance from         expanded regulation of not-for-profits over the past
being introduced.                                          40 years.
In the 1920s, a number of factors contributed to a rise    Employer-based health care plans originated in the
in both health care costs and use: a demographic shift     American war effort during World War II. In 1942,
from rural to urban centers, technological advances,       industrialist Henry Kaiser adopted a prepaid health
stricter professional standards that changed public        care system for tens of thousands of workers and
perceptions about medicine as a science, the               their families in his Richmond, Calif., shipyards and
increased development of hospitals as centers for          in his other businesses. In 1945, with the end of the
treatment, and rising incomes.                             war, Henry Kaiser offered prepaid coverage to the
                                                           general public.
Beginning in the 1930s, prepaid hospital service
plans grew in popularity with the public seeking a         To halt inflation during the war, the government
way to pay for higher health care expenses in a time       capped wage increases. Price controls designed to
of falling incomes and with hospitals needing the          prevent bidding wars by companies desperate for
plans as a reliable source of revenue. The American        limited labor had an important exception: Benefits
Hospital Association eventually coordinated efforts        above the base wage were not included in the restric-
by some hospitals to cooperate and reduce inter-           tion. Companies added health insurance to further
hospital competition. The association combined these       compensate workers. By the time the cap on raises
plans under the name Blue Cross.                           was lifted, health insurance was a common benefit.
In 1939, physicians followed suit, partly out of           Commercial insurance companies realized that their
concern that the hospitals’ prepaid plans were threat-     earlier concerns over the unpredictability of insuring
ening physicians’ livelihoods. The American Medical        people’s health could be overcome by providing
Association encouraged state and local medical             insurance to groups of employed workers, generally
societies to form their own prepaid plans. In 1946,        composed of younger, relatively healthy people. Once
physician prepaid plans affiliated and became known        these commercial insurers entered the market,
as Blue Shield.                                            enrollment in health insurance plans increased
                                                           almost seven-fold from 1940 to 1950.




                                                                                                                  3
Health Insurance in Oregon

Another important event that contributed to the         employee taxable income, further fueling the growth
growth in employer-sponsored health insurance           of employer-sponsored health insurance. By 1958,
occurred in 1950 when General Motors and the            nearly 75 percent of Americans had some form of
United Auto Workers (UAW) negotiated the workers’       private health insurance, and reformers focused on
contract. GM Chief Executive Charles Wilson             expanding coverage to the poor and elderly.
favored a company-by-company approach to worker
                                                        With support from labor unions and civil rights
benefits and offered to pay 50 percent of the health
                                                        organizations and with a large Democratic majority
care costs of GM employees. Walter Reuther, national
                                                        in Congress, President Johnson in 1965 signed the
president of the UAW, wanted a universal health care
                                                        law creating the government health insurance
system inclusive of all workers and employers that
                                                        programs of Medicare and Medicaid. Despite the
spread the cost across many companies. UAW
                                                        creation of these landmark programs, roughly 15
eventually agreed to the GM proposal and GM
                                                        percent of the population remains uninsured today.
entered the health care business.
                                                        And, in the more than 50 years since employer-based
Throughout the 1940s and 1950s, federal government      coverage became widespread, health care premiums
policy reinforced the trend toward employer-spon-       steadily increased at rates far exceeding growth in
sored health insurance. In 1954, the Internal Revenue   inflation, wages, and other economic indicators.
Code exempted employer contributions from




4
                                                                                     Health Insurance in Oregon

Growth in Health Care Spending
One measure of the steady increase in health insur-                       ■	 These PricewaterhouseCoopers reports
ance premiums is that national health expenditures                           • “The Factors Fueling Rising Healthcare Costs
have more than tripled as a share of the gross                                 2008” at http://www.americanhealthsolution.
domestic product (GDP) in the past five decades —                              org/assets/Uploads/risinghealthcarecostsfac-
from 5.2 percent of GDP in 1960 to 17.6 percent of                             tors2008.pdf.
GDP in 2009. The Centers for Medicare and Medic-
aid Services projects that national health expendi-                          • “Behind the Numbers: Medical Cost Trends
tures will increase to 19.6 percent of GDP by 2019.                            for 2010” at http://pwchealth.com/cgi-local/
At this rate, health spending will average $13,653 per                         hregister.cgi?link=reg/Behind_the_numbers_
person in 2019, up from $8,086 in 2009.                                        Medical_cost_trends_for_2010.pdf.

Health insurance premiums are a reflection of the                         Figure 1-1 shows the increases in monthly group
underlying cost of health care. Factors that drive                        health insurance premiums in Oregon since 1999.
increases in health insurance premiums include                            For people with employer-sponsored insurance, the
medical inflation, increases in use of health care                        average monthly Oregon premium in 2009 was $390
services, new technologies that cost more than                            for single coverage and $1,065 for family coverage.
current medical procedures, prescription drug costs,                      This is close to the national average of $389 monthly
aging, and unhealthy lifestyles. Studies that discuss                     for single coverage and $1,086 monthly for family
the underlying cost drivers of health insurance                           coverage.
include:
■	 Oregon Health Fund Board, “Aim High: Building
   a Healthy Oregon,” available at http://www.
   oregon.gov/OHPPR/HFB/docs/Final_Report_
   12_2008.pdf.

              Figure 1-1. Average total monthly Oregon group premiums from 1999 to 2009
    $1,200

    $1,000
                                                                                                                    $1,049     $1,065
     $800                                                                                     $968
                                                                                     $908
                                                                         $826
     $600                                                    $738
                                                 $678
                           $555       $596
     $400
                $456
                                                                                              $345                   $365       $390
     $200                                                                $309        $338
                                      $234       $242        $280
                $182       $206
       $0
                1999       2000       2001       2002        2003        2004        2005     2006       2007        2008       2009

                                                                Single      Family

             Source: Medical Expenditure Panel Survey (MEPS), 1998-2006 and 2008-2009. Tables II.D.1 (family) and 11.C.1 (single).
             Premiums are for employers of all sizes, including those who self-insure.
             Note: The annual Oregon totals are divided by 12 to obtain average total monthly premiums.
             MEPS data for 2007 is not available.




                                                                                                                                        5
Health Insurance in Oregon

Cost Shifting to Commercial Market
The commercial health insurance marketplace bears                                   Foundation study found that from 2000 to 2009, the
a disproportionate share of the increases in health                                 number of employers offering health insurance fell
care spending. When providers believe their reim-                                   by 9 percent. Firms with fewer than 200 employees
bursement rates are inadequate in one area, they look                               accounted for most of this trend.
to the commercial market to make up the difference.
                                                                                    Figure 1-2 shows that in Oregon firms with more
This fuels increases in commercial health insurance
                                                                                    than 24 employees are far more likely to offer health
premiums that, in turn, increase the number of
                                                                                    insurance than smaller firms. This is generally true
people unable to afford coverage.
                                                                                    throughout the country, as well. A common strategy
Families USA, a national nonprofit, nonpartisan                                     for employers struggling with affordability is to shift
group, issued a May 2009 study on the “hidden                                       costs to employees through higher deductible and
health tax.” It determined that nearly 37 percent of                                higher cost-share plans. This results in lower monthly
the $116 billion worth of care the uninsured received                               premiums for both employers and employees but also
in 2008 was uncompensated. While the precise                                        results in reduced benefits and increased out-of-
amount of the cost shift to the commercial market is                                pocket expenses for employees. Marketed as
unknown, there is little question that the cost shift is                            “consumer driven health plans (CDHPs),” some
real and that it affects the affordability of health                                believe these plans encourage consumers to shop for
insurance. For decades, hospitals have used cost                                    health care, ask about prices, and take control of
shifting to recover revenue lost as a result of treating                            health care spending.
the uninsured, underinsured, those on Medicaid and
                                                                                    Similarly, some Oregon health insurers have begun
Medicare, and others who do not pay for medical
                                                                                    to emphasize evidenced-based benefits as a way of
care and treatment.
                                                                                    cutting costs in the individual market. By imposing
                                                                                    higher cost sharing and deductibles on services that
Cost Shifting to Employees                                                          are more costly or less effective and lower cost
Increasing premiums as a result of cost shifting and                                sharing on evidence-based services, insurers hope
other factors causes employers to shift health insur-                               to reduce expenses by encouraging their customers
ance costs to their employees and, in some cases, to                                to think more about the cost and benefits of medical
stop providing health insurance. A Kaiser Family                                    services.

       Figure 1-2. Oregon private-sector firms that offer health insurance by firm size in 2009
                        120.0%
                                                                                                                               99.1%
                        100.0%                                                                                  93.0%
                                                                                  83.3%          81.7%
           % of firms




                        80.0%
                        60.0%         52.8%                        54.1%
                        40.0%                        34.9%
                        20.0%
                         0.0%
                                    All sizes   Less than 10       10-24         25-49          50-99         100-999     1,000 or more
                                                                  Size of firm (number of employees)

                                Source: Medical Expenditure Panel Survey (MEPS), Table II.A.1(2009) Number of private-sector
                                establishments by firm size and state: United States, 2009 and Table II.A.2 (2009) Percent of private-
                                sector establishments that offer health insurance by firm size and state: United States, 2009.




6
                                                                            Health Insurance in Oregon

Figure 1-3 shows the rise in deductibles paid by
Oregon families with employer insurance. Shifting to
higher-deductible plans is one way to lower overall
premium costs for employers.

                                Figure 1-3. Family coverage deductibles, 2004 to 2009
               2,000
                                                                                                          1,760
               1,800
                                                                                          1,531
               1,600
                                                           1,347
               1,400                       1,263
               1,200       1,059
               1,000
                 800
                 600
                 400
                 200
                   0
                           2004            2005            2006         2007 N/A          2008            2009

                       Source: Medical Expenditure Panel Survey (MEPS) Table II.F.3 (2004-2006 and 2008-2009).
                       Note: MEPS data for 2007 is not available.




Although employers are increasingly shifting more of                 Figure 1-4. Family coverage: Employee and
these costs to employees, Figure 1-4 demonstrates                    employer premium contributions, 2009
that employers still pay the significant majority of the
total premium.
                                                                                                                    Employee
                                                                                                                    contribution
                                                                                                                       22%


                                                                        Employer
                                                                       contribution
                                                                          78%




                                                                            Source: Medical Expenditure Panel Survey (MEPS)
                                                                            Table II.D.1 and Table II.D.2 (2009).




                                                                                                                                   7
Health Insurance in Oregon

Federal Health Care Reform — Affordable Care Act
This new federal law retains the employer-based           While these key reforms are still three years away,
system that has been the cornerstone of health            several provisions to preserve or expand coverage
insurance in this country for many years, but signifi-    became effective in 2010. One such provision offers
cantly alters health insurance regulation. The law        certain small businesses and small tax-exempt
requires most Americans to buy health insurance           organizations credits to offset employee coverage
starting in 2014. To make that possible, it expands       costs. Another helps employers pay the costs to main-
Medicaid for the lowest-income Americans and              tain coverage for early retirees who are not yet
provides tax credits to reduce the costs of private       eligible for Medicare. Other reforms effective in 2010
insurance for millions of lower- and middle-class         expand health insurance benefits or provide new
families, primarily those lacking employer-sponsored      consumer protections in health insurance policies.
insurance.                                                These are discussed in Section 2.
The hope is that by increasing the number of insured      Once reforms are fully implemented, federal officials
people, hospitals and other providers will shift fewer    estimate that 93 percent of the U.S. population will
costs to the insured population. Reduced cost shift-      be insured by 2019, an increase of 10 percentage
ing, along with a larger pool of insured people to        points. If accurate, an additional 32 million Ameri-
share the risk and costs, may reduce the price of         cans will be covered.
health insurance in the future.


                          Affordable Care Act reforms, effective 2014
                          ■	 Most taxpayers must have basic coverage or pay an annual
                             tax penalty.
                          ■	 Federal tax credits will help many more people afford
                             private coverage.
                          ■	 Some large employers (more than 50 employees) will pay
                             per-employee penalties under certain circumstances if they
                             do not offer certain basic health benefits.
                          ■	 Medicaid programs will cover many more people.
                          ■	 Every state will have an exchange offering one-stop
                             shopping to consumers who will be able to compare
                             prices, benefits, and health plan performance on easy-to-
                             use websites. Members of Congress and those who want
                             to take advantage of tax credits must purchase insurance
                             through an exchange.




8
                                                                Health Insurance in Oregon

Oregon’s Reform Proposals                                Improving health
In addition to federal reforms, Oregon has its own set   Primary care/regional accountability: Work
of heath reforms under way. The Oregon Health            toward providing all Oregonians with access to a
Authority (OHA) was created in 2009 to lead health       primary care team of medical providers that will
care reform efforts and to oversee some of the state’s   coordinate their care. The OHA will also explore and
key health programs. It purchases health care for        implement new regional frameworks for health care
nearly 850,000 people — about one in four Orego-         delivery, such as regional accountable health organi-
nians. These are state employees, school teachers,       zations, that will be responsible for meeting the
and other public employees as well as Oregonians         unique health needs of their populations in collabora-
who receive care through health care programs such       tion with statewide health resources. The OHA will
as Oregon Health Plan and Healthy Kids.                  measure performance with the aid of Oregon’s new
                                                         database of medical claims that will enable the state
The Oregon Health Policy Board has completed an
                                                         to see how health care costs vary by geographic area.
action plan to outline its recommendations that
promote its triple aim: improve the lifelong health      Value-based benefit plan: Move to increase the
of Oregonians; increase the quality, reliability, and    number of people with state-purchased coverage who
availability of care; and lower or contain the cost      have benefits focused on preventive care and proven
of care. Some of the key recommendations are             medical services (evidence-based). Medical services
outlined below. Learn more about details and time-       that are not as effective or do not have as much
lines of these proposals at www.oregon.gov/OHA/          evidence supporting their effectivemess will not be
action-plan.                                             covered or have greater cost sharing. This plan will
                                                         also be offered in the exchange.
Buying insurance                                         Focus on prevention: Work to create a healthy
Exchange: Create a health insurance exchange to          system that integrates public health, other health care
serve as a central marketplace where individuals and     services, long-term care, and community level
small employers can more easily compare and              activities to improve the overall health of all Orego-
purchase health insurance. People who qualify for        nians. One first step in this enhanced focus on
federal tax credits available in 2014 can buy insur-     prevention is to require that state facilities offer only
ance through the exchange to access those subsidies.     food and drinks that meet nutrition standards and
All exchange plans will include, at a minimum, basic     that all state agencies and facilities are tobacco-free.
benefits required by the federal reform law. The
exchange will set standards for the plans and select     Controlling costs
the plans from multiple insurers. The exchange will      Paying health care providers: Move toward
be available by January 2014.                            innovative payment methods instead of the current
OHA buying power: Use the OHA purchasing                 fee-for-service method that rewards quantity not
power to change how we deliver and pay for health        quality. One example is bundled payments — instead
care while improving health quality and controlling      of paying doctors, hospitals, and other medical
costs. Some of these actions include moving toward       providers separately for each procedure that might be
patient-centered primary care homes for people           part of a medical event (cancer, for example), set a
insured through OHA (including Medicaid, state           single payment for the entire treatment. Medicare
employees and educators); introducing innovative         already does this for hospitalizations.
payment methods that reward efficiency and               Medical liability: Consider changes to medical
outcomes; and establishing a value-based benefit plan    liability laws to encourage physicians and facilities
that removes barriers to preventive care.                to disclose medical errors and discuss them with
                                                         their patients, and clarify insurer and provider
                                                         responsibilities.




                                                                                                                 9
Health Insurance in Oregon

Reduce administrative paperwork: Standardize          cultural competence continuing education for health
public and private insurance paperwork so that the    care professionals and using community health care
way doctors bill insurers and the way insurers        workers as part of primary care teams.
explain payments to doctors and verify patients’      Workforce: Train more health care providers and
health plan information is the same from one insur-   better use current providers. Short-term recommen-
ance company to another. Greater standardization      dations include revitalizing a loan repayment
will lead to more automated practices and will cut    program that rewards primary care practitioners
administrative costs.                                 who work in rural or underserved areas. Other
                                                      recommendations include revising policies to allow
Other                                                 public educational institutions to respond quickly
Culturally appropriate care: Provide access for       to health care workforce training needs and helping
all Oregonians to have culturally appropriate care    to align and streamline student requirements for
through a variety of initiatives, such as requiring   clinical training.




10
                                                                                    Health Insurance in Oregon


Section 2: Overview of Health Insurance Regulation
Through its Insurance Division, the Department of Consumer and Business Services (DCBS) is the state’s
primary regulator of all types of insurance companies, including health insurance companies. Section 2 provides
an overview of the health insurance market and describes the department’s four major regulatory responsibilities
(financial solvency, policy form approval, consumer protection, and rate approval). This section also explains the
department’s health insurance rate review process, addresses rate increases, and describes the regulations that
apply to each of the submarkets within the commercial market, including new protections and benefits resulting
from federal health care reform.




Health Insurance Marketplace
The health insurance marketplace is not one seamless                       Figure 2-1 shows that 39 percent of Oregonians get
whole, but rather a series of distinct markets, each                       their health insurance in state-regulated markets and
with its own regulatory features.                                          provides a breakdown of the submarkets of the
                                                                           commercial market.

                                        Figure 2-1. Oregon health insurance enrollment
                                                                                                       2009
 Oregon population            1
                                                                                                    3,738,000
 Commercial/state regulated insurance2
         Individual                                                                 193,000                               5.2%
         Portability                                                                 21,000                               0.6%
         Small group 2-50                                                           228,000                               6.1%
         Oregon Medical Insurance Pool                                               15,000                               0.4%
         Large group                                                                804,000                               21.5%
         Associations and trusts                                                    213,000                               5.7%
 Total covered under state regulation                                           1,474,000                                 39.4%
 Large group self-insured3                                                        324,000                                  8.7%
 Federal health care programs4
         Medicare                                                                    602,000                              16.1%
         Medicaid                                                                    475,000                              12.7%
 Total covered under federal regulation                                         1,077,000                                 28.8%
 Uninsured1                                                                       647,000                                 17.3%
 These enrollment estimates do not total 100 percent of Oregon’s population because the numbers are rounded to the nearest thousand and
 come from several sources.
 Office for Oregon Health Policy & Research (OHPR). Figures for the civilian non-institutionalized population are used.
 1

 2
     Oregon Insurance Division quarterly enrollment data, except Oregon Medical Insurance Pool (OMIP) data came from OMIP.
 3
     Oregon Insurance Division quarterly enrollment data.
 4
     Centers for Medicare and Medicaid Services.




                                                                                                                                      11
Health Insurance in Oregon

Commercial/state regulated insurance. The depart-         Large group self-insured. Self-insured employers
ment regulates approximately 800 health insurers          covered 324,000 Oregonians in 2009.
covering more than 1.4 million Oregonians. Of the
                                                          A self-insured employer pays for its employees’
800 insurers, approximately 60 provide major medi-
                                                          health care costs itself rather than paying premiums
cal or comprehensive health insurance. The depart-
                                                          to a health insurer for health insurance coverage. For
ment’s role in regulating the different health
                                                          the largest groups, there is little practical difference
insurance market segments varies widely. Most
                                                          between the two since large employers tend to pay
regulatory attention focuses on the individual, small
                                                          their own claims costs either way, whether through
employer, and portability insurance markets, which
                                                          an experience-rated insurance plan or through
collectively insure 442,000 Oregonians, or roughly
                                                          self-insurance. The distinction between insured and
12 percent of Oregonians. The department has
                                                          self-insured groups is further blurred by the fact that
authority to review and approve or deny rates for
                                                          self-insured employers typically pay insurance
these markets.
                                                          companies to administer the employer’s health
Health insurance provided to large employers, those       benefits as third-party administrators (TPAs). When
with 51 or more employees, is subject to certain          an insurer acts as a TPA, it is often difficult for
requirements of the Insurance Code but is not subject     employees to determine whether their employer is
to state rate regulation. One reason for this is that     insured or self-insured. For example, assume Jim
larger groups typically do not experience the same        and Susan are two neighbors with employer-spon-
rate volatility as individual or small groups, where a    sored health coverage administered by the same
single health problem could have a dramatic effect on     insurance company. Their plans might look the same
rates without regulation.                                 — their insurance cards may look similar, their
By 2016, the federal law will require Oregon to           procedures for getting bills paid may be similar, and
expand its small group market to include groups with      the insurance company processing their claims is the
up to 100 employees. As a result, groups with 51 to       same. In reality, however, the insurance company
100 employees that are currently exempt from state        may be the actual insurer only of Jim, and merely
regulation will be subject to the same rating rules and   the third-party administrator for Susan’s employer, a
review of rates as groups with 2 to 50 employees.         self-insured company.
There are concerns that this expansion may cause          Historically, insurance regulation varied greatly,
some disruption in the markets and push healthier         depending on whether a company was insured vs.
groups with 51 to 100 employees to self-insure. The       self-insured. Employees with insured plans, for
Oregon Health Authority is funding a study to look at     example, enjoy benefits, claims-handling standards,
the impact of this expansion and to determine what        and other protections mandated by state law. They
can be done to lessen the effect.                         also have access to the department’s consumer
In addition to the commercial market, the state’s         advocates who help consumers resolve health
Oregon Medical Insurance Pool (OMIP) covers about         insurance complaints under state insurance laws.
15,000 high-risk individuals. OMIP also administers       If an insurer violates the law, the department can
a new federal high-risk pool known as the Federal         assess a civil penalty of up to $10,000 per violation.
Medical Insurance Pool for those who have been            In contrast, the federal government regulates self-
uninsured for at least six months. The federal pool       insured plans under the 1974 Employee Retirement
enrolled an additional 500 Oregonians in late 2010.       Income Security Act (ERISA). This act pre-empts
                                                          most state insurance regulations, including benefit
                                                          mandates.
                                                          The Affordable Care Act, however, is blurring the
                                                          distinction between regulation of insured and self-
                                                          insured plans by extending an array of new benefit
                                                          requirements and consumer protections to all plans,
                                                          including self-insured plans. For example, the federal
                                                          law provides that enrollees in self-insured plans
                                                          whose claims are denied have the same internal and
                                                          external appeals rights as enrollees in insured plans.

12
                                                                 Health Insurance in Oregon

Federally regulated health care. In addition to           minimum increases as the company assumes more
regulating the self-insured market, the federal           insurance risk. Capital and surplus is the amount a
government regulates Medicare and Medicaid. These         company’s assets exceed liabilities.
programs cover more than 1 million Oregonians.
                                                          The department uses technical standards established
Medicare covers people 65 or older and those with
                                                          by the National Association of Insurance Commis-
certain disabilities. Medicaid covers specific catego-
                                                          sioners (NAIC) to evaluate insurer solvency and
ries of people with low incomes. Although Medicare
                                                          financial stability. The NAIC is made up of insurance
and Medicaid are federal programs, the states are
                                                          regulators from all 50 states, the District of Colum-
responsible for some aspects of both programs and
                                                          bia, and the five U.S. territories. Its standards are
regulate Medicare supplement insurance.
                                                          used widely throughout the country and are known
Uninsured. The Office for Oregon Health Policy and        as risk-based capital (RBC) standards. RBC
Research estimates that 17.3 percent of Oregonians,       measures the minimum amount of capital appropriate
or 647,240 Oregonians, were uninsured in 2009. That       for a company to support its overall business opera-
is up nearly 50,000 people from the prior year. The       tions based on its size and risk profile.
increase might have been even greater if not for
                                                          A company’s RBC is calculated by using a formula
expanded coverage of children through the state’s
                                                          focusing on material risks.
Healthy Kids program and federal premium subsidies
to help some laid-off workers keep their employer’s       The five major risk categories for health insurance
coverage. From Sept. 1, 2008, to Sept. 1, 2010, a total   are:
of 3,810 Oregonians who worked for small employers        ■ Asset risk, affiliates — the risk a company’s
and were laid off took advantage of federal subsidies       investments in affiliates will incur losses
to help them keep their health insurance. The 2009
Legislature passed House Bill 2433, which allowed         ■ Asset risk, other — the risk of default of prin-
Oregonians who lost jobs with small employers to            cipal or interest payments and market value
obtain subsidies for the maximum amount of months           fluctuations
available. Many others working for larger employers       ■ Underwriting risk — the risk of underestimating
also received premium subsidies under the federal           existing policyholder obligations or inadequately
COBRA law but statistics were not available. Read           pricing business to be written in the coming year
more about the uninsured on the Oregon Health             ■ Credit risk — the risk of recovering receivable
Policy and Research website at http://www.oregon.           amounts from creditors
gov/OHPPR.
                                                          ■ Business risk — the general risk of operating a
                                                            business
Financial Regulation
Financial regulation is a high priority for insurance     These factors generate a dollar amount that repre-
regulators to make certain insurers can pay claims.       sents a minimum level of capital and surplus needed
Financial regulation applies to all types of insurers     to maintain solvency. The adequacy of an insurance
operating in Oregon, including all health insurers        company’s capital and surplus is evaluated by
offering individual or group health insurance.            comparing the company’s total adjusted capital and
Certain federal programs, such as Medicare, also rely     surplus with its RBC requirement. The resulting
on state regulators to ensure the solvency of insurers.   RBC ratio is used to determine whether regulatory
                                                          intervention is necessary. It is not used to set a
The purpose of financial regulation is to ensure that     maximum capital and surplus level or a target capital
insurers possess and maintain the financial resources     and surplus level. The department is required to take
necessary to meet their obligations to policyholders.     certain actions, including exercising control of the
The pursuit of financial soundness begins with the        insurer, if a company’s RBC ratio is at or below 200
department’s initial decision about whether to license    percent. Under certain circumstances, such as a
an insurer to do business in Oregon and continues         company losing money, the department has authority
with ongoing financial reviews of licensed compa-         to act if a company’s RBC ratio is between 200
nies. The Insurance Code requires a minimum of            percent and 300 percent.
$2.5 million of capital and surplus before an insurer
will be authorized to transact insurance. The required

                                                                                                                13
Health Insurance in Oregon

While these RBC levels set a minimum regulatory           able Care Act. The department disapproves forms
requirement, a company near these levels is barely        that do not comply with the law or that contain
above financial hardship. The rating organizations        provisions that are unjust, unfair, or inequitable.
that grade the financial status of insurance companies
                                                          While insurance policies for large groups of 51 or
and help determine the companies’ financial viability
                                                          more are not subject to rate regulation by DCBS,
typically expect higher RBC levels. Financial regula-
                                                          insurers must file policy forms for approval and
tors strongly prefer similar cushions, particularly for
                                                          provide all mandated health benefits for all group
not-for-profit insurers that do not have the same
                                                          insurance plans. An exception to the filing require-
access to capital markets as for-profit insurers.
                                                          ment for group health forms exists for policies that
The review of a company’s financial soundness and         are negotiated and unique to a particular group.
compliance with statutes and recordkeeping stan-          These forms, however, must still include benefit
dards is carried out primarily through the financial      mandates and comply with insurance regulations.
examination and analysis process. A financial exami-
nation occurs on site and is an in-depth financial        Consumer Protection
review of an Oregon-domiciled insurer. By law, these
                                                          Health insurers are subject to a wide range of
examinations must be conducted at least once every
                                                          consumer protections under the Oregon Insurance
five years. However, the Insurance Division has the
                                                          Code and the federal Affordable Care Act. Many of
authority to examine a company any time the direc-
                                                          these laws apply to all health insurance, including
tor determines an examination is necessary. The
                                                          limited benefit policies such as those that cover a
financial analysis process involves an in-house desk
                                                          specific disease or pay a fixed amount for each day of
audit of an insurer’s annual and quarterly statements,
                                                          hospitalization. Others target comprehensive health
supplemental filings, and other financial information.
                                                          policies, referred to in law as “health benefit plans.”
The ability of a company to meet its obligations to
                                                          Mandates. State and federal law require health
policyholders is ultimately the responsibility of
                                                          insurers to cover certain services and to include
insurance company management. When the depart-
                                                          certain types of providers in their plans. Some
ment identifies a potential problem with meeting
                                                          mandates, such as maternity coverage, apply to all
policyholder obligations, it contacts company
                                                          insurance policies. Others, such as mental health
management to explain its concerns and to obtain
                                                          parity, apply only to group and portability policies.
information regarding the steps management will
                                                          Not all Affordable Care Act reforms apply to all
take to satisfy those concerns. Once company
                                                          plans. Generally, a plan may be considered grandfa-
management implements these steps, the department
                                                          thered, and thus exempt from some provisions of
monitors the outcome. If steps taken by management
                                                          federal law, if the plan existed before the law took
do not improve operating results and adequate
                                                          effect March 23, 2010, and meets other criteria.
surplus cannot be maintained, DCBS may decide that
regulatory action, including supervision, rehabilita-     Key mandates under the new federal law:
tion, or even liquidation, is necessary.                  ■ Adult children may stay on their parents’ policies
                                                             up to age 26 even if they no longer live at home
Form Regulation                                              or no longer are students or dependents on a tax
A health policy contract or form refers to the docu-         return. Both married and unmarried children
ments that describe the benefits of a health insurance       qualify. (This applies to all plans.)
policy (as opposed to the rates that address the charge   ■ Children under age 19 who have pre-existing
for those benefits). The department reviews all              conditions may no longer be denied coverage in
individual and group health policy forms to ensure           the individual market — as long as they apply
they include all the required policy language and            for insurance during an open enrollment period.
provisions necessary to constitute a complete insur-         In Oregon, these are the months of February and
ance policy. This includes the mandated benefits             August every year. Special qualifying events,
required by Oregon law and by the federal Afford-            such as the birth of a child, may also trigger an
                                                             open enrollment period.



14
                                                                    Health Insurance in Oregon

■ Preventive services must be provided with no
    co-pays or other cost sharing. (This applies to            Claims mishandling
    non-grandfathered plans.)                                  The Department of Consumer and Business
■ Policies may not include any lifetime limits on              Services investigates consumer complaints about
    how much they pay for essential benefits. (This            potential claims mishandling. Investigations
    applies to all plans.)                                     involve such issues as whether insurers pay
                                                               claims timely, conduct reasonable investigations
■ Annual limits on what policies pay for essential             before denying claims, and correctly implement
    benefits are restricted. (This applies to some plans.)     new laws.
In 2014, federal subsidies will be available to many
                                                               From 2009 through 2010, the department recov-
individuals to buy health insurance through
                                                               ered more than $3.6 million on behalf of consum-
exchanges. Plans offered in the exchanges must
                                                               ers who were hurt by practices that violated
include certain “essential” benefits and meet cost
                                                               insurance laws. In addition to recovering money
standards. However, federal subsidies cannot be used
                                                               on behalf of consumers, the department worked
to pay for any state mandates that exceed federal
                                                               with insurance companies to change practices
requirements. In cases where people qualify for
                                                               that posed harm to other consumers. Some of the
federal subsidies, the state must pay the consumer or
                                                               key issues involved companies that:
the insurer for the costs of any additional coverage
required by state mandates. Thus, Oregon policy-               ■ Denied claims from a group plan before the
makers will likely want to weigh the costs of state              group policy was officially terminated.
mandates before an exchange begins operation in                ■ Required pre-authorization for obtaining cer-
2014.                                                            tain services when the policy did not require
Federal law identifies essential benefits that must be           pre-authorization.
included in all policies offered through an exchange.          ■ Failed to pay claims for mammograms and
They include benefits such as doctor visits and other            pap smears although Oregon law requires
outpatient care; emergency services; hospitalization;            coverage of these services.
maternity and newborn care; mental health and
substance abuse services, including behavioral health
treatment; prescription drugs; rehabilitative services;      Unfair claims settlement practices. ORS 746.230
laboratory services; preventive and wellness services;       prohibits misrepresenting facts or policy provisions
chronic disease management; and pediatric services,          in settling claims, failing to act promptly upon
including oral and vision care. Health and Human             claims-related communications, refusing to pay a
Services is not expected to define the specific essen-       claim without conducting a reasonable investigation,
tial health benefits until late 2011.                        not attempting in good faith to equitably settle claims
Unfair discrimination. ORS 746.015 prohibits                 in which liability has become reasonably clear, and
“unfair discrimination ... between risks of essentially      failing to explain the policy basis for denial of a
the same degree of hazard in the availability of             claim.
insurance, in the application of rates for insurance ...     Privacy. ORS 746.600 to 746.690 protect the privacy
or in any other terms or conditions of insurance             of health information.
policies.”
                                                             Patient protections. ORS 743.801 to 743.913 provide
Misrepresentation. ORS 746.075 and 746.100                   specific protections to consumers and disclosure
prohibit various types of false or misleading repre-         requirements for insurance companies relating to
sentations, including a broad prohibition against any        denial of claims, rights to appeals and independent
“practice or course of business which operates as a          review of adverse decisions, rights to continuity of
fraud or deceit upon the purchaser, insured, or person       coverage, rights of women to choose primary care
with policy ownership rights.”                               providers and have access to women’s health care
                                                             providers, and specific claims payment requirements.
                                                             The Affordable Care Act extends these rights to
                                                             employees of self-insured businesses.


                                                                                                                15
Health Insurance in Oregon

Rescission. Federal law prohibits insurers from             Oregon must provide reasonable cost estimates for
rescinding coverage (cancel it retroactively as if it       common medical procedures via interactive websites
never existed), unless fraud or an intentional misrep-      and toll-free telephone numbers. For a list of common
resentation of material fact is involved. In the past,      procedures, the estimators must include information
rescissions could occur if a policyholder inadver-          about how much of the deductible an enrollee has
tently left out or misstated important information          met; the amount of other costs, such as co-insurance,
about medical history when applying for insurance.          that an enrollee must pay; and the amount of any
Although rare in Oregon, rescissions will be even           applicable benefit maximum. The department also
more unlikely in the future.                                gathers information from insurers to provide
                                                            consumers with the costs of specific, inpatient
Consumer advocacy. In a typical year, the depart-
                                                            medical procedures at all Oregon hospitals. This
ment’s consumer advocacy staff handles approxi-
                                                            information, along with quality data, is available at
mately 16,000 inquiries and 4,000 consumer
                                                            http://www.oregon.gov/OHPPR.
complaints about all lines of insurance. About 40
percent of complaints involve health insurance. In
addition to helping individual consumers resolve             Federal website lists insurance options
insurance problems, the advocates also look for
violations of the law and broader trends and refer            Federal reforms require insurers to provide
problem cases to market analysts.                             information to the U.S. Department of Health
                                                              and Human Services about the costs and benefits
The market analysts conduct investigations designed           of health plans they offer. Consumers can view
to stop patterns of consumer abuse. The market                options in their area by visiting www.healthcare.
surveillance process can result in enforcement                gov. Options are listed for all consumers, includ-
actions, with civil penalties of $50,000 or more for          ing small employers, individuals who do not get
serious patterns of consumer abuse.                           coverage through an employer, people with
The department’s advocacy services will be                    limited incomes, or people with pre-existing
expanded as a result of a $431,000 consumer assis-            medical conditions.
tance grant received in late 2010 as part of federal
health care reform. The department worked with the          Rate Regulation
Oregon Health Authority to establish a new website,
Oregon Health Connect. This site provides a direc-          DCBS must approve health insurance rates in the
tory of governmental and community organizations            individual, small group, and portability markets.
involved with health insurance or health care. This is      Health insurance rates are not regulated for large
intended to help connect Oregonians with the health         groups with 51 or more employees where competition
care and insurance that best fits their needs. Visit this   plays an important role in keeping rates reasonable.
site at www.oregonhealthconnect.org.                        While there has been much discussion about how
Additionally, a new referral specialist will staff a        federal health reform might change states’ review of
toll-free number devoted to helping consumers find          proposed insurance rates, it appears that reforms will
the appropriate state program or community organi-          have little impact in states like Oregon that already
zation or explain ways to find an insurance agent.          have a strong rate review process. In late 2010, a
An appeals/enrollment specialist will help certain          proposed federal regulation maintained the role of
consumers — such as those with language or literacy         states in determining whether a small group or
barriers — complete appeals paperwork, file                 individual rate was reasonable. (The regulations do
complaints, or fill out health plan applications.           not apply to large group rates.) In states lacking an
                                                            effective rate review process, HHS would determine
Transparency. As consumers bear more of their               whether certain rates are unreasonable and, if so,
health care costs through higher deductibles,               would require justification for the rate. Under the
co-payments, and co-insurance, it is important for          proposed rules, however, HHS would not have
them to know in advance how much their health care          authority to reject the rate.
will cost so they can make good, cost-effective health
care decisions. Health insurers doing business in


16
                                                                    Health Insurance in Oregon

In Oregon, rate filings for regulated groups must            group, or large group coverage will have to report the
include actuarial documentation. Oregon law (ORS             following for each market in each state in which they
742.005) provides that rate filings will be disap-           do business:
proved if the filings are deemed “prejudicial to the         ■ Total earned premiums
interests of the insured’s policyholders,” if the filings
                                                             ■ Total reimbursement for clinical services
contain “provisions which are unjust, unfair, or
inequitable,” or, most significantly, if the “benefits ...   ■ Total spending on quality improvement activities
are not reasonable in relation to the premium                ■ Total spending on all other non-claims costs,
charged.”                                                        excluding federal and state taxes and fees
Department actuaries rely on these laws to answer            The report is due June 1 of every year, and the
two basic questions about each rate filing: Is the           information received from the report will be public
aggregate rate request justified? Is the request fairly      and posted on the HHS website.
allocated among the ratepayers? In some cases, the           In 2012, insurers will be required to begin rebating to
second question is the more important one since a            enrollees an amount proportional to the amount of
modest change in aggregate rates can mask a much             premiums paid the previous calendar year. For
larger variation among ratepayers. For example, a            example, if an insurer had a 75 percent medical loss
proposed 3 percent increase in aggregate or average          ratio in the small group market, the insurer would
rates could, depending on how the aggregate increase         have to rebate 5 percent of the amount of premiums
is allocated among ratepayers, mean a 20 percent             paid by each enrollee in a small group plan (in some
increase for some individuals or groups and a 10             cases, rebates are paid to employers on behalf of
percent decrease for others. These issues are particu-       enrollees). An enrollee that paid $1,000 in premiums,
larly important as they relate to health insurance,          therefore, would receive a $50 rebate. Rebates will
where rate regulation focuses on protecting those            take the form of a reduction in premiums, a rebate
with the greatest health needs through pooling of risk       check, or a lump-sum credit to the credit or debit
and blending of rates.                                       account used to pay the premium and are due Aug. 1
Below are the key factors the department uses to             of each year.
determine whether the overall rate request is                It is unlikely that this new regulation will have much
actuarially justified:                                       impact in Oregon. Due in part to this state’s detailed
Historical and projected loss ratio. The loss ratio is       and strict rate review requirements, most insurance
the relationship between the claims paid by the              companies in Oregon already meet or exceed the
insurance company and the premiums received.                 desired balance between medical care/quality
Companies typically have loss ratios between 80              improvement spending and administrative costs and
percent and 90 percent for health insurance. This            profits.
ratio means that for every dollar in premium, the            Historical and projected trend. Trend is the rate of
company pays out 80 cents to 90 cents in medical             increase in the claims portion of an insurance compa-
claims. Loss ratios are typically lower for individual       ny’s loss ratio and consists of two components:
and small group insurance because administrative             medical inflation and use. Medical inflation reflects
expenses are higher on a per capita basis in these           the increase in the unit cost of covered medical
markets. Insurance companies seek loss ratios below          services, including hospital stays, prescription
100 percent because the company will always incur            medications, charges by physicians and other medical
some administrative costs.                                   professionals, and costs for diagnostic services,
Under the Affordable Care Act, an insurance                  including tests and imaging. Use reflects the rate at
company is required to rebate premiums when it fails         which medical services are used and can be affected
to spend at least 80 percent of premiums collected in        by the health and age of the insured population, the
a state’s small group and individual markets on              level of coverage, the availability of new drugs and
medical care and quality improvement. It must spend          new medical technology, and the choice of treatment
at least 85 percent of premiums on these activities in       options by an insured and his or her medical provid-
a state’s large group market or pay a rebate. Under          ers. Because medical costs are the primary cost
federal regulations issued in late November 2010,            driver of health insurance premiums, trend is an
insurance companies that issue individual, small             important factor in rate filings.

                                                                                                                17
Health Insurance in Oregon

Historical and projected administrative costs.
Administrative costs are generally higher for indi-                      Executive pay
vidual and small group health insurance on a per                         One of the issues often raised by consumers in rate
capita basis and should decline on a percentage basis                    filing comments to the department is that of execu-
as the company’s business volume grows. Adminis-                         tive compensation. In 2010, executive pay (based on
trative costs are also usually higher for insurers that                  a company’s highest paid executives) accounted for
write fewer policies or that write several low-                          less than one dollar of the monthly insurance
premium policies. Short-term administrative costs                        premium in the small employer market and slightly
may increase due to factors such as technology                           more than one dollar in the individual market.
investments designed to improve medical outcomes
                                                                         In the individual market, executive salary costs
or reduce long-term costs.
                                                                         ranged from 28 cents of the monthly premium bill
Since April 2010, the department has required                            for one of the larger insurers to $1.89 per month for
insurance companies to separately report and justify                     a smaller insurer with a significant share of high-
changes in administrative expenses by line of busi-                      deductible plans that produce less premium to offset
ness and to provide details about what they spend on                     salary costs. In the small employer market, the effect
salaries, commissions, marketing, advertising, and                       of executive pay ranged from 16 cents to $1.74 of
other administrative expenses.                                           the monthly health insurance premium.
Figure 2-2 provides a rough breakdown of key                             Agent commissions
administrative expenses in the small group and                           Health insurance agents face an uncertain future as
individual markets combined.                                             rising premium costs and federal health reform pres-
                                                                         sure insurers to reduce administrative costs and give
                Figure 2-2. Breakdown of                                 consumers more information about health insurance.
             total administrative costs, 2009                            Historically, many insurance companies paid agents
                                                                         a percentage of the premium they generated in sales.
                                         Marketing and
                                          advertising                    In Oregon, commissions accounted for an average
           Commissions
              25.1%                          3.6%                        of 4.4 percent of premiums in 2009 in individual
                                                      Travel             and small group markets. A commission is paid as
                                                    expenses
                                                       0.6%              long as the client remains insured.
                                                                         However, companies are re-evaluating this commis-
                                                                         sion system as escalating claims costs push up
                                                                         premiums and reforms require insurers to spend a
                                                                         certain percentage of premiums on medical care
                                                                         versus administrative costs such as commissions.
     Office expenses,
     taxes and fees,
                                              Salaries, wages,
                                                                         One national company announced that in 2011 it
     equipment, software,
     furniture, and all                     employment taxes,            will no longer pay a commission in the group market
     other expenses                          and other benefits          but that agents can negotiate fees for their services
           28.1%                                    42.6%
                                                                         from employers. In Oregon in 2011, at least two of
Source: Oregon Insurance Division, rate filings
                                                                         the seven largest health insurers will pay a flat fee
Note: The chart breaks down average total administrative costs,
                                                                         — rather than a percent of premiums — for commis-
including claims-handling costs, for small group and individual insur-   sions in the small group market. Other companies
ance markets based on rate filings submitted after April 2010, when      are monitoring commissions.
insurers were first required to provide this information to the divi-
sion. Not all of the seven largest health insurers had submitted both    Beginning in 2014, many small employers and indi-
individual and small group rate requests at the time the chart was
prepared.
                                                                         viduals who do not get job-based insurance will buy
                                                                         health insurance through “exchanges.” Exchanges
                                                                         should make it easier for consumers to compare
                                                                         plans. While many people anticipate agents will be
                                                                         part of these state-based exchanges, many states,
                                                                         including Oregon, are still in the planning stages.

18
                                                                    Health Insurance in Oregon

Net income target. Insurance company rate filings
include a net income target for the line of insurance          Federal grant to enhance the rate
that is the projected profit or loss after subtracting         review process
projected claims costs and administrative costs from
projected revenue.                                             In addition to funding the consumer group OSPIRG
                                                               to bolster public input, the department’s $1 million
With passage of 2009 legislation, the department               federal reform grant will be used to further analyze
has explicit authority to consider an insurer’s invest-        rate requests and to improve the rate review process.
ment income, surplus, and cost containment and                 For example, the department:
quality improvement efforts when reviewing a rate
filing. It may also consider an insurer’s overall              ■ Hired an actuary and a market analyst to in-
profitability rather than just the profitability of a            crease the scrutiny of rate filings and to audit
particular line of business such as small group plans.           insurance company data that is submitted as
Because companies generally were more profitable in              part of rate requests.
2010 and some had healthy surpluses, the department            ■ Worked on administrative rules that require
pushed back on certain insurer rate requests, even               insurers to detail medical claims.
though some insurers were losing money in these
lines of insurance. However, the department is                 ■ Will fund a study on ways it might use rate
careful about using surplus and overall company                  review to lower premiums. The consultant
profitability to mitigate rate increases. As medical             conducting the study will address such
claims costs continue to rise annually by double                 questions as whether Oregon should require
digits, keeping rates artificially low will only result in       insurers to spend a minimum amount on
even greater increases in the future.                            primary care, whether Oregon should reject
                                                                 rate requests if an insurer contracts with
For each of these factors, department actuaries                  providers who have not adopted defined best
evaluate the reasonableness of insurance company                 practices, and whether Oregon should reject
assumptions in light of the company’s past experi-               proposed rate increases if certain provider
ence, the effect on policyholders, and the rates being           costs included in those rates go up by more
charged by competitors. Although the department                  than a certain percentage each year or are
does formally disapprove rate increase requests when             outside the normal range.
warranted, it more often asks for additional informa-
tion, questions an insurance company’s assumptions,
and indicates informally that the rate increase should
be reduced or spread over time.                              When determining whether to approve a rate filing,
                                                             the department considers public comments relevant
The second set of actuarial issues — how rates vary          to the rate filing standards. As part of a federal grant
among groups and individuals — typically depends             to enhance the rate review process, the department in
on whether the proposed rates comply with the                late 2010 awarded funds to the Oregon State Public
specific rules applicable to each commercial sub-            Interest Research Group (OSPIRG), a nonprofit
market and whether reasonable adjustments have               consumer advocacy organization, to regularly
been made to ensure a rate request that is reasonable        provide meaningful comment on significant rate
in the aggregate is not inequitable to particular            requests. OSPIRG’s involvement will help to ensure
groups or individuals.                                       that the department receives consumer input on the
Consumer input. Consumers have 30 days to                    key issues it considers in deciding rate requests. To
comment on insurance company rate requests for               learn how to receive e-mail notifications of rate
individual, small group, and portability health              request filings and how to comment, visit http://
insurance plans. The timeline starts when a rate             insurance.oregon.gov/insurer/rates_forms/health_
request filing is deemed complete and details are            rate_filings/health-rate-filing-search.html.
posted on the Insurance Division website. Consumers
who have signed up on the division’s website are then
notified when a company has filed a rate request. Any
comments they submit are posted on the website.


                                                                                                                  19
Health Insurance in Oregon

Health Insurance Premiums                                   The rate increases reflected in Figure 2-3 tend to
Health insurance premiums in Oregon and the rest of         mirror increases in medical claims costs. Oregon
the country generally reflect the cost of health care.      family premiums in the small employer market in
In 2009, Oregon’s seven largest health insurers spent       2009 ranked 35th among the 50 states and the
an average of 91 cents of every premium dollar on           District of Columbia, meaning only 16 states had
hospital and medical care, including prescription           lower average premiums, according to the federal
drug coverage.                                              Medical Expenditure Panel Survey. Oregon’s average
                                                            annual family premium of $11,319 in 2009 compared
Rate requests vary greatly among insurance compa-           to the national average of $12,041. See Appendix 3
nies depending on their unique financial situation.         for state-by-state annual premium comparisons.
Similarly, premium increases charged to a particular
small business can vary greatly depending on                          Figure 2-3. Average annual rate
changes in the group’s characteristics. For example,                increase in the Small Group Market
rates would more than likely rise because the average
employee age went from 35 to 50. Generally,                              Year                         Increase
however, cost and use of health care are the key                         2006                            8.39%
factors that drive rates. Cost is related to such factors
                                                                         2007                           11.92%
as new and more expensive technologies, cost shift-
ing, and reduced competition among providers.                            2008                           13.44%
Increased use is attributable to such factors as aging                   2009                           10.47%
of the population and unhealthy lifestyles. Because                       2010                          11.68%
insurance is a tool to finance the underlying costs of
health care, Oregon’s planned reforms include efforts       Source: Department of Consumer and Business Services,
                                                            Insurance Division, approved rate filings.
to contain health care costs.
While consumers are sensitive to premium prices —           Figure 2-4 shows that Oregon’s individual health
the monthly bill they pay regardless of whether they        insurance market has been more volatile than its
use medical services — premiums only tell part of           small group counterpart over the past five years,
the story of health insurance costs. In an effort to        ranging from an average rate decrease of 1.09 percent
contain premium costs, several insurers in the              in 2006 to an average rate increase of more than 21.3
individual market significantly redesigned health           percent in 2008. One reason for this volatility is that
plans in 2010 to shift more of the costs of using medi-     in 2006, following a profitable period, Regence
cal services to policyholders. One of the most visible      BlueCross BlueShield of Oregon lowered its rates
changes for consumers was a rise in deductibles —           by 16 percent, prompting many other insurers to
the amount they must pay in a calendar year before          suppress rate increases. However, insurers could not
the insurance company begins paying benefits. For           maintain these artificially low rates in the face of
those with employer-sponsored insurance, deduct-            continuing increases in medical costs, forcing them
ibles for family coverage increased 66 percent over         to increase rates significantly.
the five-year period ending in 2009, according to a
federal survey of Oregon employers. (See Figure                       Figure 2-4. Average annual rate
1-3.) They increased 55 percent for a single employee.               increase in the Individual Market
Figures 2-3 and 2-4 show the average annual rate                         Year                         Increase
changes in the small group and individual markets
                                                                         2006                           -1.09%
over the past five years. These averages are weighted
based on enrollment and are calculated based on                          2007                           13.34%
data submitted by insurers in rate filing documents.                     2008                           21.34%
The averages are not comparable to the averages                          2009                           14.92%
used in previous reports because they are calculated
based on approval date rather than effective date as                      2010                          15.57%
in years past.                                              Source: Department of Consumer and Business Services,
                                                            Insurance Division, approved rate filings.



20
                                                                                   Health Insurance in Oregon


 Federal reform and health insurance rates
  New consumer benefits mandated by federal health                     People with policies that cover children —
  care reform generally accounted for no more than 4                   whether they are child-only policies or individual
  percentage points of rate increases approved in late                 family plans covering dependents — were likely to
  2010. The amount varied by insurance company and                     see higher-than-average increases. These increases
  by plan. For example, policies that already cover                    resulted from the Affordable Care Act’s prohibition
  preventive benefits with no cost-sharing might have                  against denying coverage to children with pre-exist-
  less of a rate increase than a policy that formerly                  ing health conditions.
  charged members a co-pay for preventive services
  but can no longer do so under health care reform.


Medical costs drive rates
Both the use and cost of medical care drive                            from 2005 to 2009. Figure 2-6 shows the increase in
health insurance rates. Figure 2-5 shows the                           the cost of certain common medical procedures from
corresponding rise in medical claims and premiums                      2005 to 2009.

                           Figure 2-5. Monthly earned premium and medical claim costs
                             per member, of seven largest insurers from 2005 to 2009
           $350                                                                                                 310
                                                                                            289
           $300                                   256                 264
                              242
           $250                                                                                                 281
                                                                                            263
           $200                                   226                 237
                              206
           $150
           $100
            $50
              $0
                             2005                 2006             2007                     2008               2009

                                                    Medical claim costs               Earned premium




                         Figure 2-6. Percent ch an ge in allo wed p aymen from 2005 5 2009.
                        Figure 2-6. P ercent change in allowed paymentsts fro m 2 0 0 to to 2 0 0 9 .
                     Cesarean delivery                        20.4%
               Knee joint replacement                                  27.6%
                            Pneumonia                                     28.6%
                        Vaginal delivery                                  29.2%
          Coronary artery bypass graft                                      31.3%
              Congestive heart failure                                       32.3%
                      Appendix removal                                       32.4%
                   Hip joint replacement                                          34.3%
          Major depression/psychoses                                               36.0%
                           Heart attack                                                       47.1%
                               Diabetes                                                                 57.7%

                                           0.0%           20.0%                     40.0%              60.0%             80.0%

         Source: Office for Oregon Health Policy and Research and Oregon Department of Consumer and Business Services:
         Health Benefit Plan Reports (Figure 2-5) and Market Conduct Examination Data (Figure 2-6).

                                                                                                                                 21
Health Insurance in Oregon

Commercial Submarkets
Each submarket in commercial health insurance has        High-risk pool eligibility. Individuals denied cover-
its own regulations. Below are descriptions of the       age in the individual market are eligible for coverage
individual, small group, and large group submarkets.     through the Oregon Medical Insurance Pool (OMIP).
                                                         This program operates state and federal high-risk
Individual Market                                        pools. Applicants for the federal pool must be unin-
The individual market includes individuals and           sured for at least six months, have an existing medi-
families who do not have access to employer-             cal condition, and be a U.S. citizen or legally present
sponsored group coverage. Approximately 193,000          in the United States. There is a choice of two compre-
Oregonians, or 5 percent of the population, purchase     hensive health plans under the federal pool. The
health insurance in the individual market.               federal government subsidizes premiums and federal
                                                         law requires that they be no higher than the market
Insurers may turn down adult applicants for individ-     average for comparable benefit plans.
ual health insurance coverage for various reasons,
including health. People under age 19 cannot be          For those who have been uninsured for less than six
denied coverage because of pre-existing conditions.      months or who otherwise do not meet the federal
However, insurers may limit enrollment of this           pool eligibility requirements, coverage under the
population to certain times of the year. In Oregon,      state high-risk pool is available. A board of directors
open enrollment is February and August of every          determines the coverage and the rates for the state
year.                                                    pool. The law prohibits the state pool from charging
                                                         rates that are more than 25 percent higher than those
Once covered, however, those with individual health      in the individual market. The state program may also
insurance have guaranteed renewability as long as        serve as the health plan option for individuals quali-
they pay their premiums. Adults age 19 or older who      fied for the Federal Health Coverage Tax Credit, as
are denied coverage because of health status can         well as the portability option for individuals who lose
obtain coverage through the Oregon Medical Insur-        their self-insured, employer-based group coverage.
ance Pool (OMIP). This program operates state and        Portability rates are set at the average of current
federally funded high-risk pools.                        portability market rates. Because premiums in the
In the individual health insurance market, DCBS          state pool are not sufficient to cover claims costs, the
must review and approve both the content of insur-       board imposes an assessment on insurance compa-
ance contracts and the rates charged for the coverage    nies and reinsurance companies to cover the short-
provided. The department’s review of the insurance       fall. Both pools will be available until 2014, when
contracts ensures that mandated services are included    insurers will no longer be able to deny coverage
and consumer protection standards are met. Provi-        based on pre-existing conditions.
sions of the Oregon Insurance Code or federal law        Guaranteed renewability. All individual health
applicable to the individual market include:             insurance policies are guaranteed renewable as long
Standard health statement. Companies that sell in        as the individual continues to make the required
the individual market must use information obtained      premium payments. A general exception from the
from the standard health statement to decide whether     guaranteed renewability requirement exists for a
to offer coverage to people age 19 or older. The         company that chooses to withdraw from a particular
health statement contains a series of questions          geographic area or from the entire state or that
regarding an applicant’s medical history for the         discontinues a particular health plan.
previous five years. As noted earlier, insurers may      Rating rules. Premium rates cannot be based on an
decline to offer coverage to adults 19 or older          individual’s health or claims experience, and insur-
because of health history. If an insurer offers cover-   ance companies may not consider an individual’s
age, however, premium rates cannot be based on an        health status in setting premium rates. With the
individual’s health experience. People under age 19      exception of age, insurers are prohibited from using
may not be denied coverage because of pre-existing       individual characteristics when setting premiums and
conditions and do not have to provide medical history    cannot increase rates for an individual more than
information on the health statement.                     once per year.

22
                                                                 Health Insurance in Oregon

                                                          Small Group Market (2-50 employees)
Mandated benefits. All individual health insurance        Insurers serving the small group market must accept
policies must include certain mandated health bene-       all groups regardless of their health status. The
fits. Under the Affordable Care Act, insurers must        department reviews rates to ensure they meet stan-
provide preventive benefits, some of which are            dards that protect groups with older or less healthy
similar to benefits mandated under Oregon law.            employees. Similar rules apply to “portability”
Under federal law, however, insurers may not impose       coverage, which is available to Oregonians who leave
cost sharing (co-pays, deductibles, etc.) on preventive   group coverage and who meet certain eligibility
benefits. Oregon law does not limit cost sharing on       standards. Federal law requires all states to offer
Oregon-mandated coverage. This means that unless          portability coverage, and most states offer the cover-
an Oregon mandate is also a preventive benefit under      age either in the individual market or through a state
federal law, an insurer will be able to continue to       high-risk pool. Oregon has a more successful porta-
impose cost sharing on the coverage. A comparison         bility program than most states because Oregon law
of coverage required by the preventive benefit            requires group health insurers to provide portability
requirements of the Affordable Care Act and the           coverage to individuals leaving an insurer’s group
Oregon mandates can be found at http://insurance.         business. Portability coverage through the Oregon
oregon.gov/consumer/federal-health-reform/                Medical Insurance Pool is available to individuals
mandate-comparison-chart.pdf.                             leaving group coverage only when a group insurer’s
                                                          portability coverage is not available for very
Pre-existing conditions. Insurers cannot deny
                                                          specific reasons. Approximately 7 percent of
coverage to people under age 19 nor can they make
                                                          Oregonians obtain their insurance from the small
children wait for coverage for pre-existing condi-
                                                          group (228,000 Oregonians) and portability markets
tions. In the case of adults, an insurer can only
                                                          (21,000 Oregonians).
impose an exclusion from coverage for a pre-existing
medical condition if medical advice, diagnosis, care,     In the small group health insurance market, as in the
or treatment was recommended or received during           individual market, DCBS must review and approve
the six months prior to the effective date of coverage.   both the insurance contracts and the rates charged for
If an insurer excludes a pre-existing condition from      the coverage provided. Provisions of Oregon law
coverage, it may only do so for up to six months.         applicable to the small group market include:
This six-month exclusion period, however, is reduced      Guaranteed issue. Insurers selling health insurance
by the number of months the insured had continuous        in the small group market must offer all of their small
prior coverage or eliminated altogether. For example,     group products to all small groups on a “guaranteed
an insurer may exclude coverage for a member’s            issue” basis, meaning that each small group has
pre-existing heart condition for up to six months;        access to all products offered to any other small
however, if the member had prior continuous cover-        group in the relevant service area. A group cannot be
age without a break of more than 63 days for five         turned down based on the age, health, or claims
months, the six-month exclusion is reduced to one         experience of those covered.
month. If the member had prior continuous coverage
for six months, there would be no exclusion of            Guaranteed renewability. Small employer plans are
coverage of the heart condition. Insurers can impose      guaranteed renewable, meaning the coverage contin-
waivers of coverage on pre-existing conditions for up     ues at the employer’s option as long as the employer
to 24 months and can restrict an individual’s choice      continues to make the required premium payments.
of health plans, but must do so based solely on the       As with individual insurers, a general exception from
standard health statement. An insurance company           guaranteed renewability exists for an insurance
may legally decide not to insure women who are 19         company that chooses to withdraw from a particular
or older and pregnant when they apply for an indi-        geographic area or from the entire state.
vidual plan. The father of the child may also be          Rating rules. Insurance companies must pool all of
denied coverage. However, people who are denied           their small group employers when setting rates; thus,
coverage may apply for insurance through the              the rate charged to a business largely reflects medical
Oregon Medical Insurance Pool and the Federal             claims for the entire small group market and not
Medical Insurance Pool.                                   claims for that particular business.

                                                                                                              23
Health Insurance in Oregon

Rate bands. In the small group market, the most            Oregon law allows group health insurers flexibility in
expensive rate charged by an insurer can be no more        rating association and trust health benefit plans
than three times the lowest rate charged. This is          offered to small employer groups. It also establishes
known as a 3-to-1 rate band. For example, if an            protections to keep groups insured under these plans
insurer’s lowest offered rate is $50, then the insurer’s   from losing coverage due to high claims. Out-of-state
highest offered rate may not exceed $150.                  association and trust plans are subject to the same
Rating factors. The law limits the factors that can be     requirements as Oregon-based associations.
used to set rates. Factors that may be used include        Association health plans are exempt from the
age, participation in wellness programs, employer          small group rating laws (previously discussed) if
contributions, customer loyalty, tobacco use, and          associations meet criteria aimed at preventing
expected claims, which is limited to a 5 percent           “cherry-picking,” or providing less expensive
variation.                                                 coverage to the healthiest groups. Cherry-picking
Pre-existing condition exclusionary periods. Small         leaves the less-healthy groups to buy coverage in the
group plans can exclude coverage for certain condi-        general market, which makes this market less
tions that an employee age 19 and older had prior to       healthy and leads to increased rates over time.
enrollment, but the exclusion period cannot exceed         ■ Associations and insurers cannot deny member-
six months (12 months for late enrollees). Insurers          ship or coverage to any small employer group
cannot impose an exclusion period on coverage for            based on health.
any dependents who are under age 19 and may not
                                                           ■ There are limits on how much the initial premium
treat pregnancy as a pre-existing condition. Any
                                                             rate may vary between groups of small employers
six-month exclusion period imposed on adults is
                                                             so that rates cannot be used to ward off higher-
reduced by the number of months the insured had
                                                             risk groups.
continuous prior coverage without a break of more
than 63 days.                                              ■ Associations must maintain high retention rates,
                                                             apply for an exception to these retention rate
Mandated benefits. All small group health insurance
                                                             requirements, or follow the more stringent regula-
policies must include certain mandated health bene-
                                                             tions of small-group health insurance laws.
fits. See the mandates at www.cbs.state.or.us/exter-
nal/ins/sehi/mandated_health_provisions.pdf.               Large Group Market (51 or more employees)
Nondiscrimination. Both federal and state law              The large group market is made up of employers that
prohibit health insurance companies from applying          have 51 or more employees that choose to purchase
different eligibility rules, offering different health     insurance for their employees rather than self-insure.
insurance benefits, or charging higher premium rates       There are approximately 804,000 Oregonians, or 22
to individual employees within a small employer            percent of the population, insured in the large group
group on the basis of health status or other health-       health insurance market. The insured portion of the
related factors, including claims experience, medical      market is subject to consumer protection laws, such
history, or genetic information.                           as mandated benefits and claims-handling rules.
Participation requirements. Health insurance compa-        There are no laws regulating rates in this market and
nies may require small employers to pay some portion       no requirement that coverage be offered to all groups.
of their employees’ health insurance premiums and          The department reviews and approves the content of
may also require that a certain percentage of eligible     large group insurance contracts to ensure that they
employees participate in the plan. If an insurer           include coverage mandates and meet consumer
requires 100 percent of eligible employees to partici-     protection standards. Legal requirements that apply
pate in the plan, the insurer may not require a small      to both small and large groups are guaranteed
employer to contribute more than 50 percent of the         renewability, mandated benefits, nondiscrimination,
premium cost of an employee-only benefit plan.             participation requirements, portability, and pre-
Associations and trusts                                    existing conditions. As noted previously in this
Associations offer group health insurance to their         section, Oregon laws governing large groups are not
members who are employers or unions. In 2009,              applicable to self-insured employers.
approximately 213,000 Oregonians received health
insurance through an association.
24
                                                                                           Health Insurance in Oregon


Section 3: Financial Status of Largest Health Insurers
As the economy begins to show signs of recovery, the Department of Consumer and Business Services continues
to closely monitor the financial condition of Oregon’s domestic health insurers. Despite enrollment losses for
most insurers, carriers have taken steps to stay financially strong as the economy stabilizes. Nonetheless, these
turbulent economic times underscore the importance of the department’s responsibility to monitor the financial
condition of insurers to make sure that each is able to pay policyholder claims.
The department conducts financial examinations of Oregon health insurers every three to five years or more
frequently when warranted. Oregon health insurers also submit quarterly and annual financial statements to the
department. The department’s financial analysts review these statements to evaluate each insurer’s financial
status and operational health over time.
This section presents an overview of the financial status of the seven largest Oregon-based health insurers using
financial statements over five- and 10-year periods.
Note: This report uses data from several sources; and the numbers presented in this section cannot be compared
to those in Section 4. See the Appendix for more information about key data sources.
Figures 3-1 and 3-2 show the recession’s toll on the number of people enrolled in health coverage through the
state’s seven largest health insurers. From 2007 through 2009, enrollment through these companies declined by
15 percent.

                         Figure 3-1. Seven largest insurers, number of members, 2005 to 2009
                                1,400
                                                                                         1,384
                                1,350          1,315            1,319
               In thousands




                                1,300
                                                                                                    1,247
                                1,250
                                1,200
                                                                                                                      1,173
                                1,150
                                               2005             2006              2007           2008          2009

             Source: Oregon Insurance Division, Health Benefit Plan Reports.




                                          Figure 3-2. Seven largest insurers, percent change in
                                           number of members from prior years, 2007-2009
                               Insurer                        2007                       2008               2009
                               Health Net                       -2%                       0%                -10%
                               Kaiser                           0%                        -1%                0%
                               LifeWise                        -4%                    -30%                  -20%
                               ODS Health Plan                  5%                       26%                12%
                               PacificSource                    0%                       -7%                 2%
                               Providence                       5%                       17%                -14%
                               Regence                         15%                    -25%                  -9%
                               Total all seven                  5%                    -10%                  -6%
                              Source: Oregon Insurance Division, Health Benefit Plan Reports.




                                                                                                                              25
  Health Insurance in Oregon

  Figure 3-3 shows the total Oregon premiums earned
  by Oregon’s seven largest health insurers since 2005,
  as well as total combined Oregon premiums of the
  other health insurers doing business in Oregon.

                                                                                    Figure 3-3. Oregon total premiums earned
              $1,800




                                                                                                                                                                                                                                        1,547
                                                                                                                                                                                                                                1,457
              $1,600

                                                                                1,319




                                                                                                                                                                                                                                                1,308
                                                                        1,262




                                                                                                                                                                                                                        1,280
              $1,400
                                                                1,190




                                                                                                                                                                                                                1,170
                                                        1,083




              $1,200
                                                      995
In millions




              $1,000
               $800




                                                                                                                                                                                                          549




                                                                                                                                                                                                                                                        530
                                                                                                                                                                                                    506
                                                                                                                                                                462
                                                                                                                                                                      472
                                                                                                                                                                            468
               $600




                                                                                                                                                                                                                                                                          451
                                                                                                                                                                                              434
                                                                                                                                                          433




                                                                                                                                                                                                                                                                    426
                                                                                                                                                    407
                                                407




                                                                                                                                                                                        395




                                                                                                                                                                                                                                                              405
                                          400




                                                                                                                                                                                                                                                                                379
                                    371
                              366




                                                                                                                                                                                  352
                        360




                                                                                        367
                                                                                              320
                                                                                                    316




               $400
                                                                                                          263
                                                                                                                212




                                                                                                                                              182
                                                                                                                                        158
                                                                                                                            133
                                                                                                                                  133
                                                                                                                      125

               $200
                  $0
                          Health Net                    Kaiser NW                             LifeWise                        ODS                   PacificSource                  Providence                   Regence BCBS                                   Other

                                                                                                      2005            2006              2007          2008             2009

                       Source: Oregon Insurance Division, 2005-2009 Health Benefit Plan Reports




  Figure 3-4 shows that in 2009, the seven largest                                                                                                   Figure 3-4. Oregon health insurance
  insurers earned 92 percent of the $4.8 billion in                                                                                                 market share, premium earned in 2009
  Oregon comprehensive health insurance premiums
                                                                                                                                                                                                                All others
  paid. The two largest health insurers, Kaiser and                                                                                                                                                                 8%
  Regence, earned 55 percent of all Oregon health                                                                                                         Regence
                                                                                                                                                                                                                                         Health Net
  premiums in 2009.                                                                                                                                         27%
                                                                                                                                                                                                                                            8%




                                                                                                                                                                                                                                                        Kaiser
                                                                                                                                                    Providence                                                                                           28%
                                                                                                                                                       11%


                                                                                                                                                                              Pacific-
                                                                                                                                                                              Source                ODS LifeWise
                                                                                                                                                                               10%                  4%     4%

                                                                                                                                                Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




  26
                                                                                   Health Insurance in Oregon

Key Financial Indicators                                                  Profit Margins — Net Income to
The remainder of this section examines key financial                      Premium Earned
indicators for Oregon’s seven largest health insurance                    One measure of an insurer’s profitability is the
companies and is compiled from the insurers’                              insurer’s net income, which is the net result of all
companywide data. This includes financial data from                       revenue, expenses, and write-offs (total revenues
the insurers’ operations in other states. The section                     minus expenses). Net income, sometimes referred to
begins with net income, which is sometimes referred                       as profit margin, includes the insurer’s companywide
to as profit margin. This is the net result of total                      business — not just its Oregon business.
revenue minus expenses. This section then considers
each insurer’s surplus, which is the amount an                            Figure 3-5 summarizes profitability as a percentage
insurer’s assets exceed its liabilities. The remaining                    of earned premium for each year from 1999 to June
indicators — medical loss ratios, administrative                          2010. This figure demonstrates that the profitability
expenses, claim adjustment expenses, net underwrit-                       of Oregon’s seven largest insurers is typically
ing gains or losses, and net investment gains — are                       between 1 percent and 2.5 percent. Insurers posted
key components of an insurer’s net income or loss.                        exceptional earnings (between 3.8 percent and 4.7
See the Appendix for a more detailed explanation of                       percent) during 2004, 2005, and 2006, at a time when
these terms.                                                              other segments of the economy were also performing
                                                                          exceptionally well.

                            Figure 3-5. Cycle of profitability, net income to premium
                                         earned from 1998 to June 2010
                5.0%
                4.5%                                                                  4.0%
                4.0%                                        3.8%            4.7%
                3.5%                                                                                                2.9%
                3.0%
                                                 2.2%                                         2.4%
                2.5%
                2.0%
                1.5%    1.0%             1.0%                                                               1.1%
                                                                                                     0.7%
                1.0%            0.3%
                0.5%                                       1.0%
                0.0%
                        1999    2000     2001    2002    2003      2004    2005    2006   2007    2008       2009   YTD
                                                                                                                    June
                                                                                                                    2010
                       From data compiled by the NAIC from the filings database.
                       Year-to-date compiled from the June 30, 2010, filings with the Oregon Insurance Division.




                                                                                                                           27
Health Insurance in Oregon

Figure 3-6 shows net income to premiums earned by                         The 10-year average of the largest seven largest
year and by company from 2005 through June 2010.                          insurers is 2 percent.

                    Figure 3-6. Net income to earned premiums from 2005 to June 30, 2010

                                                                                                           10-year
                                                                                                           average
 Insurer                        2005           2006            2007           2008           2009         2000-2009   YTD 6-10
 Health Net                       3%             3%              3%             1%             -1%          2%          3%
 Kaiser                           2%             2%              3%             1%             2%           2%          1%
 LifeWise                         3%             4%             -2%            -4%             0%           2%          -2%
 ODS Health Plan                  4%             4%              2%             1%            -5%           0%          -1%
 PacificSource                    7%             6%              2%            -1%             1%           3%          1%
 Providence                       9%             8%              7%             0%             3%           4%          7%
 Regence                          6%             4%              1%             1%             1%           1%          5%
 Average all seven               5%              4%              2%             1%             1%           2%          3%
From data compiled by the NAIC from the filings database. Year-to-date compiled from the June 30, 2010,
filings with the Oregon Insurance Division




Capital and Surplus
Insurers must maintain capital and surplus. For-profit                    While the law specifies the minimum amounts of
insurers report capital and surplus amounts; not-for-                     surplus a company must have, there is no agreement
profit insurers report only surplus. Capital reflects the                 on how much is too much.
funds received by a for-profit company when it issues                     Companies use surplus in a variety of ways. Capital
shares of its common stock. Surplus includes profits                      and surplus provide an insurance company with
accumulated by for-profit and not-for-profit companies.                   assets to protect against adverse conditions, allow the
The combination of capital and surplus is the amount                      company to take on additional enrollment, and allow
that an insurance company’s assets exceed its liabili-                    it to invest in new technology and infrastructure.
ties. It is the amount over and above what a company                      Adverse conditions may include unusually high and
expects to pay out for medical claims, expenses, taxes,                   unexpected medical expenses, lower than expected
and other obligations.                                                    investment income, or investment losses. When an
                                                                          insurer experiences an adverse condition, it cannot
As discussed in Section 2, insurers are legally
                                                                          immediately raise premium rates because health
required to maintain minimum levels of capital and
                                                                          insurance rates are guaranteed for 12-month cycles.
surplus to ensure that they will be able to meet their
                                                                          As a result, insurers must rely on surplus or other
financial obligations to policyholders. Capital and
                                                                          non-premium sources.
surplus requirements vary by insurer because they
depend on the size and risk profile of a company.

                               Figure 3-7. Oregon’s for-profit and not-for-profit insurers

              For-profit:                                          Not-for-profit:
              Health Net Health Plan of Oregon                     Regence BlueCross BlueShield of Oregon
              LifeWise Health Plan of Oregon                       Kaiser Foundation Health Plan of the Northwest
              ODS Health Plan, Inc.                                PacificSource Health Plans
                                                                   Providence Health Plan

28
                                                                                  Health Insurance in Oregon

For a variety of reasons, Oregon’s largest for-profit                    Surplus and Rate Review
insurers have maintained consistent levels of surplus
                                                                         The Insurance Division has authority to consider
over the past 10 years, despite varying operational
                                                                         surplus in reviewing insurer rate requests and has
and investment gains and losses. For example, in
                                                                         used this authority to approve rates that are lower
years when Health Net and ODS experienced losses,
                                                                         than initially requested, even when a company is
their parent companies contributed surplus. In more
                                                                         losing money in a particular line of business.
profitable years, Health Net paid dividends to its
                                                                         However, using surplus to keep rates artificially low
parent (2006 through 2008) while ODS used most of
                                                                         does not address ongoing increases in health care
its earnings in 2005 and 2006 to invest in computer
                                                                         costs and will likely create problems for consumers
data processing equipment and software.
                                                                         in future years when rates need to be raised to cover
Oregon’s largest not-for-profit insurers maintain larger                 medical claims. Additionally, the division believes
surpluses than the for-profit insurers because not-for-                  Oregon consumers benefit from a competitive insur-
profits tend to rely on surpluses to cover operation and                 ance market. Companies that continually lose money
investment losses. Growth in these insurers’ surpluses                   in a particular line of insurance may ultimately leave
generally mirror profitability rates — with greater                      that market, leaving consumers with fewer choices.
contributions to surplus in profitable years.
                                                                         Figure 3-8 shows nine years worth of surplus levels,
                                                                         along with the mid-year trend for 2010.

                                        Figure 3-8. Surplus levels from 2001 to June 30, 2010
                        $700


                        $600


                        $500


                        $400


                        $300
          In millions




                        $200


                        $100


                         $0
                                                                                                                            YTD
                               2001      2002     2003       2004        2005       2006       2007       2008     2009
                                                                                                                           6-2010
       Health Net              $17.6     $24.7    $28.6     $39.5      $49.6       $59.8      $67.4       $57.4    $73.7   $79.1
       Kaiser                  $160.5   $189.5   $240.8    $308.4 $359.2         $430.0 $494.2          $480.1 $494.9      $514.0
       LifeWise                $29.5     $43.4   $58.9      $60.6      $62.8       $74.9      $69.9       $58.8   $58.5     $57.2
       ODS                     $24.5     $26.5   $29.2      $32.4      $36.6      $37.8       $38.3       $39.8   $71.4     $69.5
       PacificSource           $38.8     $51.3   $64.3      $84.6     $112.8     $123.5 $124.5            $93.2   $107.1   $102.9
       Providence              $73.5     $81.3   $113.0   $163.9 $224.2          $285.6     $340.5      $343.0 $373.5      $406.5
       Regence                 $266.3   $235.6   $282.2   $366.4 $466.9          $533.5     $552.2      $486.1 $565.2      $595.7

  Source: The annual data was compiled by the NAIC from the filings database and the year-to-date figures were
  compiled from the June 30, 2010, filings with the Oregon Insurance Division.




                                                                                                                                    29
Health Insurance in Oregon

Medical Loss Ratios
Medical loss ratio is the percentage of health insur-                      quality improvement activities toward health care
ance premiums that an insurer pays in health care                          claims expenditures and deduct amounts paid for
claims, including amounts reserved for expected                            state taxes and fees from administrative expenses, is
future payments for services already provided and                          more generous to insurers than the calculation used
for claims that are expected to be reported to the                         in this report. Although based on a different calcula-
insurer. For example, an insurer with a 90 percent                         tion, Figure 3-9 demonstrates it is unlikely the largest
medical loss ratio pays 90 cents in claims costs for                       seven Oregon insurers will be required to rebate
every dollar collected in premiums.                                        premiums to enrollees.
Starting in 2012, the Affordable Care Act requires an                      Figure 3-9 illustrates the medical loss ratios for
insurance company to rebate premiums when it fails                         Oregon’s seven largest insurers from 2005 through
to meet specific medical loss ratio benchmarks (80                         June 2010. Unlike the other six insurers, Kaiser has
percent in the small group and individual markets                          an integrated delivery system, meaning it owns and
and 85 percent in the large group market). The                             operates medical clinics, offices, and equipment. As a
calculation under federal law for rebating purposes is                     result, Kaiser’s claims expenses include some costs
different than the medical loss ratio calculation                          (operating facilities and depreciation) that other
referenced in this report. The federal calculation,                        insurers record as administrative.
which allows insurers to count amounts spent on

                     Figure 3-9. Medical loss ratios — averages from 2005 to June 30, 2010

                                                                                                           5-year
 Insurer                       2005              2006            2007             2008             2009               YTD 6-10
                                                                                                          average
 Health Net                     82%              82%              82%              87%              89%     85%           82%
 Kaiser                         95%              96%              95%              96%              96%     96%           97%
 LifeWise                        81%             78%              88%              88%              83%     83%           85%
 ODS Health Plan                86%              84%              84%              88%             101%     90%           99%
 PacificSource                  83%              86%              89%              87%              84%     86%           83%
 Providence                     83%              85%              88%              89%              90%     87%           89%
 Regence                        85%              87%              89%              90%              87%     88%           83%
 Average all seven              88%              89%              90%              91%              91%     90%           89%

From data compiled by the NAIC from the filings database. Year-to-date compiled from the June 30, 2010,
filings with the Oregon Insurance Division.
Note: Five-year average includes 2005 to 2009.
These calculations for medical loss ratio are different than those required by the federal government
and cannot be used to determine if an insurance company owes a rebate.




30
                                                                                  Health Insurance in Oregon

General Administrative Expenses
General administrative expenses are expenses an                          Figure 3-10 shows overall that the level of general
insurer incurs to run its business that are not directly                 administrative expenses in 2009 has remained
related to paying claims. Included in this category are                  consistent with prior years. Administrative costs vary
variable expenses such as salaries and benefits;                         by insurer for a variety of reasons. For example,
commissions, marketing, and advertising expenses;                        plans with higher deductibles have lower premiums
office supplies and travel; and fixed expenses such as                   and higher administrative costs as a percent of
rent, taxes, utilities, and facilities maintenance and                   premium. The top five administrative expenses for all
depreciation. Generally, variable expenses directly                      Oregon companies are included in the Health Benefit
relate to the volume of business and will fluctuate                      Plan Reports on the department’s website at http://
with premium volume. Fixed expenses are those that                       www.insurance.oregon.gov/insurer/rates_forms/
are incurred regardless of the volume of premium                         health-benefit-plan-reports.html.
and can be difficult to reduce, especially if the
insurer owns its facilities.

     Figure 3-10. General administrative expenses to premium earned from 2005 to June 30, 2010

                                                                                                            5-year
 Insurer                       2005            2006            2007             2008            2009                 YTD 6-10
                                                                                                           average
 Health Net                     12%               12%           12%              9%               9%        11%        10%
 Kaiser                          4%               4%             4%               4%              5%         4%         5%
 LifeWise                       10%               11%           10%             11%              13%        11%        14%
 ODS Health Plan                 5%               7%             8%               6%              4%         6%         3%
 PacificSource                   9%               9%            10%             10%              12%        10%        13%
 Providence                      8%               4%             4%               4%              5%         5%         4%
 Regence                         6%               8%             8%               6%              8%         7%         8%
 Average all seven               7%               7%             7%               6%              7%         6%         7%

 From data compiled by the NAIC from the filings database. Year-to-date compiled from the June 30, 2010,
 filings with the Oregon Insurance Division.
 Note: Five-year average includes 2005 to 2009.




                                                                                                                             31
Health Insurance in Oregon

Claims Adjustment Expenses
Claims adjustment expenses are expenses incurred to                      Figure 3-11 shows claims adjustment expenses for
record, adjust, and settle claims. Claims adjustment                     Oregon’s seven largest health insurers consistently
expenses are a separate category from general                            average 3 percent.
administrative expenses.

        Figure 3-11. Claims adjustment expenses to earned premium from 2005 to June 30, 2010

 Insurer                       2005            2006            2007            2008             2009        5-year   YTD 6-10
                                                                                                           average
 Health Net                     2%                2%            2%               2%              3%          2%        3%
 Kaiser                          1%               1%             1%              1%              1%          1%        1%
 LifeWise                       5%                7%            6%               7%              7%          6%        7%
 ODS Health Plan                6%                8%            8%               6%              4%          6%        3%
 PacificSource                  2%                2%            2%               3%              3%          2%        3%
 Providence                     2%                4%            4%               3%              4%          3%        4%
 Regence                        4%                4%            6%               5%              5%          5%        6%
 Average all seven              3%                3%            4%               3%              3%         3%         3%

 From data compiled by the NAIC from the filings database. Year-to-date compiled from the June 30, 2010,
 filings with the Oregon Insurance Division.
 Note: Five-year average includes 2005 to 2009.




32
                                                                                  Health Insurance in Oregon

Net Underwriting Gain/Loss
Net underwriting gain or loss is not a separate                          Figure 3-12 shows that, collectively, underwriting
revenue or expense category. Rather, it represents an                    gains for the seven largest insurers improved for the
insurer’s gain or loss from its insuring activities.                     first time since 2006. In 2007, 2008, and 2009, three
When an insurer earns more premiums than it incurs                       insurers out of the seven reported underwriting
in medical claims, claims adjustment expenses, and                       losses. Year-to-date data through June 2010 show an
administrative expenses, the insurer has an under-                       overall average net underwriting gain of 1 percent, in
writing gain. If the medical claims, claims adjust-                      spite of fairly significant underwriting losses by
ment expenses, and administrative expenses exceed                        LifeWise and ODS.
the premiums earned, the insurer has an underwrit-
ing loss. An insurer with a net underwriting loss may
still be profitable if it earns enough investment
income to offset its underwriting losses.

          Figure 3-12. Net underwriting gain/loss to earned premium from 2005 to June 30, 2010
                                                                                                            5-year
 Insurer                      2005               2006          2007            2008            2009                  YTD 6-10
                                                                                                           average
 Health Net                     4%               4%             3%               1%             -2%          2%        4%
 Kaiser                         1%                1%             1%              1%              1%          1%        0%
 LifeWise                       4%               4%            -4%              -6%             -2%         -1%        -6%
 ODS Health Plan                3%                1%            0%              -1%             -9%         -2%        -6%
 PacificSource                  7%               4%             -2%              0%              1%          2%        1%
 Providence                     8%               7%             4%               3%              2%          4%        4%
 Regence                        4%                1%            -2%             -1%              0%          0%        3%
 Average all seven             4%                2%             0%              0%               0%          1%        1%

 From data compiled by the NAIC from the filings database. Year-to-date compiled from the June 30, 2010,
 filings with the Oregon Insurance Division.
Note: Five-year average includes 2005 to 2009.




                                                                                                                             33
Health Insurance in Oregon

Net Investment Gain
An insurer’s net investment gain includes all income                     lag periods between when premiums are earned and
earned from invested assets minus expenses related                       when claims are incurred. Health insurers earn
to investments (service fees, management expenses,                       investment income, too, but the investment income is
etc.) plus the profit (or loss) realized on the sale of                  a smaller factor in the company’s overall profitability
investments.                                                             because most claims incurred are settled within one
For some types of insurance, investment income can                       year of its earning the premium.
play a decisive role in overall profitability. For                       Figure 3-13 illustrates that from 2005 to 2009, the
example, property and casualty insurers routinely                        seven largest health insurers averaged 1 percent
have underwriting losses but remain profitable,                          investment gains. Data for the first six months of
because they earn investment income based on long                        2010 showed investment gains averaging 2 percent.

              Figure 3-13. Net investment gain to earned premium from 2005 to June 30, 2010

 Insurer name                  2005           2006             2007            2008            2009         5-year   YTD 6-10
                                                                                                           average
 Health Net                     1%                1%            1%              0%              0%           1%        1%
 Kaiser                         1%                1%            1%              1%              1%           1%        1%
 LifeWise                       1%                2%            2%              1%              2%          2%         3%
 ODS Health Plan                3%                3%            3%              -1%             2%          2%         2%
 PacificSource                  3%                4%            3%             -2%              0%          2%         1%
 Providence                     1%                1%            3%             -3%              1%           1%        3%
 Regence BCBS                   2%                2%            4%              2%              1%          2%         3%
 Average all seven              1%                2%            3%              0%              1%           1%        2%

 From data compiled by the NAIC from the filings database. Year-to-date compiled from the June 30, 2010,
 filings with the Oregon Insurance Division.
 Note: Five-year average includes 2005 to 2009.




34
                                                                    Health Insurance in Oregon


Section 4: Comparisons of Seven Largest Insurers
by Market Segment
The analysis in this section shifts to different health insurance markets, including what share of the individual,
small group, large group, and association markets are held by each of the largest health insurers.
The analysis is based on Health Benefit Plan Report data submitted to the department. These reports, required by
Senate Bill 501 (passed in 2005), allow policymakers to spot trends in the different health insurance markets.
In addition to Health Benefit Plan Reports, the department collects health benefit plan enrollment data in its
quarterly enrollment reports. Although both of these reports include information about enrollment in health
insurance in Oregon, they contain distinctly different data and are used for different purposes.
Note: Since different data sources are used in Sections 3 and 4, the numbers cannot be compared. See the
Appendix for more information about these data sources, what they measure, and how they are used.




                                                                                                                 35
Health Insurance in Oregon

All markets
Figure 4-1 summarizes data by market segment and                             The overall average premium per member per month
compares Oregon’s seven largest health insurers with                         for all markets was $310 for Oregon’s seven largest
all health insurers that filed a Health Benefit Plan                         insurers and $306 for all insurers.
report. These seven largest insurers combined have
dominant market shares in premiums earned and
members enrolled in every market segment.

                                       Figure 4-1. Health Benefit Plan Report, in 2009
                                           Totals for seven largest Oregon insurers
                                          Number of               Premium              Medical          Average premium per
 Market segment                           members                 earned*             loss ratio         member per month
 Individual                                    170,727                 $422                90%                $203
 Small group                                   217,460                 $825                88%                $310
 Large group                                  648,628               $2,657                 92%                $335
 Associations and trusts                       135,793                 $541                93%                $322
 Total                                    1,172,608               $4,445                  91%                $310

                  Totals for all insurers reporting (including the seven largest Oregon insurers)
                                          Number of               Premium              Medical          Average premium per
 Market segment                           members                 earned*             loss ratio         member per month
 Individual                                     190,307                $470                89%                $202
 Small group                                    235,649                $874                87%                $306
 Large group                                   693,044              $2,848                 92%                $332
 Associations and trusts                        161,333                $632                92%                $312
 Total                                     1,280,333               $4,824                  91%               $306

*Rounded in millions
Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports.
These calculations for medical loss ratio are different than those required by the federal government
and cannot be used to determine if an insurance company owes a rebate.




36
                                                                                Health Insurance in Oregon

Figure 4-2 reflects that average premiums for                         Average premium per member is only one way to
Oregon’s seven largest health insurers were similar to                discuss average premiums. In the group market,
the average premiums of all insurers combined.                        another common method is average monthly
                                                                      premium for single employee coverage or family
Average premium per member per month is calcu-
                                                                      coverage. Family coverage will have the highest
lated by dividing the total premiums paid by all
                                                                      average since it combines employees and dependents
members by the total number of members. It is not
                                                                      in single-family units, but even single coverage will
representative of what a person might pay for an
                                                                      have a higher average than a “per member” calcula-
individual health plan. Actual premium rates may
                                                                      tion. That’s because the former counts only individ-
differ for individuals and groups based on a number
                                                                      ual employees as units and the latter counts both
of factors, including the type and level of benefits,
                                                                      employees and dependents as separate units. For
family members covered, the amount of co-insur-
                                                                      example, consider an employer that spends $400 per
ance, geographical location within the state, the age
                                                                      month to cover an employee and an additional $400 a
of members, and, for large groups, the claims experi-
                                                                      month to cover the employee’s three dependents. The
ence of the group. These variations are important to
                                                                      cost of family coverage is $800; the cost of single
consider when comparing premiums of insurers or
                                                                      coverage is $400; and the cost per member is $200
market segments.
                                                                      ($800 divided by the four members).

              Figure 4-2. Average premium per member per month, market segments in 2009

                                                                                      $203
                   Individual
                                                                                      $202

                                                                                                      $310
                 Small group
                                                                                                      $306

                                                                                                             $335
                 Large group
                                                                                                             $332

                 Associations                                                                           $322
                   and trusts
                                                                                                      $312

                                                                                                      $310
                        Total
                                                                                                      $306


                                                 Seven largest         All insurers

                                Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




                                                                                                                       37
Health Insurance in Oregon

Figure 4-3 shows that in 2009, the large group          Figure 4-3. Market share by premium,
market accounted for 60 percent of the total health     seven largest insurers in 2009
insurance premiums earned by the seven largest
insurers in Oregon.                                            Associations                  Individual
                                                                and trusts                      9%
                                                                  12%


                                                                                                           Small Group
                                                                                                              19%




                                                             Large Group
                                                                 60%

                                                      Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




Figure 4-4 shows that in 2009, the large group           Figure 4-4. Market share by premium,
market accounted for 59 percent of the total health                  all insurers in 2009
insurance premiums earned by all insurers in                   Associations                   Individual
Oregon.                                                         and trusts                       10%
                                                                  13%


                                                                                                           Small Group
                                                                                                              18%




                                                             Large Group
                                                                 59%

                                                      Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




38
                                                                                       Health Insurance in Oregon

Individual Market
As discussed in Section 2, the individual market is                          Figure 4-5 summarizes individual market data for
composed of individuals who either lack access to                            2009. The average monthly premium for Oregon’s
employer-sponsored health insurance or decline                               seven largest health insurers was $203, nearly the
group coverage.                                                              same as for all insurers at $202.

                               Figure 4-5. Seven largest insurers, individual plans in 2009
                                                       Number of           Premium               Medical            Average premium per
 Insurer                                               members             earned*              loss ratio           member per month
 Health Net                                                 6,250              $19.4               101%                          $237
 Kaiser                                                     14,714             $74.1                97%                           $419
 LifeWise                                                  29,675              $74.0                 77%                          $198
 ODS Health Plans                                          18,903              $23.2                 85%                         $124
 PacificSource                                             12,541              $22.5                 74%                          $152
 Providence                                                  9,590             $19.0                 95%                          $182
 Regence BCBS                                              79,054             $189.4                 94%                          $189
 Total – above seven largest insurers                    170,727             $421.6                  90%                         $203
 Total – all insurers                                    190,307             $469.9                  89%                         $202

*Rounded in millions
Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports.
These calculations for medical loss ratio are different than those required by the federal government
and cannot be used to determine if an insurance company owes a rebate.




Figure 4-6 shows that in 2009, Oregon’s seven                                    Figure 4-6. Market share by premium,
largest health insurers earned 90 percent of the                                       individual market in 2009
premiums in the individual health insurance market.                                                              Health Net
Smaller Oregon insurers and national insurers earned                                              Other             4%
                                                                                                  10%
the remaining 10 percent of total premiums.                                                                                     Kaiser
                                                                                                                                 16%




                                                                                Regence                                                LifeWise
                                                                                  40%                                                    16%


                                                                                                                                  ODS
                                                                                                                                  5%
                                                                                                                            PacificSource
                                                                                                           Providence            5%
                                                                                                               4%
                                                                               Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




                                                                                                                                                     39
Health Insurance in Oregon

Figure 4-7 compares Oregon’s seven largest insur-                                       tions in premium among insurers. These variations
ers’ average premiums in the individual market to                                       reflect the array of plans available in the individual
those of all insurers. There were significant varia-                                    market.

        Figure 4-7. Average premium per member per month in individual plans from 2005 to 2009
$500
                                  422
                                  419
                               382



$400
                          316
                         309




$300
            237
          210
          211




                                                                                                                                203




                                                                                                                                              202
                                               198
        191
        185




                                                                                                                               190
                                                                                                                      189




                                                                                                                              184




                                                                                                                                            184
                                                                                                   182




                                                                                                                                            181
                                                                                                                     180
                                             175




                                                                                                                                           173
                                             164




                                                                                                                             172




                                                                                                                                           168
                                                                                                                             166
                                                                               168
                                            163




$200




                                                                               161
                                            158




                                                                                                                   159
                                                                                                 157
                                                                              152




                                                                                                                   147
                                                                                                141
                                                                             143
                                                                             139
                                                            141




                                                                                               136
                                                            135

                                                            133




                                                                                               133
                                                           124




                                                                                                                 127
                                                           111
$100



 $0
         Health Net         Kaiser NW        LifeWise           ODS         PacificSource       Providence       Regence       Seven        All insurers
                                                                                                                  BCBS         largest
                                                               2005      2006           2007   2008       2009

        Source: Oregon Insurance Division, 2005 to 2009 Health Benefit Plan Reports




Figure 4-8 compares the seven largest insurers’                                         insurance. Individual premiums tend to be lower
average premium per member per month of $203 for                                        because benefits are not as rich and because insurers
the individual market with $310 for all markets. In                                     can limit their risk by denying coverage to people age
2009, average individual premiums for Oregon’s                                          19 and older with health problems. They cannot do
largest insurers were 35 percent less per member per                                    this in the group market.
month than the average premium for all health

       Figure 4-8. Average premium per member per month, individual plans vs. all markets in 2009
     $500
                                419
     $400
                                      337
                                                                                         316             310           304         310          306
                      295
     $300                                            256              267
               237
                                               198                                                               189         203          202
                                                                                                 182
     $200                                                                         152
                                                                124

     $100


       $0
              Health Net       Kaiser NW        LifeWise          ODS        PacificSource      Providence       Regence     Seven       All insurers
                                                                                                                  BCBS       largest

                                                                   Individual plans        All markets

            Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




40
                                                                                               Health Insurance in Oregon

Figure 4-9 shows the 2005 to 2009 medical loss                                      higher on a per-capita basis in these markets. Insur-
ratios for Oregon’s seven largest companies in the                                  ance companies seek loss ratios below 100 percent
individual health market compared to all insurers. As                               because the company will always incur some admin-
noted previously, medical loss ratios reveal what                                   istrative costs. In 2009, medical loss ratios for the
portion of premiums go to pay medical claims.                                       seven largest insurers ranged from 74 percent to 101
Companies typically have loss ratios between 80                                     percent. Medical loss ratios averaged 90 percent in
percent and 90 percent. This ratio means that for                                   2009, which is down from 98 percent in 2008, when
every dollar in premium, the company pays out 80                                    some of Oregon’s seven largest health insurers paid
cents to 90 cents in medical claims. Loss ratios are                                more in claims than they earned in premiums. This
typically lower for individual and small group                                      compares with an average loss ratio of 89 percent for
insurance because administrative expenses are                                       all insurers.

                             Figure 4-9. Medical loss ratios, individual plans from 2005 to 2009
120




                                                                                                                     107
                                                                                    108




                                                                                                                     105
                                                                           106
        102

        101
        101
        100




                                                                                                                               98
                                                                                                                               98
       97




                                                                                                                   97
                          97
                          96
                          96
                          96

                          95




                                                                                  95




                                                                                                                                                       95
                                                                                                                                                       94
                                                                                                             95
100




                                                                                                                  94
                                                                                                                  93




                                                                                                                             90
                                                                                                                             90
                                                                                                                             90




                                                                                                                                                     89
                                                87
                                               86




                                                                                                        85
                                                                  85




                                                                                                                                              85
                                                       85




                                                                  85


                                                                             84




                                                                                                                                              84
                                                                                              80
                                             77
                                        75




                                                                                         74
                                                           74


80
                                        73




                                                          69




                                                                                                 66
                                                                                                 66
60

40

20

 0
           Health Net      Kaiser NW       LifeWise          ODS            PacificSource        Providence        Regence        Seven           All insurers
                                                                                                                    BCBS          largest

                                                        2005        2006         2007     2008        2009

       Source: Oregon Insurance Division, 2005 to 2009 Health Benefit Plan Reports



Figure 4-10 shows the 2009 medical loss ratios for
individual plans compared to all markets. On aver-
age, the seven largest insurers spent 90 cents of every
premium dollar on medical services in the individual
market compared to 91 cents in all markets.

                          Figure 4-10. Medical loss ratio, individual plans vs. all markets in 2009
     120
              101                                                                                      93
                             97   97                              96                             95               94
     100            89                                                                                                 88    90     91       89      91
                                                  82        85                      85
                                            77                               74
      80

      60

      40

      20

       0
             Health Net     Kaiser NW       LifeWise         ODS           PacificSource      Providence          Regence    Seven          All insurers
                                                                                                                   BCBS      largest
                                                                 Individual plans         All markets

           Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports
           Calculations for medical loss ratio (Figures 4-9 and 4-10) are different than those required by the
           federal government and cannot be used to determine if an insurance company owes a rebate.

                                                                                                                                                           41
Health Insurance in Oregon

Small Group Market
(Employer groups with 2-50 employees)
Small employers account for 61 percent of all                              the entire pool. Increases based on the claims of a
employers in Oregon, according to the Oregon                               particular employer are limited to 5 percent.
Employment Department. Any one of these 76,987                             Figure 4-11 summarizes the small group market data
small employers may purchase health insurance in                           for 2009. Average premium costs per member per
the small group market. Rates in this market are                           month were $310 for the seven largest insurers
pooled and based on the overall claims experience of                       compared to $306 for all insurers.

                           Figure 4-11. Seven largest insurers, small group plans in 2009
                                                      Number of           Premium             Medical            Average premium per
 Insurer                                              members             earned*            loss ratio           member per month
 Health Net                                                37,447           $134.5               83%                            $306
 Kaiser                                                    31,121           $128.3               96%                            $339
 LifeWise                                                  12,221             $54.7              83%                            $275
 ODS Health Plans                                          15,094             $43.7              92%                            $234
 PacificSource                                             35,669           $124.5               86%                            $309
 Providence                                                27,932           $118.9               96%                            $322
 Regence BCBS                                              57,976           $220.6               83%                            $320
 Total – above seven largest insurers                   217,460            $825.3                88%                           $310
 Total – all insurers                                   235,649            $873.9                87%                           $306
*Rounded in millions.
Source: Oregon Insurance Division 2009 Health Benefit Plan Reports
These calculations for medical loss ratio are different than those required by the federal government
and cannot be used to determine if an insurance company owes a rebate.




Figure 4-12 shows each insurer’s share of Oregon’s                             Figure 4-12. Market share by premium,
small group health insurance market. The seven                                 small group market in 2009
largest insurers provide 94 percent of small group
coverage. Regence is Oregon’s largest insurer in this                                             Other               Health Net
                                                                                                   6%
market with $221 million in small group premiums,                                                                       15%

or 25 percent of the total.
                                                                                 Regence
                                                                                   25%
                                                                                                                                     Kaiser
                                                                                                                                      15%



                                                                                                                                    LifeWise
                                                                                                                                       6%
                                                                                Providence                                     ODS
                                                                                   14%                                         5%
                                                                                                           PacificSource
                                                                                                               14%

                                                                            Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports

42
                                                                                       Health Insurance in Oregon

Figure 4-13 compares the seven largest insurers’
average premiums in the small group market from
2005 to 2009 to those of all insurers.

                 Figure 4-13. Average premium per member per month, small group in 2005 to 2009
$400



                                 339




                                                                                            322




                                                                                                             320
                                316




                                                                           314




                                                                                                                         310
                                                                          309
             306




                                                                                                                                     306
                                                                                           301
            292




                                                                                                                       289




                                                                                                                                    286
                                                                        283
          278




                                                                                                          276
                             274




                                            275




                                                                       264
$300




                                                                                        263




                                                                                                                     262
         261




                                                                      259




                                                                                                                                 259
                                                                                                        248
                                          252




                                                                                       257




                                                                                                                    250
                                                                                       255
                          250




                                                         248




                                                                                                                                247
        243




                                                         245




                                                                                                       245




                                                                                                                                243
                                                         241




                                                                                                                   240
                                                        234
                                         233



                                                        233
                         232




                                                                                                     224
                                        223
                                        219
$200


$100


 $0
            Health Net      Kaiser NW     LifeWise         ODS        PacificSource     Providence    Regence         Seven       All insurers
                                                                                                       BCBS           largest
                                                         2005     2006     2007       2008   2009

       Source: Oregon Insurance Division, 2005 to 2009 Health Benefit Plan Reports




Figure 4-14 shows that in 2009 the average premium
per member per month of $310 for Oregon’s seven
largest insurers was the same for the small group
market as for all markets.

        Figure 4-14. Average premium per member per month, small group vs. all markets in 2009
  $400
                              339 337
                                                                         309 316        322 310       320          310 310
               306 295                                                                                      304                 306 306
  $300                                      275                 267
                                                  256
                                                          234

  $200


  $100


       $0
               Health Net     Kaiser NW     LifeWise       ODS        PacificSource     Providence    Regence       Seven       All insurers
                                                                                                       BCBS         largest

                                                                 Small group       All markets

             Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




                                                                                                                                           43
Health Insurance in Oregon

Figure 4-15 compares the 2005 to 2009 average
medical loss ratios for Oregon’s seven largest insur-
ers in the small group market to those of all insurers.
In 2009, the average medical loss ratio for the seven
largest insurers was 88 percent.

                          Figure 4-15. Medical loss ratios, small group plans from 2005 to 2009
  120
                            96
                            96

                            96
                            96
                            96




                                                                                            96
  100




                                                                                          93
                                                           92
                                             93




                                                          89




                                                                                                                          89




                                                                                                                                        88
                                            89



                                                          89




                                                                          88




                                                                                                                         88
                                                                                         87




                                                                                                                                        87
                                                         87




                                                                                         87




                                                                                                                         87




                                                                                                                                        86
                                                                                                             86
                                                                         86
                                                                         86




                                                                                                             86




                                                                                                                                       85
                                                                                                                        85




                                                                                                                                       84
                                                                        83




                                                                                                            83
                                          83
              83




                                                        82
             81




                                          81




                                                                                                           80




                                                                                                                       80
                                                                       78
                                         78
            77




                                                                                                          77
            76




                                                                                       76
            75




   80

   60

   40

   20

      0
             Health Net     Kaiser NW       LifeWise       ODS         PacificSource Providence            Regence      Seven          All insurers
                                                                                                            BCBS        largest

                                                                2005     2006         2007      2008      2009

           Source: Oregon Insurance Division, 2005 to 2009 Health Benefit Plan Reports
           These calculations for medical loss ratio are different than those required by the federal government
           and cannot be used to determine if an insurance company owes a rebate.




Figure 4-16 compares the medical loss ratios for
Oregon’s seven largest insurers in the small group
market to all markets and all insurers. These seven
largest insurers’ overall average medical loss ratio for
the small group market was slightly less than their
overall average for all markets.

                          Figure 4-16. Medical loss ratio, small groups plans vs. all markets in 2009
100
                             96   97
                                                                 96                           96
 95                                                        92                                      93
                                                                                                                                  91              91
                   89
 90                                                                                                               88      88                87
                                                                          86
                                                                                 85
 85          83                             83   82                                                          83

 80

 75

 70
           Health Net      Kaiser NW       LifeWise         ODS         PacificSource        Providence      Regence       Seven          All insurers
                                                                                                              BCBS         largest
                                                                  Small groups          All markets

          Source: Oregon Insurance Division, 2005-2009 Health Benefit Plan Reports
          These calculations for medical loss ratio are different than those required by the federal government
          and cannot be used to determine if an insurance company owes a rebate.

44
                                                                                     Health Insurance in Oregon

Large Group Market
(Employer groups with 51 or more employees)                                 Figure 4-17 summarizes the 2009 Health Benefit
There are 5,247 large employers in Oregon, represent-                       Plan Report data for the large group market. The
ing 4 percent of the state’s 125,523 total employers.                       average monthly large group premium per member
                                                                            for the seven largest health insurers was $335,
                                                                            compared to $332 for all insurers.

                            Figure 4-17. Seven largest insurers, large group plans in 2009
                                                       Number of           Premium              Medical            Average premium per
 Insurer                                               members             earned*             loss ratio           member per month
 Health Net                                                 45,610              $194.7              90%                        $299
 Kaiser                                                   240,162               $955.7              97%                         $335
 LifeWise                                                   16,495               $69.3              88%                        $343
 ODS Health Plans                                           25,856              $111.7              99%                        $379
 PacificSource                                              65,332              $265.7              86%                        $348
 Providence                                                 86,051              $347.0              91%                         $318
 Regence BCBS                                              169,122              $713.2              87%                         $343
 Total – above seven largest insurers                   648,628            $2,657.2                92%                         $335
 Total – all insurers                                   693,044            $2,848.4                92%                         $332
 *Rounded in millions.
 Source: Oregon Insurance Division 2009 Health Benefit Plan Reports
 These calculations for medical loss ratio are different than those required by the federal government
 and cannot be used to determine if an insurance company owes a rebate.




Figure 4-18 shows the seven largest Oregon insurers                             Figure 4-18. Market share by premium,
earned 93 percent of all premiums in the large group                            large group market in 2009
market. Oregon’s two largest insurers, Regence and                                                  Other           Health Net
Kaiser, earned a combined 59 percent of the premi-                                                   7%                7%
ums in this market.

                                                                                 Regence
                                                                                   25%

                                                                                                                                       Kaiser
                                                                                                                                        34%




                                                                                  Providence
                                                                                     12%                                    LifeWise
                                                                                                      Pacific-       ODS       2%
                                                                                                      Source         4%
                                                                                                        9%

                                                                              Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




                                                                                                                                                    45
Health Insurance in Oregon

Figure 4-19 shows that average premiums for the
seven largest insurers in the large group market
increased 9 percent in 2009 compared to 2008.

     Figure 4-19. Average premium per member per month in large group plans from 2008 to 2009
  $450
  $400                                                          379
  $350                      324 335
                                                 343      343            331 348                318
                                                                                                            343         335          332
                                           317                                            293         294         308          301
                   299
  $300       278
  $250
  $200
  $150
  $100
   $50
     $0
            Health Net     Kaiser NW       LifeWise         ODS        PacificSource     Providence   Regence     Seven       All insurers
                                                                                                       BCBS       largest
                                                                        2008         2009

          Source: Oregon Insurance Division, 2005 to 2009 Health Benefit Plan Reports




Figure 4-20 shows that the seven largest insurers’                             with more and richer benefits than those purchased
large group market average premium per member per                              in the individual and small group markets. Large
month of $335 is 8 percent higher than the average                             employers typically negotiate both benefit levels and
for all markets. This is likely a reflection of the fact                       premium rates directly with insurers.
that large employers tend to offer health benefit plans

  Figure 4-20. Average premium per member per month, large group plans vs. all markets in 2009
$450
$400                                                      379
                           335 337        343                            348                          343         335          332
$350                                                                           316        318 310           304         310          306
            299 295
$300                                             256            267
$250
$200
$150
$100
 $50
  $0
           Health Net      Kaiser NW       LifeWise         ODS        PacificSource     Providence   Regence      Seven      All insurers
                                                                                                       BCBS        largest
                                                                Large groups         All markets

          Source: Oregon Insurance Division, 2005 to 2009 Health Benefit Plan Reports




46
                                                                                           Health Insurance in Oregon

Figure 4-21 shows that the average large group
medical loss ratio for 2009 for the seven largest
insurers was similar to that of 2008.

                        Figure 4-21. Medical loss ratios, large group plans from 2008 to 2009
 105

  100                                                             99
                            96    97
   95
                                                            92                                 92                        92           92
                  90                                                                                 91             91          90
            89                                    88                         89
   90
                                                                                                               87
                                                                                   86                     85
   85                                       84

   80

   75
           Health Net      Kaiser NW        LifeWise          ODS        PacificSource     Providence     Regence   Seven     All insurers
                                                                                                           BCBS     largest
                                                                          2008          2009

        Source: Oregon Insurance Division, 2005 to 2009 Health Benefit Plan Reports
        These calculations for medical loss ratio are different than those required by the federal
        government and cannot be used to determine if an insurance company owes a rebate.




Figure 4-22 shows that the medical loss ratio for
large groups was similar to that for all markets.

                             Figure 4-22. Medical loss ratio, large group vs. all markets in 2009
  120
                            97    97                        99    96
  100       90    89                                                                           91    93             92   91    92    91
                                            88                              86    85                      87   88
                                                  82
   80

   60

   40

   20

    0
           Health Net      Kaiser NW        LifeWise          ODS        PacificSource Providence         Regence   Seven     All insurers
                                                                                                           BCBS     largest
                                                                       Large groups        All markets

        Source: Oregon Insurance Division, 2005 to 2009 Health Benefit Plan Reports
        These calculations for medical loss ratio are different than those required by the federal
        government and cannot be used to determine if an insurance company owes a rebate.




                                                                                                                                             47
Health Insurance in Oregon

Associations
Some small employers and individuals purchase                                   The Department of Consumer and Business Services
health insurance through associations. Associations                             does not review or approve association health plan
may take many forms, including trade organizations                              rates unless an insurer chooses to rate an association
made up of businesses that represent a particular                               group according to small employer group premium
industry or individuals who work in common fields or                            rating laws or is required to do so because the plan
have common experiences or interests. To qualify as                             does not meet certain exemptions.
an association, an association must be active for at                            Figure 4-23 summarizes the association and trust
least one year and must be organized and maintained                             plan data for 2009. The average premium per member
in good faith primarily for purposes other than serv-                           per month was $322 for the seven largest insurers
ing as a vehicle for its members to obtain insurance.                           compared to $312 for all insurers.
In 2010, approximately 213,000 Oregonians received
health insurance through associations and trusts.

                                  Figure 4-23. Seven largest insurers, associations in 2009
                                                          Number of            Premium            Medical             Average premium per
 Insurer                                                  members              earned*           loss ratio            member per month
 Health Net                                                   16,089               $58.3               94%                         $282
 Kaiser                                                       39,944             $160.7                96%                         $318
 LifeWise                                                      4,288               $14.3               78%                         $271
 ODS Health Plans                                              1,053                $3.5               97%                         $275
 PacificSource                                                13,573               $55.5               78%                         $333
 Providence                                                   16,783               $63.9               99%                         $313
 Regence BCBS                                                 44,063              $185.0               92%                         $346
 Total – above seven largest insurers                      135,793              $541.1                 93%                         $322
 Total – all insurers                                      161,333              $632.1                 92%                         $312
*Rounded in millions.
Source: Oregon Insurance Division 2008 Health Benefit Plan Reports
These calculations for medical loss ratio are different than those required by the federal
government and cannot be used to determine if an insurance company owes a rebate.


Figure 4-24 shows that in 2009, the seven largest                                    Figure 4-24. Market share by premium,
insurers earned 86 percent of all premiums in                                        associations and trusts market in 2009
Oregon’s association market. In 2009, insurers earned                                                                   Health Net
more in premiums from the association market than                                              Other
                                                                                                                           9%
                                                                                               14%
they did from the individual market.


                                                                                                                                         Kaiser
                                                                                                                                          25%


                                                                                  Regence
                                                                                                                                     LifeWise
                                                                                    30%
                                                                                                                                        2%
                                                                                                                                   ODS
                                                                                                                                    1%
                                                                                                                            Pacific-
                                                                                                Providence                  Source
                                                                                                   10%                        9%

                                                                                  Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports

48
                                                                                       Health Insurance in Oregon

Figure 4-25 shows that in 2009, average association
plan premiums for Oregon’s seven largest insurers
were somewhat higher than those of all insurers.

                                    Figure 4-25. Average premium per member per month,
                                         association and trust plans from 2008 to 2009
 $400
                                                                              333                      342 346
                                                                                              313
            290 282               318
                                                                        301                                        312 322       305 312
 $300                      280                  271            275                      269
                                                         261


 $200


 $100
                                            0

   $0
           Health Net     Kaiser NW       LifeWise         ODS        PacificSource    Providence     Regence       Seven      All insurers
                                                                                                       BCBS         largest
                                                                       2008          2009

         Source: Oregon Insurance Division, 2005 to 2009 Health Benefit Plan Reports




Figure 4-26 shows that in 2009, average premiums                              this could be a reflection that association and trust
for associations and trusts were somewhat higher                              plans typically provide more and richer benefits than
than premiums for all markets. As with large groups,                          small group and individual plans.

                                   Figure 4-26. Average premium per member per month,
                                        associations and trusts vs. all markets in 2009
  $400
                                  337                                   333                           346
                            318                                               316      313 310                    322 310      312 306
                                                                                                            304
  $300       282 295                      271            275 267
                                                256


  $200


  $100


    $0
            Health Net     Kaiser NW       LifeWise        ODS       PacificSource     Providence     Regence     Seven       All insurers
                                                                                                       BCBS       largest
                                                           Associations and trusts      All markets

          Source: Oregon Insurance Division, 2005-2009 Health Benefit Plan Reports




                                                                                                                                             49
Health Insurance in Oregon

Figure 4-27 shows Oregon’s seven largest insurers
spent 93 cents of every association and trust premium
dollar on medical claims, similar to that of all insurers.

                  Figure 4-27. Medical loss ratios, associations and trusts from 2008 to 2009
 120

                  94        97    96                              97                              99
 100                                                                                                       93   92   91        93      91    92
            88                                              87
                                                  78                        81    78        79
  80

  60

  40

  20
                                             0
     0
           Health Net      Kaiser NW        LifeWise          ODS        PacificSource     Providence     Regence     Seven          All insurers
                                                                                                           BCBS       largest

                                                                           2008         2009

         Source: Oregon Insurance Division, 2005 to 2009 Health Benefit Plan Reports
         These calculations for medical loss ratio are different than those required by the federal
         government and cannot be used to determine if an insurance company owes a rebate.




Figure 4-28 shows insurers spent slightly more of
the premium dollar to pay medical claims for associa-
tions and trusts versus other insurance markets.

                    Figure 4-28. Medical loss ratio, associations and trusts vs. all markets in 2009
  120

                            96    97                        97    96                       99
  100       94                                                                                   93       92         93   91         92     91
                  89                                                                                            88
                                                  82                              85
                                            78                              78
   80

   60

   40

   20

     0
           Health Net      Kaiser NW        LifeWise          ODS        PacificSource Providence         Regence    Seven          All insurers
                                                                                                           BCBS      largest
                                                             Associations and trusts        All markets

         Source: Oregon Insurance Division, 2005 to 2009 Health Benefit Plan Reports
         These calculations for medical loss ratio are different than those required by the federal
         government and cannot be used to determine if an insurance company owes a rebate.




50
                                                                    Health Insurance in Oregon


Section 5: Insurer Profiles
This section profiles Oregon’s seven largest health insurers using data from the Health Benefit Plan Reports. The
information contained in these annual reports allows the Department of Consumer and Business Services to
analyze trends in enrollment, premiums, and medical loss ratios for each insurer in each market segment.
The numbers discussed in this section relate exclusively to business in the defined market segments and do not
cover other business of these companies such as Medicare and Medicaid, dental insurance, and claims manage-
ment or other third-party administrator services for self-insured employers.
The data show that in 2009:
■ Five of the seven largest insurers saw declines in enrollment of up to 20 percent from 2008, while only one
  of the seven saw enrollment gains of more than 2 percent.
■ Four of the seven largest insurers earned between 2 percent and 16 percent more in premiums in 2009 than
  they did in 2008. The remaining three earned between 0.9 percent and 19.3 percent less in premiums in 2009
  than in 2008.
■ Four of the seven largest insurers saw net underwriting losses in 2009. Of the three insurers reporting net
  underwriting gains, two saw increases from 2008. Net underwriting gains and losses account for the money
  insurers earn or lose from activities related to providing insurance.
■ Four of the seven largest insurers saw increases in net income from 2008. Only two of the seven largest
  insurers reported net losses after taxes.
The insurer profiles are listed in order of the largest to smallest premium earned in 2009.




                                                                                                              51
Health Insurance in Oregon

Kaiser Foundation Health Plan of the Northwest
Kaiser was granted a certificate of authority in 1948.                                network of hospitals and physician practices operat-
Kaiser is part of a national network of health plans                                  ing under the Kaiser Permanente name. Plans offered
headquartered in Oakland, Calif., with 8.6 million                                    include traditional co-payment plans, deductible
members in nine states and Washington, D.C. Based                                     plans, and Medicare plans with care provided at
in Portland, the Northwest region of Kaiser encom-                                    participating facilities. Point-of-service plans are also
passes Kaiser Foundation Health Plan of the North-                                    offered that provide additional locations where
west; Kaiser Foundation Hospitals; Northwest                                          enrollees can receive care.
Permanente, P.C., Physicians and Surgeons; and
                                                                                      Figure 5-1 shows that Kaiser insured nearly 326,000
Permanente Dental Associates.
                                                                                      Oregonians in 2009, about 600 fewer than in 2008.
Kaiser is one of the largest not-for-profit managed                                   Despite flat enrollment, Kaiser generated approxi-
health care companies in the country. It has an                                       mately $1.3 billion in Oregon premiums in 2009, up 4
integrated care model, meaning its members have                                       percent from 2008. Net income of $36 million was up
access to hospital and physician care through a                                       11 percent from 2008.

                Figure 5-1. Kaiser Foundation Health Plan of the Northwest, 2009 financial data
                                                                                                                                     Average premium
                                                           Total                                                  Medical              per member
 Oregon Market                                            members              Premium earned                    loss ratio             per month
 Individual health benefit plans                               14,714                    $74,072,134                   97%               $418.54
 Small group                                                   31,121                  $128,340,183                    96%               $339.36
 Large group                                                 240,162                   $955,695,282                    97%               $334.89
 Associations and trusts                                       39,944                   $160,701,350                   96%                $318.31
 Total for all markets above                               325,941              $1,318,808,949                        97%                $336.97
 Nationwide for 2009
 Total surplus maintained.......................................................................................$494,918,142
 Total unpaid claims reserves maintained ................................................................$35,435,931
 Net underwriting gain or loss ................................................................................. $13,415,918
 Net income after taxes ............................................................................................$36,291,771
 Oregon Medical Insurance Pool ............................................................................. $15,753,251
 Total general administrative expense ...................................................................$108,076,316

 Nationwide for 2009
 Largest nonmedical administrative expenses................................ Total year-end
 Salaries, wages, employment taxes, and other benefits .........................................$60,808,301
 Commissions...........................................................................................................$15,975,434
 Marketing and advertising ....................................................................................... $3,509,055
 Rent (occupancy)........................................................................................................2,950,488
 Legal fees, expenses, and other professional or consulting fees .............................$2,020,597
Source: Oregon Insurance Division 2009 Health Benefit Plan Reports




52
                                                                              Health Insurance in Oregon


Figure 5-2 shows Kaiser’s overall market share and                 cent of the individual market, 15 percent of the small
its market share in each market segment. Kaiser                    group market, 34 percent of the large group market,
earned 27 percent of all premiums in 2009 in all                   and 25 percent of the associations and trusts market.
Oregon health insurance markets. Kaiser had 16 per-

                           Figure 5-2. Kaiser Foundation Health Plan of the Northwest:
                                   Premium as percent of 2009 Oregon market
                 40%

                 35%                                              34%

                 30%                                                                                       27%
                                                                                      25%
                 25%

                 20%
                             16%                15%
                 15%

                 10%

                  5%

                  0%
                           Individual      Small group        Large group         Associations             Total
                                                                                   and trusts

                       Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




Figure 5-3 provides a breakdown by market segment                  Figure 5-3. Kaiser Foundation Health Plan
of Kaiser premiums. Kaiser earned 84 percent of its                of the Northwest: Premium as percent of
premiums from the large group and associations and                 its Oregon 2009 business
trusts markets.
                                                                                                       Individual
                                                                            Associations
                                                                                                          6%
                                                                             and trusts
                                                                               12%                               Small Group
                                                                                                                    10%




                                                                                Large Group
                                                                                    72%

                                                                   Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




                                                                                                                                         53
Health Insurance in Oregon

Figure 5-4 shows that Kaiser’s surplus increased 3 per-
cent in 2009 after dipping in 2008. Through June 2010,
Kaiser’s surplus was up 4 percent from 2009. Kaiser’s
surplus exceeds the minimum required surplus.

                                  Figure 5-4. Kaiser Foundation Health Plan: Surplus trend,
                                 actual and minimum required from 1998 to June 30, 2010
        600.0                                                                                                                 514.0
                                                                                                     494.2   480.1    494.9
        500.0                                                                               430.0
                                                                                   359.2
        400.0
                                                                          308.4
        300.0                                                     240.8
                                                        189.5
                                      145.6    160.5
        200.0                119.5
                    98.3
        100.0

            -                                                                       67.5     75.3     78.3   80.8     81.9
                                                46.3     51.1     52.9     58.4
                    28.6     32.8      35.8
                   1998      1999     2000     2001     2002      2003    2004     2005     2006     2007    2008     2009     YTD
                                                                                                                              6-2010
                                                            Actual surplus             Minimum surplus

                  Source: The annual data was compiled by the NAIC from the filings database and
                  the year-to-date figures were compiled from the June 30, 2010, filings with the Oregon
                  Insurance Division.
                  Note: The minimum surplus required is not available for YTD, June 2010.




Figures 5-5, 5-6, and 5-7 show Kaiser’s average                              Figure 5-6. Kaiser approved rate changes, small
health insurance rate changes over the past five years                       group plans
for individual, small group, and portability plans.
                                                                                           Year                     Annual Rate Change
Figure 5-5. Kaiser approved rate changes,                                                  2006                           9.90%
individual plans                                                                           2007                          14.30%
                Year                    Annual Rate Change                                 2008                           8.00%
                2006                            12.80%                                     2009                           7.70%
                2007                              7.30%                                2010                              10.78%
                2008                             6.50%                         2006-2010 Cumulative                      61.86%
                2009                              9.60%
                                                                             Figure 5-7. Kaiser approved rate changes,
           2010                                   *                          portability plans
   2006-2010 Cumulative                         41.28%
                                                                                            Year                    Annual Rate Change
                                                                                           2006                          3.60%
                                                                                           2007                          17.30%
Source: Data for Figures 5-5 through 5-7 were obtained from Kaiser                         2008                          4.90%
individual, small group, and portability Health Benefit Plan rate
filings.
                                                                                           2009                          6.10%
*Blank spots for years 2006-2009 mean that no rate change was                            2010                            6.70%
approved in that particular year. For 2010, a rate request could be
pending at the time of this report.
                                                                                 2006-2010 Cumulative                   44.32%

54
                                                                                                 Health Insurance in Oregon

Regence BlueCross BlueShield of Oregon
The Regence Group is the Pacific Northwest’s largest                                   Regence operates under a certificate of authority
affiliation of health care plans. The Regence Group                                    issued by the State of Oregon in 1942 and is
includes Regence BlueCross BlueShield of Oregon;                                       headquartered in Portland. Prior to 1983, Regence
Regence BlueShield, which serves parts of Washing-                                     was incorporated and operated as Oregon
ton; Regence BlueShield of Idaho; and Regence                                          Physician’s Service (Blue Shield). Regence is a
BlueCross BlueShield of Utah. Collectively, the four                                   not-for-profit company, insuring approximately
plans serve 2.5 million people in four states.                                         350,000 Oregonians.
Regence is an independent licensee of the BlueCross                                    Figure 5-8 shows that Regence enrolled 350,000
and BlueShield Association, a national association of                                  Oregonians in its health plans in 2009. This is down
community-based and locally operated Blue Cross                                        approximately 9 percent from 2008 and 31 percent
and Blue Shield companies. Although each “Blue” is                                     from 2007. Regence generated $1.3 billion in Oregon
an independent company, each must adhere to                                            premium in 2009, a decrease of 15 percent from
specific requirements and guidelines established by                                    2008. Net income of approximately $22 million in
the national association in order to use the name.                                     2009 was down nearly 13 percent from the prior year.

                                Figure 5-8. Regence BlueCross BlueShied, 2009 financial data
                                                                                                                                      Average premium
                                                           Total                                                   Medical              per member
 Oregon Market                                            members               Premium earned                    loss ratio             per month
 Individual                                                    79,054                  $189,444,014                    94%                 $188.67
 Small Group                                                   57,976                  $220,575,898                    83%                 $320.27
 Large Group                                                  169,122                  $713,151,627                    87%                 $342.70
 Associations and Trusts                                       44,063                  $184,975,058                    92%                 $345.59
 Total for all markets above                                350,215                $1,308,146,597                      88%                 $303.58
 Nationwide for 2009
 Total surplus maintained............................................................................................ $565,197,607
 Total unpaid claims reserves maintained ................................................................... $245,894,165
 Net underwriting gain or loss ...................................................................................... -$2,051,060
 Net income after taxes .................................................................................................$21,885,285
 Oregon Medical Insurance Pool ..................................................................................$20,215,809
 Total general administrative expense ........................................................................$186,642,907

 Nationwide for 2009
 Largest nonmedical administrative expenses.....................................Total year-end
 Salaries, wages, employment taxes, and other benefits ............................................... $75,390,927
 Commissions................................................................................................................ $35,856,772
 Other taxes, licenses and fees ......................................................................................$32,222,057
 Cost depreciation: equipment, software, furniture, etc. ...............................................$21,416,402
 General office expenses: sundries, supplies, phones, printing, postage, etc. ...............$10,186,874
Source: Oregon Insurance Division 2009 Health Benefit Plan Reports




                                                                                                                                                     55
Health Insurance in Oregon

Figure 5-9 shows Regence’s overall market share                     40 percent of the individual market, 25 percent of the
and its market share in each market segment.                        small group market, 25 percent of the large group
Regence earned 27 percent of all premiums in 2009                   market, and 29 percent of the associations and trusts
in all Oregon health insurance markets. Regence had                 market.

                                       Figure 5-9. Regence BlueCross BlueShield:
                                      Premium as percent of 2009 Oregon market
               45%
                           40%
               40%
               35%
                                                                                  29%
               30%                                                                                     27%
                                             25%               25%
               25%
               20%
               15%
               10%
                5%
                0%
                         Individual      Small group        Large group        Associations             Total
                                                                                and trusts

                     Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




Figure 5-10 provides a breakdown by market                           Figure 5-10. Regence BlueCross BlueShield:
segment of Regence premiums. Regence earned                          Premium as percent of its Oregon
more than $898 million, or 69 percent, of its premi-                 2009 business
ums from the large group and associations and trusts
                                                                          Associations                             Individual
markets.                                                                   and trusts                                 14%
                                                                              14%

                                                                                                                           Small Group
                                                                                                                              17%




                                                                          Large Group
                                                                              55%
                                                                      Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




56
                                                                                      Health Insurance in Oregon

Figure 5-11 shows that Regence’s surplus increased
by approximately 16 percent in 2009 after a decrease
in surplus in 2008. Through June 2010, surplus was
up 5 percent from 2009. Regence’s surplus exceeds
the minimum required surplus.

                                  Figure 5-11. Regence BlueCross BlueShield: Surplus trend,
                                  actual and minimum required from 1998 to June 30, 2010
        700.0
                                                                                                                               595.7
                                                                                                     552.2             565.2
        600.0                                                                               533.5
                                                                                   466.9                      486.1
        500.0
                                                                          366.4
        400.0                 301.1
                                               266.3             282.2
        300.0      235.6                                235.6
                                      207.8
                                                                                                      148.8   172.8    156.2
        200.0                 109.6            120.0    122.3     118.3                     130.2
                                       86.1                               103.8     96.9
                       63.8
        100.0
            -
                   1998       1999    2000     2001     2002      2003    2004     2005     2006      2007    2008     2009     YTD
                                                                                                                               6-2010
                                                            Actual surplus            Minimum surplus

                  Source: The annual data was compiled by the NAIC from the filings database and
                  the year-to-date figures were compiled from the June 30, 2010, filings with the Oregon
                  Insurance Division.
                  Note: The minimum surplus required is not available for YTD, June 2010.




Figures 5-12, 5-13, and 5-14 show Regence’s average                          Figure 5-13. Regence approved rate changes,
health insurance rate changes over the past five years                       small group plans
for individual, small group, and portability plans.
                                                                                           Year                      Annual Rate Change
Figure 5-12. Regence approved rate changes,                                                2006                            1.40%
individual plans                                                                           2007                           12.37%
                Year                    Annual Rate Change                                 2008                           13.20%
                2006                           -16.00%                                     2009                           11.62%
                2007                            17.60%                                 2010                                15.00%
                2008                            24.10%                         2006-2010 Cumulative                       65.56%
                2009                            17.10%
                                                                             Figure 5-14. Regence approved rate changes,
          2010                                  16.36%                       portability plans
  2006-2010 Cumulative                          67.04%                                     Year                      Annual Rate Change
                                                                                           2006                           -11.40%
                                                                                           2007                           25.80%
Source: Data for figures 5-12 through 5-14 were obtained from                              2008                           28.10%
Regence individual, small group, and portability Health Benefit Plan
rate filings                                                                               2009                           20.80%
*Blank spots for years 2006-2009 mean that no rate change was                          2010                                 *
approved in that particular year. For 2010, a rate request could be
pending at the time of this report.
                                                                               2006-2010 Cumulative                       72.48%

                                                                                                                                          57
Health Insurance in Oregon

Providence Health Plan of Oregon, Inc.
Providence is an Oregon-based, not-for-profit plan                                     Figure 5-15 shows that Providence enrolled more
sponsored by Providence Health System. Providence                                      than 140,000 Oregonians in its health plans in 2009.
is authorized to do business in both Oregon and                                        That is down nearly 14 percent from 2008. Even so,
Washington and operates in Oregon under a certifi-                                     Providence generated close to $549 million in Oregon
cate of authority granted by the state in 1984. As                                     premiums in 2009, an increase of about 9 percent
Providence only first began offering health insurance                                  from 2008. Providence had nearly $29 million in net
to individuals in 2005, it is a relatively recent entrant                              income in 2009 compared to a more than $2 million
into the Oregon individual health insurance market.                                    loss in 2008.

                                    Figure 5-15. Providence Health Plan, 2009 financial data
                                                                                                                                       Average premium
                                                            Total                                                  Medical               per member
 Oregon Market                                             members              Premium earned                    loss ratio              per month
 Individual health benefit plans                                 9,590                   $18,958,515                   95%                       $182.18
 Small group                                                    27,932                 $118,938,245                    96%                       $322.23
 Large group                                                    86,051                 $347,014,256                     91%                      $317.66
 Associations and trusts                                        16,783                   $63,913,810                   99%                       $312.72
 Total for all markets above                                140,356                $548,824,826                       93%                       $310.08
 Nationwide for 2009
 Total surplus maintained................................................................................................. $373,505,101
 Total unpaid claims reserves maintained ..........................................................................$74,324,977
 Net underwriting gain or loss ...........................................................................................$16,822,987
 Net income after taxes ......................................................................................................$28,801,443
 Oregon Medical Insurance Pool .........................................................................................$7,625,988
 Total general administrative expense ...............................................................................$43,545,534

 Nationwide for 2009
 Largest nonmedical administrative expenses.........................................Total year-end
 Salaries, wages, employment taxes, and other benefits ................................................... $12,654,653
 Commissions .................................................................................................................... $11,444,735
 Third party administration expenses or fees or other group service expenses or fees ....... $7,491,992
 Marketing and advertising ................................................................................................. $4,965,320
 Other taxes, licenses and fees ............................................................................................ $4,441,422
Source: Oregon Insurance Division 2009 Health Benefit Plan Reports




58
                                                                            Health Insurance in Oregon


Figure 5-16 shows Providence’s overall market share                percent of the individual market, 14 percent of the
and its market share in each of the market segments.               small group market, 12 percent of the large group
Providence earned 11 percent of all premiums in all                market, and 10 percent of the associations and trusts
Oregon health insurance markets. Providence had 4                  market.

                                          Figure 5-16. Providence Health Plans:
                                       Premium as percent of 2009 Oregon market
                16%
                                               14%
                14%
                                                                 12%
                                                                                                           11%
                12%
                                                                                      10%
                10%

                 8%

                 6%
                             4%
                 4%

                 2%

                 0%
                          Individual       Small group        Large group         Associations             Total
                                                                                   and trusts

                       Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




Figure 5-17 provides a breakdown by market                             Figure 5-17. Providence Health Plans:
segment of Providence premiums. In 2009, Provi-                        Premium as percent of its Oregon
dence earned 75 percent of its premiums from the                       2009 business
large group and associations and trusts markets.
                                                                                                     Individual
                                                                         Associations                   3%
                                                                          and trusts
                                                                            12%                                      Small Group
                                                                                                                        22%




                                                                             Large Group
                                                                                 63%

                                                                   Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




                                                                                                                                         59
Health Insurance in Oregon

Figure 5-18 shows that Providence’s surplus                                 surplus was up nearly 9 percent from 2009. Provi-
increased by approximately 9 percent in 2009                                dence’s surplus exceeds minimum required surplus
compared to 2008. Through June 2010, Providence’s                           levels.
                                  Figure 5-18. Providence Health Plan: Surplus trend, actual
                                     and minimum required from 1998 to June 30, 2010
       450.0                                                                                                                    406.5
                                                                                                                      373.5
       400.0                                                                                         340.5   343.0
       350.0                                                                               285.6
       300.0
                                                                                  224.2
       250.0
       200.0                                                              163.9
       150.0                                                      113.0
                                               73.5     81.3
       100.0           54.1   62.5    63.5
         50.0
                                      57.2                                                           58.7    66.9      68.0
            -          46.0   46.9                                37.2    38.4     42.8     50.9
                                                        33.6
                                               16.5
                   1998       1999   2000     2001     2002       2003    2004     2005     2006     2007    2008     2009      YTD
                                                                                                                               6-2010
                                                           Actual surplus             Minimum surplus

                  Source: The annual data was compiled by the NAIC from the filings database and
                  the year-to-date figures were compiled from the June 30, 2010, filings with the Oregon
                  Insurance Division.
                  Note: The minimum surplus required is not available for YTD, June 2010.



Figures 5-19, 5-20, and 5-21 show Providence’s                              Figure 5-20. Providence Health Plan approved
average health insurance rate changes for the past                          rate changes, small group plans
five years for individual, small group, small group
                                                                                           Year                      Annual Rate Change
portability, and large group portability plans.
                                                                                           2006                               5.92%
Figure 5-19. Providence Health Plan approved                                               2007                               13.34%
rate changes, individual plans                                                             2008                               0.86%
                Year                   Annual Rate Change                                  2009                               16.99%
                2006                            3.70%                                    2010                                 1.16%
                2007                           12.00%                            2006-2010 Cumulative                        43.31%
                2008                           25.00%                       Figure 5-21. Providence Health Plan approved
                2009                           15.50%                       rate changes, portability plans
          2010                                 12.90%
                                                                                      Large group                       Small group
  2006-2010 Cumulative                         89.31%                                          Annual Rate                      Annual Rate
                                                                                  Year                               Year
                                                                                                 Change                           Change
                                                                                  2006             0.00%             2006           0.00%
                                                                                  2007             -1.10%            2007           4.10%
                                                                                  2008             6.60%             2008          10.00%
                                                                                  2009              7.50%            2009           3.00%
Source: Data for figures 5-19 through 5-21 were obtained from                     2010              8.50%        2010              17.10%
Providence Health Plan individual, small group, and portability
Health Benefit Plan rate filings.                                                2006-10           22.97%       2006-10            38.11%

60
                                                                                                 Health Insurance in Oregon

PacificSource Health Plan
PacificSource is a Eugene-based, independent,                                          Source announced the acquisition of Clear One
not-for-profit health care service contractor that                                     Health Plans, Inc., allowing the company to provide
operates under a certificate of authority granted by                                   Medicare and Medicaid coverage.
the State of Oregon in 1940. Founded in 1933,                                          Figure 5-22 shows that PacificSource enrolled
PacificSource is licensed in Oregon, Idaho, and                                        127,115 Oregonians in health plans in 2009. This is
Washington. The company provides health coverage                                       up 2 percent from 2008. PacificSource generated
to approximately 162,500 people in the Pacific                                         more than $468 million in Oregon premiums, down
Northwest. PacificSource significantly expanded its                                    less than a percentage point from 2008. PacificSource
dental insurance business in 2009 with the acquisi-                                    had a net income of nearly $4.3 million compared to
tion of the commercial business of Advantage Dental,                                   a $3.6 million loss in 2008.
based in Redmond, Ore. In spring 2010, Pacific-

                                 Figure 5-22. PacificSource Health Plans, 2009 financial data
                                                                                                                                       Average premium
                                                            Total                                                  Medical               per member
 Oregon Market                                             members              Premium earned                    loss ratio              per month
Individual health benefit plans                                 12,541                   $22,548,793                     74%                       $151.72
Small group                                                     35,669                  $124,513,723                     86%                      $309.34
Large group                                                     65,332                  $265,678,213                     86%                      $348.31
Associations and trusts                                         13,573                   $55,450,830                     78%                      $332.96
Total for all markets above                                  127,115                $468,191,559                        85%                       $316.25
Nationwide for 2009
 Total surplus maintained.................................................................................................... $107,075,852
 Total unpaid claims reserves maintained ............................................................................ $44,518,499
 Net underwriting gain or loss ...............................................................................................$4,544,695
 Net income after taxes ..........................................................................................................$4,290,283
 Oregon Medical Insurance Pool ........................................................................................... $6,519,872
 Total general administrative expense ..................................................................................$61,524,739

 Nationwide for 2009
 Largest nonmedical administrative expenses........................................... Total year-end
 Salaries, wages, employment taxes, and other benefits ......................................................$19,819,564
 Commissions .......................................................................................................................$15,256,906
 Other taxes, licenses and fees ...............................................................................................$8,418,602
 Cost depreciation: equipment, software, furniture, etc. ........................................................$7,038,225
 Legal fees, expenses, and other professional or consulting fees..............................................$892,614
Source: Oregon Insurance Division 2009 Health Benefit Plan Reports




                                                                                                                                                             61
Health Insurance in Oregon

Figure 5-23 shows PacificSource’s overall market                   Source had 5 percent of the individual market, 14
share and its market share in each market segment.                 percent of the small group market, 9 percent of the
PacificSource earned 10 percent of all premiums in                 large group market, and 9 percent of the associations
2009 in all Oregon health insurance markets. Pacific-              and trusts market.

                                        Figure 5-23. PacificSource Health Plans:
                                      Premium as percent of 2009 Oregon market
               16%
                                             14%
               14%

               12%
                                                                9%                                       10%
               10%                                                                  9%
                8%

                6%         5%
                4%

                2%

                0%
                         Individual       Small group        Large group        Associations              Total
                                                                                 and trusts

                      Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




Figure 5-24 provides a breakdown by market                           Figure 5-24. PacificSource Health Plans:
segment of PacificSource premiums. In 2009, Pacific-                 Premium as percent of its Oregon
Source earned about $321 million, or 68 percent, of                  2009 business
its premiums from the large group and associations
                                                                                                   Individual
and trusts markets.                                                   Associations                    5%
                                                                       and trusts
                                                                         12%
                                                                                                                     Small Group
                                                                                                                        27%




                                                                           Large Group
                                                                               56%

                                                                   Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




62
                                                                                       Health Insurance in Oregon

Figure 5-25 shows that PacificSource’s surplus                                down nearly 4 percent from 2009. PacificSource’s
increased by approximately 15 percent in 2009 after                           surplus exceeds the minimum required surplus.
a decrease in 2008. Through June 2010, surplus was

                                   Figure 5-25. PacificSource Health Plan: Surplus trend,
                                 actual and minimum required from 1998 to June 30, 2010
        140.0                                                                                 123.5    124.5
                                                                                     112.8
        120.0                                                                                                           107.1    102.9
                                                                                                               93.2
        100.0                                                                84.6

          80.0                                                     64.3
                                                          51.3
          60.0
                                                 38.8
          40.0                 25.7     29.1
                        22.3
                                                                                               40.8     45.0            42.8
          20.0                                                                        38.9                     39.3
                                                                   30.7      33.8
             -                                   16.5     17.8
                                9.0     12.6
                      6.7
                     1998      1999    2000     2001     2002      2003     2004     2005     2006     2007    2008     2009      YTD
                                                                                                                                 6-2010
                                                            Actual surplus             Minimum surplus

                   Source: The annual data was compiled by the NAIC from the filings database and
                   the year-to-date figures were compiled from the June 30, 2010, filings with the Oregon
                   Insurance Division.
                   Note: The minimum surplus required is not available for YTD, June 2010.




Figures 5-26, 5-27, and 5-28 show PacificSource’s                             Figure 5-27. PacificSource approved rate
average health insurance rate changes over the past                           changes, small group plans
five years for individual, small group, and portability
                                                                                             Year                     Annual Rate Change
plans.
                                                                                             2006                           11.85%
Figure 5-26. PacificSource approved rate                                                     2007                           10.34%
changes, individual plans                                                                    2008                           20.27%
                 Year                    Annual Rate Change                                  2009                               9.23%
                 2006                           11.40%                                   2010                              13.60%
                 2007                             3.20%                          2006-2010 Cumulative                      84.17%
                 2008                           18.10%                        Figure 5-28. PacificSource approved rate
                 2009                           25.00%                        changes, portability plans
           2010                                 15.40%                                       Year                     Annual Rate Change
   2006-2010 Cumulative                         95.85%                                       2006                           17.70%
                                                                                             2007                               9.70%
                                                                                             2008                          13.40%
                                                                                             2009                          13.80%
Source: Data for figures 5-26 through 5-28 were obtained from                            2010                              14.50%
PacificSource individual, small group, and portability Health Benefit
Plan rate filings.                                                               2006-2010 Cumulative                      90.78%

                                                                                                                                           63
Health Insurance in Oregon

Health Net Health Plan of Oregon, Inc.
Health Net is a subsidiary of Health Net, Inc., a                                      Figure 5-29 shows that Health Net insured 105,396
national, publicly traded managed health care                                          Oregonians in its health plans in 2009. That is down
company providing health benefits to approximately                                     10 percent from 2008. Despite the loss in enrollment,
6.1 million people nationwide. Health Net operates                                     Health Net generated approximately $407 million in
under a certificate of authority issued by the State of                                Oregon premium, a nearly 2 percent increase from the
Oregon in 1989 and covers approximately 105,000                                        prior year. Its net loss of $3.2 million in 2009 contrasts
Oregonians.                                                                            with $3.8 million in net income in 2008.

                           Figure 5-29. Health Net Health Plan of Oregon, 2009 financial data
                                                                                                                                      Average premium
                                                            Total                                                  Medical              per member
 Oregon Market                                             members              Premium earned                    loss ratio             per month
 Individual health benefit plans                                 6,250                  $19,356,684                   101%                    $237.32
 Small group                                                   37,447                 $134,502,077                      83%                   $305.70
 Large group                                                   45,610                  $194,731,154                    90%                    $298.75
 Associations and trusts                                       16,089                   $58,323,621                     94%                   $282.28
 Total for all markets above                               105,396                $406,913,536                        89%                     $294.87
 Nationwide for 2009
 Total surplus maintained................................................................................................. $73,677,286
 Total unpaid claims reserves maintained ......................................................................... $30,916,113
 Net underwriting gain or loss ..........................................................................................-$6,536,533
 Net income after taxes ..................................................................................................... -$3,231,055
 Oregon Medical Insurance Pool ........................................................................................ $5,143,321
 Total general administrative expense ..............................................................................$38,411,992

 Nationwide for 2009
 Largest nonmedical administrative expenses........................................Total year-end
 Salaries, wages, employment taxes, and other benefits ..................................................$16,918,205
 Commissions ...................................................................................................................$11,921,622
 Third party administration expenses or fees or other group service expenses or fees ......$1,733,602
 Cost depreciation: equipment, software, furniture, etc. ....................................................$1,623,673
 Other taxes, licenses and fees ...........................................................................................$1,341,303
Source: Oregon Insurance Division 2009 Health Benefit Plan Reports




64
                                                                            Health Insurance in Oregon


Figure 5-30 shows Health Net’s overall market share               Net had 4 percent of the individual market, 15
in Oregon and its market share in each market                     percent of all small group premiums, 7 percent of the
segment. Health Net earned 8 percent of all premi-                large group market, and 9 percent of the associations
ums in 2009 in all Oregon insurance markets. Health               and trusts market.

                                       Figure 5-30. Health Net Health Plans:
                                    Premium as percent of 2009 Oregon market
              18%
                                            15%
              16%
              14%
              12%
              10%                                                                   9%
                                                                                                          8%
               8%                                               7%
               6%
                          4%
               4%
               2%
               0%
                       Individual        Small group        Large group        Associations              Total
                                                                                and trusts

                     Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




Figure 5-31 provides a breakdown by market                           Figure 5-31. Health Net Health Plans:
segment of Health Net premiums. Health Net earned                    Premium as percent of its Oregon
approximately $253 million, or 62 percent of its                     2009 business
premiums, from the large group and associations and
trusts markets.                                                      Associations
                                                                                                 Individual
                                                                                                    5%
                                                                      and trusts
                                                                        14%



                                                                                                                     Small Group
                                                                                                                        33%




                                                                          Large Group
                                                                              48%

                                                                  Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




                                                                                                                                        65
Health Insurance in Oregon

Figure 5-32 shows that Health Net increased surplus                           ness) totaling $19.2 million. Through June 2010,
by approximately 28 percent in 2009 after decreasing                          surplus was up 7 percent from 2009. Health Net’s
surplus in 2008. The increase in 2009 is primarily                            surplus exceeds the minimum required amounts.
the result of issuing surplus notes (a type of indebted-

                                    Figure 5-32. Health Net Health Plan: Surplus trend, actual
                                       and minimum required from 1998 to June 30, 2010
        90.0                                                                                                                   79.1
                                                                                                                      73.7
        80.0                                                                                          67.4
        70.0                                                                                 59.8            57.4
        60.0                                                                         49.6
        50.0                                                                39.5
        40.0                                                         28.6
                                                         24.7
        30.0       17.7     19.2               17.6
                                      15.9                                                            33.3   33.9     35.9
        20.0                                                                         26.9    27.8
        10.0                                                                23.1
                                      14.5                           17.6
                   14.1      11.9              11.3      11.6
           -
                  1998      1999     2000      2001     2002     2003       2004    2005    2006     2007    2008     2009     YTD
                                                                                                                              6-2010
                                                           Actual surplus             Minimum surplus

                 Source: The annual data was compiled by the NAIC from the filings database and
                 the year-to-date figures were compiled from the June 30, 2010, filings with the Oregon
                 Insurance Division.
                 Note: The minimum surplus required is not available for YTD, June 2010.




Figures 5-33 5-34, and 5-35 show Health Net’s                                 Figure 5-34. Health Net Health Plan approved
average health insurance rate changes over the                                rate changes, small group plans
past five years for individual, small group, and
                                                                                            Year                    Annual Rate Change
portability plans.
                                                                                            2006                             9.62%
Figure 5-33. Health Net Health Plan approved                                                2007                             8.50%
rate changes, individual plans                                                              2008                             7.50%
               Year                     Annual Rate Change                                  2009                         10.32%
               2006                              8.00%                                     2010                          12.20%
               2007                               9.30%                            2006-2010 Cumulative                  58.27%
               2008                             13.50%                        Figure 5-35. Health Net Health Plan approved
               2009                             22.80%                        rate changes, portability plans
          2010                                    8.00%                                     Year                    Annual Rate Change
  2006-2010 Cumulative                           77.69%                                     2006                             3.10%
                                                                                            2007                         10.00%
                                                                                            2008                         11.40%
                                                                                            2009                         13.40%
Source: Data for figures 5-33 through 5-35 were obtained from                              2010                          20.60%
Health Net individual, small group, and portability Health Benefit
Plan rate filings.                                                                 2006-2010 Cumulative                  72.78%

66
                                                                                                  Health Insurance in Oregon

LifeWise Health Plan of Oregon, Inc.
LifeWise operates as a health insurer under a certifi-                                  Figure 5-36 shows that LifeWise insured roughly
cate of authority granted by the State of Oregon in                                     63,000 Oregon members in 2009. That’s down about
1986. LifeWise is a privately held, for-profit company                                  20 percent from 2008 and more than 44 percent from
with nearly 63,000 members in Oregon. LifeWise is a                                     2007. LifeWise generated $212 million in Oregon
part of the group of Premera companies whose                                            premiums in 2009, a decrease of nearly 19 percent
ultimate parent is Premera, a Washington nonprofit.                                     from 2008. LifeWise reported nearly $767,000 in net
LifeWise is headquartered in Portland. The company                                      income compared to a $10 million net loss in 2008.
and its affiliates provide health care coverage to more
than 1.5 million members throughout Oregon,
Washington, and Alaska.

                                      Figure 5-36. LifeWise Health Plan, 2009 financial data
                                                                                                                                        Average premium
                                                            Total                                                   Medical               per member
 Oregon Market                                             members               Premium earned                    loss ratio              per month
 Individual health benefit plans                               29,675                    $73,986,616                     77%                     $197.70
 Small group                                                   12,221                    $54,723,991                     83%                     $274.53
 Large group                                                   16,495                    $69,272,618                     88%                     $343.42
 Associations and trusts                                        4,288                     $14,267,752                    78%                     $271.13
 Total for all markets above                                 62,679                $212,250,977                         82%                     $256.37
 Nationwide for 2009
 Total surplus maintained..................................................................................................$58,463,824
 Total unpaid claims reserves maintained ......................................................................... $20,741,439
 Net underwriting gain or loss .......................................................................................... -$5,386,912
 Net income after taxes ..........................................................................................................$766,750
 Oregon Medical Insurance Pool ........................................................................................$4,963,615
 Total general administrative expense .............................................................................. $28,172,432

 Nationwide for 2009
 Largest nonmedical administrative expenses........................................ Total year-end
 Salaries, wages, employment taxes, and other benefits .................................................. $11,415,054
 Commissions ..................................................................................................................... $9,657,198
 Cost depreciation: equipment, software, furniture, etc. .................................................... $1,940,141
 Marketing and advertising ................................................................................................ $1,656,639
 Legal fees, expenses, and other professional or consulting fees....................................... $1,172,349
Source: Oregon Insurance Division 2009 Health Benefit Plan Reports




                                                                                                                                                           67
Health Insurance in Oregon

Figure 5-37 shows LifeWise’s overall market share                   markets. LifeWise had 16 percent of the individual
in Oregon and its market share in each market                       market, 6 percent of the small group market, 2
segment. LifeWise earned 4 percent of all Oregon                    percent of the large group market, and 2 percent of
premiums in 2009 in all Oregon health insurance                     the associations and trusts market.

                                        Figure 5-37. LifeWiseHealth Plans:
                                    Premium as percent of 2009 Oregon market
              18%
                          16%
              16%
              14%
              12%
              10%
               8%                            6%
               6%                                                                                         4%
               4%                                              2%                    2%
               2%
               0%
                       Individual        Small group       Large group         Associations              Total
                                                                                and trusts

                    Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




Figure 5-38 provides a breakdown by market                               Figure 5-38. LifeWise Health Plans:
segment of LifeWise premiums. The company earned                         Premium as percent of its Oregon
nearly $129 million, or 60 percent of its premiums,                      2009 business
from the individual and small group markets. Life-
Wise is the only one of the seven largest health                                  Associations
                                                                                   and trusts
insurers to earn the majority of its premiums from                                    7%
markets other than the large group market or large                                                                         Individual
                                                                                                                              34%
group and associations markets combined.


                                                                    Large Group
                                                                        33%




                                                                                                                  Small Group
                                                                                                                     26%


                                                                    Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




68
                                                                                       Health Insurance in Oregon

Figure 5-39 shows that LifeWise’s surplus decreased                          down 2 percent compared to 2009. Despite these
less than a percentage point in 2009 compared to                             recent decreases, LifeWise’s surplus exceeds mini-
2008. Through June 2010, LifeWise’s surplus was                              mum requirements.

                                           Figure 5-39. LifeWise Health Plan: Surplus trend, actual
                                             and minimum required from 1998 to June 30, 2010
                                                                                                    74.9
               80.0                                                                                          69.9
               70.0                                                                 60.6   62.8
                                                                         58.9                                       58.8    58.5     57.2
               60.0
               50.0                                            43.4

               40.0                                   29.5
               30.0                          20.4
                          16.8     16.6
               20.0
                                                                                    25.9   24.4
                                                               22.1      22.6                       20.3     23.0
               10.0                                   18.3                                                          19.5
                                                                                                                            15.0
                  -       10.0      11.1
                                              8.1
                         1998      1999     2000     2001     2002      2003     2004      2005    2006     2007    2008    2009     YTD
                                                                                                                                    6-2010
                                                                   Actual surplus           Minimum surplus

                        Source: The annual data was compiled by the NAIC from the filings database and
                        the year-to-date figures were compiled from the June 30, 2010, filings with the Oregon
                        Insurance Division.
                        Note: The minimum surplus required is not available for YTD, June 2010.




Figures 5-40, 5-41, and 5-42 show LifeWise’s                                 Figure 5-41. LifeWise Health Plan approved
average health insurance rate changes over the past                          rate changes, small group plans
five years for individual, small group, and portability
                                                                                            Year                    Annual Rate Change
plans.
                                                                                            2006                            7.30%
Figure 5-40. LifeWise Health Plan approved                                                  2007                           13.17%
rate changes, individual plans                                                              2008                           28.82%
               Year                     Annual Rate Change                                  2009                            3.42%
              2006                               6.54%                                  2010                               -4.26%
              2007                               9.00%                          2006-2010 Cumulative                       54.88%
              2008                             28.00%                        Figure 5-42. LifeWise Health Plan approved
              2009                             16.00%                        rate changes, portability plans
          2010                                 15.00%                                       Year                    Annual Rate Change
  2006-2010 Cumulative                         98.29%                                       2006                           -4.60%
                                                                                            2007                           8.60%
                                                                                            2008                           20.10%
                                                                                            2009                           24.00%
Source: Data for figures 5-40 through 5-42 were obtained from                           2010                               11.90%
LifeWise individual, small group, and portability Health Benefit
Plan rate filings.
                                                                                2006-2010 Cumulative                       72.65%

                                                                                                                                            69
Health Insurance in Oregon

ODS Health Plan, Inc.
ODS, a for-profit company, first received a Certificate                                Figure 5-43 shows that ODS insured 60,906 Orego-
of Authority in Oregon in 1988. The company is a                                       nians in 2009. This is an increase of 12 percent from
subsidiary of the not-for-profit Oregon Dental                                         2008. ODS generated more than $182 million in
Service, which has been offering dental insurance                                      Oregon premiums in 2009, up 16 percent from 2008.
and administering dental benefits in Oregon since                                      Despite the significant increases in premiums and
1955. The company provides medical insurance in                                        members enrolled, ODS’s net loss after taxes was
Oregon and Alaska and is also licensed in Washing-                                     nearly $10 million in 2009. That compares to its $1.3
ton and Idaho. Oregon represented more than 94                                         million net gain in 2008
percent of the company’s premium in 2009. The ODS
board of directors is appointed by the not-for-profit
Oregon Dental Association, and the ODS Companies
are headquartered in Portland.

                                        Figure 5-43. ODS Health Plans, 2009 financial data
                                                                                                                                        Average premium
                                                            Total                                                   Medical               per member
 Oregon Market                                             members               Premium earned                    loss ratio              per month
 Individual                                                   18,903                   $23,190,827                       85%                     $124.36
 Small Group                                                  15,094                   $43,663,483                       92%                     $233.59
 Large Group                                                  25,856                  $111,703,304                       99%                     $379.28
 Associations and Trusts                                        1,053                    $3,459,627                      97%                     $274.88
 Total for all markets above                                60,906                  $182,017,241                        96%                      $267.47
 Nationwide for 2009
 Total surplus maintained.................................................................................................... $71,413,177
 Total unpaid claims reserves maintained ..........................................................................$21,200,000
 Net underwriting gain or loss ..........................................................................................-$20,223,124
 Net income after taxes ....................................................................................................... -$9,979,067
 Oregon Medical Insurance Pool ......................................................................................... $3,573,198
 Total general administrative expense ..................................................................................$8,918,810

 Nationwide for 2009
 Largest nonmedical administrative expenses......................................... Total year-end
 Salaries, wages, employment taxes, and other benefits .................................................... $12,987,043
 Cost depreciation: equipment, software, furniture, etc. .....................................................$6,403,656
 Commissions....................................................................................................................... $6,399,943
 Other taxes, licenses and fees ............................................................................................. $1,993,845
 Third party administration expenses or fees or other group service expenses or fees .......$1,567,941
Source: Oregon Insurance Division 2009 Health Benefit Plan Reports




70
                                                                              Health Insurance in Oregon


Figure 5-44 shows ODS’s overall market share in                      of the individual market, 5 percent of the small group
Oregon and its market share in each market segment.                  market, 4 percent of the large group market, and 1
ODS earned 4 percent of all premiums in 2009 in all                  percent of the associations and trust market.
Oregon health insurance markets. ODS had 5 percent

                                         Figure 5-44. ODS Health Plans:
                                    Premium as percent of 2009 Oregon market
              6%
                          5%                5%
              5%
                                                               4%                                        4%
              4%

              3%

              2%

              1%                                                                   1%

              0%
                       Individual       Small group        Large group        Associations              Total
                                                                               and trusts

                    Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




Figure 5-45 provides a breakdown by market                           Figure 5-45. ODS Health Plans: Premium
segment of ODS premiums. ODS earned $115                             as percent of its Oregon 2009 business
million, or 63 percent of its premiums, from the large
group and associations and trusts markets.                                Associations                   Individual
                                                                           and trusts                       13%
                                                                              2%

                                                                                                                         Small Group
                                                                                                                            24%




                                                                     Large Group
                                                                         61%

                                                                     Source: Oregon Insurance Division, 2009 Health Benefit Plan Reports




                                                                                                                                           71
Health Insurance in Oregon

Figure 5-46 shows that from 2008, ODS increased                                 (a type of indebtedness) totaling $23 million. The
surplus by approximately 79 percent. The increase in                            company’s surplus exceeds the minimum required
2009 is primarily the result of issuing surplus notes                           surplus.

                                       Figure 5-46. ODS Health Plan: Surplus trend, actual
                                       and minimum required from 1998 to June 30, 2010
         80.0                                                                                                          71.4     69.5
         70.0
         60.0
         50.0                                                                                          38.3   39.8
                                                                                        36.6   37.8
         40.0                                                                  32.4
                                                            26.5      29.2
                    25.5      24.4                24.5
         30.0                           20.1
         20.0
         10.0                           19.8                                                   17.7    19.3            20.1
                              17.1                16.8                                  16.1
                                                                               12.9                           14.1
            -                                               10.9      10.6
                   1998      1999      2000      2001      2002      2003    2004       2005   2006    2007   2008     2009     YTD
                                                                                                                               6-2010

                                                              Actual surplus             Minimum surplus

                  Source: The annual data was compiled by the NAIC from the filings database and
                  the year-to-date figures were compiled from the June 30, 2010, filings with the Oregon
                  Insurance Division.
                  Note: The minimum surplus required is not available for YTD, June 2010.




Figures 5-47, 5-48, and 5-49 show ODS’s average                                 Figure 5-48. ODS Health Plan approved rate
health insurance rate changes over the past five years                          changes, small group plans
for individual, small group, and portability plans.
                                                                                               Year                  Annual Rate Change
                                                                                               2006                           9.79%
Figure 5-47. ODS Health Plan approved rate
changes, individual plans                                                                      2007                           6.31%
                Year                      Annual Rate Change
                                                                                               2008                       13.02%
                                                                                               2009                       14.27%
                2006                                9.99%
                                                                                              2010                        16.50%
                2007                               -4.50%
                                                                                      2006-2010 Cumulative                75.62%
                2008                                8.90%
                2009                               17.67%                       Figure 5-49. ODS Health Plan approved rate
           2010                                   17.54%                        changes, portability plans
   2006-2010 Cumulative                           58.21%                                       Year                  Annual Rate Change
                                                                                               2006                       -6.41%
                                                                                               2007                           0.03%
                                                                                               2008                       11.40%
                                                                                               2009                           8.06%
                                                                                              2010                         0.00%
Source: Data for figures 5-47 through 5-49 were obtained from ODS
individual, small group, and portability Health Benefit Plan rate filings.            2006-2010 Cumulative                12.70%

72
                                                                   Health Insurance in Oregon


Appendix 1: Key Data Sources
The analyses in this report rely heavily on data from two sources: Health Benefit Plan Report data and quarterly
enrollment reports, both submitted to the Department of Consumer and Business Services. Although both of
these reports include information about enrollment in health insurance in Oregon, they contain distinctly differ-
ent data and are used for different purposes.


Health Benefit Plan Report (501) data
■ Numbers cover: Only data specific to health               surveys of employers across the United States. MEPS
    benefit plans issued in Oregon, including out-of-       collects data on the number and types of private
    state residents who are covered by a plan issued in     insurance plans offered, premiums, contributions by
    Oregon.                                                 employers and employees, eligibility requirements,
■ Who submits them: Any insurance carrier licensed          plan benefits, and employer characteristics. Learn
    in Oregon that has issued or offered a health ben-      more at http://www.meps.ahrq.gov/mepsweb/about_
    efit plan in this state.                                meps/survey_back.jsp.
■ How they are used: DCBS uses this information to
    prepare reports on the regulated health
                                                            Insurance Company Financial Information
    insurance market segments (individual, small em-        Premium and Expense Reports — The financial data
    ployer group, associations/trusts, large group).        used in this report was taken from the annual state-
                                                            ments filed by each insurer.
The department posts the full filings for each insurer
on its website: www.insurance.oregon.gov/insurer/           Financial Statements — Each insurer files detailed
rates_forms/health-benefit-plan-reports.html.               financial statements covering its financial status and
                                                            income and expense activity for each calendar quarter
Quarterly enrollment reports                                and each calendar year. The annual statement
                                                            (prepared as of Dec. 31 of each year) must be filed with
■ Numbers cover: All Oregon residents, regardless
                                                            the department by March 1 of each year. The quarterly
    of where the policy was issued and whether the
                                                            statements are prepared as of March 31 and due to be
    insurance plan is regulated by the State of Oregon.
                                                            filed May 15; as of June 30 and due to be filed Aug. 15;
    For example, these reports collect enrollment data
                                                            and as of Sept. 30 and due to be filed Nov. 15.
    on coverage such as Medicare and TRICARE
    (military health plan) in addition to commercial        The detailed financial statements for Oregon domestic
    markets.                                                insurers are available at the Insurance Division’s office
                                                            in Salem. Call 503-947-7982 to schedule an appoint-
■ Who submits them: Licensed carriers, third-party
                                                            ment to review filed statements. A copier is available
    administrators, and special districts.
                                                            for public use. Copy charges apply.
■ How they are used: In addition to looking at en-
    rollment numbers, these reports are used to collect     Data from the NAIC — Insurers file their financial
    geographical average rate data for small group          statements electronically with the National Association
    policies, small employer group and individual           of Insurance Commissioners (NAIC), and state insur-
    health benefit plan age bands, and individual health    ance departments file summarized information with
    benefit plan rejection rates. Beginning in 2010,        the NAIC about consumer complaints against insurers.
    the Oregon Medical Insurance Pool will use this         The NAIC makes basic financial and complaint
    information when developing assessment amounts.         information available on its website, www.naic.org.
                                                            The following information is available without regis-
You can review these reports online at http://insurance.    tration or charge: summarized closed complaint
oregon.gov/sehi/health-insurance_topresent-enroll-          reports, licensing by state, and basic financial informa-
ment.html.                                                  tion (premium, assets, liabilities, financial profile).
                                                            Consumers who set up an account with the NAIC
Medical expenditure panel survey                            Consumer Information Source can access financial
Section 1 of this report also draws on survey data          information on five insurers free of charge. After the
collected by the federal Agency for Healthcare              fifth, there is a charge. To access the NAIC’s insurer
Research and Quality. Its Medical Expenditure Panel         information, go to the NAIC website, select “Consumer
Survey (MEPS), which began in 1996, includes                Information Source,” and follow the directions.
                                                                                                                 73
Health Insurance in Oregon


Appendix 2: Glossary
Claims adjustment expense — Expenses to record,             Net income — The net result of all revenue, claims
adjust, and settle claims. This includes cost-              incurred, expenses, investment results, taxes, and
containment expenses that reduce the number of health       write-offs. Net income is sometimes referred to as
services provided or the cost of services. Included in      profit margin.
this category are salaries of claims personnel.
                                                            Net investment income (or gain) — Includes all
General administrative expense — Expenses an                income earned from invested assets minus expenses
insurer incurs to run its business. This includes all       associated with investments plus the profit (or loss)
expenses that are not directly attributed to settling and   realized from the sale of assets.
paying claims of members. Examples are commissions,
                                                            Net premium earned — The amount charged by the
marketing and advertising expenses, and salaries of
                                                            insurer to the policyholder for the effective period of
non-claims personnel.
                                                            the contract, reinsurance premiums, plus the change
Lines of business (all) — Comprehensive, Medicare           in the unearned premium liability. The unearned
supplement, dental only, vision only, Federal               premium liability is the portion of the premium that
Employees Health Benefit Plan, Medicare, Medicaid,          has been received by the insurer for insurance that has
stop loss, disability income, other health, and other       not yet been provided. It is the amount that would have
non-health.                                                 to be returned to the policyholder if the policy was
                                                            canceled before the end of the policy period.
Lines of business (comprehensive) — Individual,
group, and portability plans.                               Net underwriting gain/loss — Gain or loss after an
                                                            insurer pays claims, adjustment expenses, and general
Medicare — A federal health insurance program for
                                                            administrative expenses. In other words, it is the
people 65 years of age and older, and for people of all
                                                            amount an insurer earns from its insuring activities.
ages with certain disabilities. Eligibility is not income
                                                            When insurers collect more premiums than they pay
based.
                                                            in medical claims, claims expenses, and administra-
Medicaid — A federal program that provides health           tive expenses, the insurer has an underwriting gain.
coverage for certain categories of people with low          If the medical claims, claims expenses, and
incomes.                                                    administrative expenses exceed the premiums
Medical loss ratio — The percent of health insurance        collected, the insurer has an underwriting loss.
premiums spent on medical claims. A 0.96 loss ratio         Premium-to-surplus ratio — This ratio measures an
means that 96 percent of the insurer’s health insurance     insurer’s ability to support its existing business, as
premiums purchased medical services. The more               well as any growth. Since surplus provides a cushion
technical definition of medical loss ratio is claims        for claims and expenses that exceed what the insurer
incurred divided by net premium earned. Under the           expected, this ratio measures the adequacy of the
federal Affordable Care Act, medical loss ratio is          surplus cushion available for unexpected claims and
defined somewhat differently to determine whether an        expenses.
insurer is required to rebate premium. The federal
                                                            Risk-based capital (RBC) — A method for
definition calculates medical loss ratio by dividing
                                                            evaluating an insurer’s surplus in relation to its overall
incurred claims plus health care quality improvement
                                                            business operations in consideration of its size and
costs by earned premiums less federal and state taxes
                                                            lines of business written. An insurer’s RBC is
and licensing or regulatory fees.
                                                            calculated by applying factors to various assets,
Net claims incurred — Cost for hospital and medical         premium, and reserve items. The calculation produces
benefits, emergency room, and prescription drugs            the “authorized control level.” The RBC ratio is the
minus recoveries from the reinsurer plus the change         insurer’s surplus divided by the authorized control
in the unpaid claim liability. The unpaid claim liability   level. The department is required to take certain
is the insurer’s estimate of the cost for claims already    actions, including exercising control of the insurer, if a
reported but not yet paid and an estimate of claims         company’s RBC ratio is at or below 200 percent.
incurred by a member but not yet submitted for              Under certain circumstances, such as a company
payment.
74
                                                            Health Insurance in Oregon



losing money, the department has authority to act if a
company’s RBC ratio is between 200 percent and 300
percent.
Reserves — Funds created to pay anticipated claims.
Surplus — The amount an insurance company’s
assets exceed its liabilities. Additional funds are
surplus over and above what the insurer expects to pay
out for medical claims, expenses, taxes, and other
obligations. All insurers must, by law, maintain
minimum levels of surplus to ensure they will be able
to meet their financial obligations to policyholders.
Surplus includes common and preferred stock issued
to its shareholders, any funds that are contributed to
the insurer, and the accumulation of the insurer’s net
income or losses since its inception.
Surplus notes — Surplus notes are a form of
indebtedness that insurers are allowed to include as
surplus because they are subject to strict control by the
director of the department. Surplus note obligations
are subordinated to all other obligations of an insurer,
and the payment of interest and repayment of principal
requires prior approval of the director.
Taxes and other adjustments — Includes federal and
foreign income taxes, and income and expenses that
are not included in the underwriting results or
investment results. Generally, these include net gain/
(loss) from write-off of agent/premium balances,
restructuring costs, pension adjustments, and other
extraordinary expenses not related to underwriting
or investments.
Total revenue — Net premium earned plus other
revenue.




                                                                                    75
Health Insurance in Oregon


Appendix 3: Annual Premiums by State, Small Group Market
              Individual annual coverage                                        Family annual coverage
Alaska                               1              $6,569     Alaska                               1              $14,975
New Hampshire                        2              $5,494     New Hampshire                        2              $14,577
Delaware                             3              $5,360     Massachusetts                        3              $14,203
Rhode Island                         4              $5,337     Wisconsin                            4              $14,127
District of Columbia                 5              $5,277     Delaware                             5              $13,733
Massachusetts                        6              $5,250     Rhode Island                         6              $13,716
New York                             7              $5,140     Connecticut                          7              $13,685
New Jersey                           8              $5,129     New Jersey                           8              $13,394
Illinois                             9              $5,052     District of Columbia                 9              $13,389
Michigan                            10              $5,033     Maryland                            10              $13,325
Connecticut                         11              $5,019     Vermont                             11              $12,918
North Carolina                      12              $4,966     Wyoming                             12              $12,865
Minnesota                           13              $4,957     Illinois                            13              $12,857
Vermont                             14              $4,948     Texas                               14              $12,674
New Mexico                          15              $4,907     New York                            15              $12,582
Nevada                              16              $4,892     Virginia                            16              $12,468
Virginia                            17              $4,891     Michigan                            17              $12,456
Florida                             18              $4,800     North Carolina                      18              $12,401
Maryland                            19              $4,797     Pennsylvania                        19              $12,250
Wisconsin                           20              $4,753     Louisiana                           20              $12,093
Georgia                             21              $4,731     Maine                               21              $12,054
Oregon                              22              $4,709     Colorado                            22              $11,895
Maine                               23              $4,698     Tennessee                           23              $11,809
Mississippi                         24              $4,610     West Virginia                       24              $11,808
Louisiana                           25              $4,600     Oklahoma                            25              $11,774
Wyoming                             26              $4,598     Florida                             26              $11,766
Colorado                            27              $4,592     Indiana                             27              $11,682
Indiana                             28              $4,586     Minnesota                           28              $11,637
Pennsylvania                        29              $4,581     Arizona                             29              $11,605
West Virginia                       30              $4,568     Nebraska                            30              $11,487
South Carolina                      31              $4,565     Washington                          31              $11,487
Washington                          32              $4,555     Nevada                              32              $11,427
Montana                             33              $4,493     New Mexico                          33              $11,400
Missouri                            34              $4,457     Ohio                                34              $11,332
Tennessee                           35              $4,439     Oregon                              35              $11,319
Texas                               36              $4,391     Utah                                36              $11,300
Idaho                               37              $4,339     Hawaii                              37              $11,238
California                          38              $4,337     Mississippi                         38              $11,160
Kansas                              39              $4,331     South Carolina                      39              $11,045
Utah                                40              $4,318     California                          40              $11,009
Nebraska                            41              $4,316     North Dakota                        41              $10,838
Hawaii                              42              $4,248     Georgia                             42              $10,818
Iowa                                43              $4,220     Kansas                              43              $10,793
South Dakota                        44              $4,195     Idaho                               44              $10,739
Alabama                             45              $4,105     Iowa                                45              $10,476
Ohio                                46              $4,095     Missouri                            46              $10,449
Oklahoma                            47              $4,081     South Dakota                        47              $10,325
North Dakota                        48              $3,894     Alabama                             48              $10,260
Arizona                             49              $3,892     Kentucky                            49               $9,874
Kentucky                            50              $3,841     Arkansas                            50               $9,673
Arkansas                            51              $3,713     Montana                             51               $9,510
Source: Table II.C.1 (2009) Average annual total individual    Source: Table II.D.1 (2009) Average annual total family
premium (in dollars) per enrolled employee at private-sector   premium (in dollars) per enrolled employee at private-sector
establishments that offer health insurance by firm size and    establishments that offer health insurance by firm size and state:
state: United States, 2009                                     United States, 2009

76
Oregon Insurance Division
350 Winter St. NE
P.O. Box 14480
Salem, Oregon 97309-0405




440-3458 (1/2011/COM)

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:0
posted:7/27/2012
language:
pages:84
censhunay censhunay http://
About