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Understanding health insurance rate review

Reviewing health insurance rates is one of the many ways the Division of Financial Regulation regulates the insurance industry.

The division reviews and approves health insurance rates for plans sold directly to individuals and small employers (between one and 50 employees).

The rate review process is transparent and the division encourages public comment.

What a rate is

The price for a health insurance plan is known as a base rate. A premium is the specific amount a policyholder pays for insurance coverage and is calculated from the base rate. Your actual premium will be higher or lower than the base rate, depending on several key factors:

  • How old you are
  • Where you live in Oregon
  • If you smoke
  • The plan you choose
  • The number of people in your family

The health of you and your family, however, is not a factor in how much you pay for health insurance.

What drives the cost of health insurance

Health insurance premiums reflect the costs of providing health care to Oregonians.

The most significant drivers of the cost of insurance are the cost of providing care and how sick members are. This means how often policyholders file claims for health care services and how much those services cost.

In 2016, the average amount health insurance companies spent on medical care for Oregonians was 97 cents for every dollar collected through premiums.

These numbers include an insurance company's individual and small group business. However, these numbers vary significantly based on the line of business (small group plans versus individual plans, for example).

Every rate request filed with the division includes a projection of how the company will spend your premium dollar if its rate is approved.

How we review rate requests

Once a year, insurance companies submit to the division their rate change requests for the next year. These requests are rigorously reviewed by division actuaries during a months-long public review process.

All rate filings and correspondence, including questions and challenges between insurance companies and the division, are made public on this website. Then, the division holds public conference calls to discuss filings.

After an initial review, the division announces preliminary rate decisions and schedules public hearings.

Finally, after public hearings have been held, the insurance commissioner makes the final decision about health insurance rate approvals.

Rates are required by law to:

  • Adequately cover the cost of claims without being excessively high or unfairly discriminatory
  • Be reasonable in relation to the benefits offered

Principles of rate review

  • Rates are required to reflect the average cost of providing health care to a member in Oregon's health insurance market. The division has determined that the average cost of paying claims in the individual health insurance market in 2016 was $384 per member per month; in 2015, the average cost of paying claims was $385 per member per month. Health insurance companies are required to justify any differences to this average in their rate filings.
  • While rates are permitted to pay for the cost of operating an insurance company, and even generate a small amount of profit, rates cannot be excessive.
  • Rates are not allowed to be unfairly discriminatory. This means people in similar circumstances should pay similar rates and that rate increases should be shared between different groups of policyholders.

Rates must cover the cost of benefits plus the insurance company's costs to operate, without being overpriced.

Key factors when considering rates

When considering a rate request, the division looks at such factors as an insurance company's:

  • Recent and projected medical care and prescription drug costs, including any benefit changes to insurance plans
  • Past and future loss ratios (how much of every premium dollar goes to pay health care claims)
  • Recent history of rate changes
  • Overall financial strength (profitability, investment income, surplus)
  • Premiums (how they compare to those of competitors)
  • Administrative costs

The cost of medical care

Recent and future costs of medical care and prescription drugs are a significant driver of insurance rates. Thus, the division closely examines the assumptions behind insurance company estimates about future claims costs. We ask the following questions:

  • How much will any benefit changes increase or decrease costs?
  • Are new contracts with hospitals, doctors, and other providers increasing costs?
  • Why do companies expect policyholders to use more or fewer medical services or a different type of service in the coming year?
  • How many policyholders are likely to switch to a higher deductible plan so they can still afford coverage (resulting in less premium to the company)?
  • Is there any "margin" or padding in the company's projections?
  • To what extent are a company's members aging or are other demographic characteristics changing? How will those changes affect claims?
  • What are the average Oregon and national trends in medical claims costs?


  • Oregon's health insurance companies averaged an 8 percent loss in the individual and small group markets in recent years.
  • Sometimes, a company may be profitable in some lines of business, but not others.


  • Insurance companies are required to have minimum amounts of capital and surplus so they can pay policyholders' claims. Surplus includes profits accumulated by for-profit and nonprofit companies.
  • Companies might use surplus to invest in new technology, protect against adverse conditions such as unexpected claims, or take on additional enrollment and new risk.

Administrative costs

  • The division looks at a company's administrative costs, as well as its projected growth in administrative costs. Companies must report these costs by type of insurance (individual or small employer health plans, for example). They must break out what they spend on salaries, agent commissions, marketing, advertising, and other expenses.
  • Administrative costs are generally higher for individual and small group health insurance compared to large groups. They are also typically higher for insurers that write fewer policies or that write several low-premium, low-benefit policies.
  • To help determine if any proposed increase in administrative expenses is reasonable, the division compares the proposed amount to the Producer Price Index for Direct Health and Medical Insurance Carriers Industry, which is published by the federal Bureau of Labor Statistics.

Public comment

The division encourages public comment throughout the rate review process. You can submit public comment online, during public conference calls, and at public hearings.

Before making a rate decision, the division reviews and considers all comments made by the public. The Oregon State Public Interest Research Group (OSPIRG) has been appointed to review rate filings and submit comments on behalf of consumers.

How to participate

Comment online: You can use to look up a rate request; once you find the rate filing, you will see a "Make a comment" link.

Attend a public hearing: Visit the public hearings section of this website to see hearing times and locations. All hearings are available to view online via livestreaming.

How large group (more than 50 employees) insurance rates are set

Employers negotiate rates directly with the insurance company; these plans' rates are not subject to state regulation.