Reviewing health insurance rates is one of the many ways the Division of Financial
Regulation regulates the insurance
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
- 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
- How much will any benefit changes increase or decrease costs?
- Are new contracts with hospitals, doctors, and other providers increasing
- 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
- 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.
- 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,
- 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.
The division encourages public comment throughout the rate review process.
You can submit public comment online, during public conference calls, and at
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 OregonHealthRates.org 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.