Moda back in the individual market
Moda Health Plan Inc. has had a tumultuous couple weeks. But for the time being, they are now back in the individual market in Oregon and Alaska, renewing coverage and selling new plans. Here’s what’s gone on so far:
On January 28, the Oregon Division of Financial Regulation placed Moda under supervision, and ordered the carrier to cease issuing or renewing individual plans, or enrolling new groups. At that point, Moda had until January 29 to propose a new business plan that would either increase reserves or reduce operations.
That same day, Moda said that they would exit the individual market in both Oregon and Alaska in an effort to stem the losses they’ve incurred. In the first three quarters of 2015, Moda lost $30 million, and their capital reserves dropped from $120 million to $53 million. The carrier had been dominant in the individual market in 2014 and and 2015, with plans priced lower than most of the competition. As of September 2015, Moda covered about 95,000 Oregon residents with individual plans. But Moda’s average rate increase for 2016 in Oregon was more than 25 percent, and enrollment in their individual market plans has dropped to 67,000.
As of January 28, Moda enrollees in Oregon and Alaska were told that they could switch to a different carrier by the end of January (for coverage effective March 1), or that they could keep their Moda coverage for the time being, and that there would be a special enrollment period (triggered by loss of coverage) that would apply to Moda enrollees if their plans terminated at some point in the future. Regulators assured Moda insureds that their claims would be covered, and that they didn’t have to take action to switch plans if they preferred to stay with Moda.
On February 8, regulators in Alaska and Oregon reached an agreement with Moda that allows the carrier to resume selling and renewing coverage in the individual markets in both states. Part of the agreement is a commitment from Moda to continue to service individual market policy-holders until at least the end of 2016. So assuming Moda is able to uphold their end of the agreement, individual plans from Moda are safe for at least the remainder of this year.
In short, consumers in Oregon and Alaska who have Moda coverage in the individual market do not have to make any changes at this point. And people who are shopping for coverage during a special enrollment period this year will continue to have access to new coverage from Moda.
Moda’s CEO indicated that claims costs in the individual market have been higher than anticipated. And the risk corridor shortfall in October – which was a significant factor in the failure of Health Republic Insurance last fall – has been implicated in the excessive losses Moda is facing. In October, Moda exited the market in Washington and California, in order to focus on Oregon and Alaska. The agreement between Moda and regulators in Alaska and Oregon allows the carrier to continue to do so for at least the immediate future.
139k enrolled by January 23
During the first 12 weeks of 2016 open enrollment (November 1 through January 23), 138,862 people enrolled in private plans through Oregon’s federally-supported state-based exchange. That included new enrollees and renewals, and unpaid enrollments have already been subtracted from the total (unlike the previous two years, when HHS waited until after the end of open enrollment to subtract enrollments that were cancelled or never effectuated)
At the end of the 2015 open enrollment period, total of 113,219 Oregon residents had enrolled in private plans. So Oregon is well ahead of their 2015 enrollment total.
Oregon’s off-exchange enrollments were nearly as high as on-exchange enrollments in 2015, and substantial rate hikes have hit both markets for 2016. The higher premiums mean that more people qualify for premium subsidies (and subsidies are larger) for 2016 – but subsidies are only available through the exchange. Thus it makes sense that some of Oregon’s previously off-exchange enrollees may be converting to on-exchange coverage for 2016 in order to get premium subsidies.
Open enrollment will continue until January 31. Enrollments completed between January 16 and January 31 will have coverage effective March 1.
Oregon reconsidering fully state-run exchange
Oregon launched a state-run exchange in October 2013, but it was a failure from the start. It never worked properly, and the state opted to switch to the Healthcare.gov enrollment platform starting with 2015 enrollments. But Oregon has retained control over the exchange with the Oregon Department of Consumer and Business Services (DCBS) responsible for exchange oversight.
Oregon charges insurers a fee of $9.66 per-member per-month to pay for the exchange, but has thus far been able to use Healthcare.gov without pay any additional fees to the federal government. That’s likely to change starting in 2017 however. In the proposed Benefit and Payment Parameters for 2017 that HHS published in December 2015, HHS has proposed a fee of 3 percent of premiums for states that run their own exchanges but use the Heathcare.gov enrollment platform.
DCBS director Patrick Allen submitted comments to HHS regarding the proposal, and noted that it would make more sense to have the fee be smaller, based on the number of enrollees serviced by the platform. He also explained that it would make more sense to assess the fee as a per-member amount rather than a percentage of premium, in order to avoid the impression that HHS benefits when premiums increase. HHS is considering a transitional fee of 1.5 percent for 2017, but it would ratchet up to 3 percent starting in 2018.
But Allen has said that Oregon is also considering ceasing their dependence on Healthcare.gov and once again running their own enrollment platform – albeit by purchasing software with a “demonstrated track record” from another state with a highly-functional state-run exchange.
Nevada and New Mexico – both of which also have federally-supported state-based exchanges – have echoed the concern that a 3 percent fee to continue to use Healthcare.gov is excessive, and have said that they will consider other alternatives if that fee ends up being included when the final Benefit and Payment Parameters are released. Healthcare.gov charges 3.5 percent of premiums in states where the federal government runs the entire exchange, but states with federally-supported state-based exchanges already have their own fees that are assessed to cover the exchange administration conducted by the state. Tacking on an additional 3 percent charge would make total exchange admin costs far more expensive in federally-supported state-based exchanges than it is in states where the exchange is fully state-run or fully federally-run.
Health Republic Insurance fails
On October 16, Health Republic Insurance – one of two ACA-created CO-OPs in Oregon – announced that they would not offer plans for sale in 2016, and that their existing 15,000 members (including employees of 800 small businesses) would need to find coverage from another carrier for 2016.
With this announcement, Health Republic Insurance became the eighth CO-OP to fail, and the fourth as a result of the risk corridor shortfall that was announced on October 1 (WINhealth, a Wyoming carrier, also shut down as a result of the risk corridor shortfall). In all, 10 CO-OPs closed their doors on December 31, and another – Health Republic in New York – closed at the end of November.
General open enrollment ends on January 31, but loss of coverage triggers a 60 day special enrollment period. Former Health Republic members have until the end of February to pick a new plan, although they’ll have a gap in coverage if they didn’t enroll in a new plan prior to the start of January, as there’s no provision to allow for retroactive coverage during the special enrollment period.
Although Health Republic and Moda plans are no longer available for sale, there are nine insurers still offering medical plans through Oregon’s exchange for 2016:
- Atrio Health Plans
- Kaiser Permanente
- Oregon Health CO-OP
- Providence Health Plan
- Trillium Community Health Plan
- Zoom+ Performance Health Plan
24% weighted average rate increase
In 2014, individual plan carriers in Oregon took in $703 million in premiums, and spent $830 million. They had to use reserves to make up the difference, and the state wanted to make sure that their premiums in 2016 are adequate to cover costs.
Earlier in 2015, when proposed rates were filed in Oregon, carriers were requesting a weighted average rate increase of about 23 percent. But Oregon’s Insurance Commissioner determined that some of the rates filed – from Health Net (off-exchange), Kaiser, Health CO-OP, and Providence – were too low, and wouldn’t be adequate to meet projected claims costs. To mitigate the problem, the state needed to require higher rates than some of the carriers had proposed.
On July 1, Oregon became the first state to release final rates for 2016, and Oregon regulators did indeed increase rates beyond what several carriers had requested. But they also ended up reducing the proposed rate hikes for two carriers – PacificSource and LifeWise.
Ultimately, the weighted average rate increase in Oregon’s individual market came in at 24.24 percent for 2016, although the small group market had a weighted average rate increase of only about 2.5 percent. But Health Republic Insurance was going to have a 37.8 percent average rate increase, so although all of their enrollees had to switch to new carriers for 2016, the result is a lower overall average rate increase in the Oregon exchange. The difference isn’t dramatic however, since Health Republic Insurance had a small market share in 2015.
Moda’s rate increase for 2016 was more than 25 percent, which is higher than six other carriers. Nearly 30,000 of their individual market enrollees had already switched to other carriers by late January, but the rest will now need to do so aswell.
The 2016 rate increase in Oregon is certainly steep, but subsidies will absorb the brunt of the rate hike for eligible enrollees, as long as they shopped around during open enrollment to make sure they’re still getting the plan that represents the best value. Even for people not receiving subsidies, the importance of shopping around cannot be overstated. Rate increases in the individual market range from 8.3 percent to 37.1 percent, so it is clearly beneficial to shop around before open enrollment ends on January 31.
Although rates will be considerably higher in Oregon in 2016, it’s important to remember that average rates in the state actually decreased from 2014 to 2015, which means that Oregon residents are in the same position they’d have been in if the state had experienced more modest rate hikes for both 2015 and 2016.
For sample rates based on age and region, you can visit Oregon Health Rates. The site also has information about the rate review process and public hearings on rates.
Carrier losses mounting in 2015
Rates for 2016 were established based on 2014 claims data, and were already set by mid-2015. But although rates increased substantially for 2016 based on 2014’s losses, most of the health insurers that offer plans in the Oregon exchange are losing even more more in 2015 than they did in 2014.
Ten insurers are offering medical plans through Oregon’s exchange for 2016. And six of them were losing money in 2015 as of the end of the third quarter. Total losses for eight insurers (including Health Republic along with Health Net, which only offers plans outside the exchange) reached $127 million in the first three quarters of 2015, which was four and a half times higher than their total losses in the first three quarters of 2014 (about $28 million).
Moda’s losses were the most significant among the eight carriers; Moda is also the carrier with the highest number of ACA-compliant plans in Oregon, including both on and off-exchange enrollments during the 2015 open enrollment period.
Grandmothered plans ended
Transitional (grandmothered) plans that were purchased after the ACA was singed into law but before the end of 2013 were allowed to remain in force (at carrier discretion) in Oregon until the end of 2015. That means anyone in Oregon who still had a non-ACA-compliant, non-grandfathered plan, had to select new coverage for 2016.
Oregon is one of two states – the other is Colorado – where grandmothered plans were allowed to remain in force in 2015, but had to be replaced by ACA-compliant coverage for 2016.
Uninsured rate more than halved since 2013
According to Gallup data, the uninsured rate in Oregon in 2013 was about 19.4 percent. By mid-2015, it had dropped to 8.8 percent. That’s well below the national average of 11.7 percent, but about the same as the average among states that established their own exchanges and expanded Medicaid (8.9 percent). Oregon did both, but its exchange was generally regarded as a failure, and is now operating as a federally-supported state based marketplace.
Exchange dissolution complete
Oregon was one of the states that initially opted to run its own exchange, but the state-based enrollment system never worked properly. Following months of efforts to fix the troubled website, Cover Oregon’s board voted on April 25, 2014 to switch to using Healthcare.gov rather than continue to try to repair the existing site. The supported state based marketplace (SSBM) model means that Oregon works together with HHS, with the state retaining some functions and HealthCare.gov being utilized for exchange enrollment.
On Friday, March 6,2015, Oregon Governor Kate Brown signed Senate Bill 1 into law. The legislation dissolved Cover Oregon and its board of directors, and transfered remaining responsibilities to the Oregon Department of Consumer and Business Services (the agency that oversees the Oregon Insurance Division).
The act was effective as of its passage, and DCBS Director Pat Allen officially took charge of the exchange, replacing Executive Director Aaron Patnode. But the full transfer of Cover Oregon to DCBS wasn’t complete until June 30th. By the end of April, 52 exchange employees had been let go, although more than 40 others remained on the payroll through June. Although Allen had considered keeping Patnode on board for the transition, he ultimately decided in March that the new operation would be “best served with a simpler decision making structure.”
The Cover Oregon website also ceased to exist at the end of June. Instead, the URL now redirects visitors to OregonHealthcare.gov. From that site, residents can enroll in Medicaid if eligible, or will be redirected to Healthcare.gov to enroll in a private plan.
Cover Oregon and Governor Kitzhaber’s resignation
In February 2015, Governor Kitzhaber announced his resignation from the Governor’s office just one month after starting his fourth term. He was replaced by Secretary of State Kate Brown. Although the scandals that led to Kitzhaber’s resignation were not related to Cover Oregon, questions were raised about whether there were any conflicts of interest between Kitzhaber’s reelection campaign and the decision to shut down Cover Oregon and switch to Healthcare.gov.
Oracle (the vendor that built Cover Oregon) contends that there was, and now a congressional committee is demanding documentation to conduct an investigation. By late February, Oracle had filed a lawsuit against several member’s of Kitzhaber’s staff and campaign team (including campaign consultant Patricia McCaig), alleging that the decision to shut down Cover Oregon was made for political reasons, and that the website had been functional by February 2014, two months prior to the decision to switch to Healthcare.gov. The defendants in the case have asked that it be dismissed.
In addition, there are concerns that perhaps the lawsuit against Oracle was an effort to deflect blame away from the state and Kitzhaber leading up to the Governor’s re-election campaign in 2014. In April, emails were released that indicated Governor Kitzhaber was advised to settle with Oracle rather than pursuing a legal battle, although he ultimately opted for the lawsuit.
Oracle fought to delay exchange dissolution
While the passage of SB1 had seemed inevitable given the number of lawmakers who supported it, Oracle fought to block the dissolution of the exchange, claiming that Cover Oregon owes them $23 million, and that the exchange was using Oracle’s copyrighted code without paying for it. The state wanted to delay Oracle’s attempt to block dissolution of the exchange, because once Cover Oregon came under control of DCBS, it became a state agency that is immune from the copyright violation claim. But if Cover Oregon had continued to exist as its own legal entity, Oracle’s claim could be significant. Nonetheless, the copyright infringement case is ongoing as of September.
The legal battle between Oracle and Cover Oregon has been dragging on – without getting anywhere – for months. The case started out in the Marion County Circuit Court, but was later moved to a federal court. On February 13, however, a US District Judge announced that the case would be moving back to the Marion County Circuit Court, and expressed dissatisfaction with the fact that no progress had been made in the case.
2015 Oregon enrollment
All 2014 policies that were purchased through Cover Oregon terminated on December 31, 2014. Open enrollment for 2015 began on November 15 and ended on February 15 (with extension, it lasted until February 22). But in order to have seamless coverage, with a new plan taking effect January 1, Cover Oregon repeatedly announced that 2014 enrollees needed to re-enroll through HealthCare.gov between November 15 and December 15.
Somewhere between 65,000 and 77,000 people had private plans through Cover Oregon just prior to the 2015 open enrollment, and all of them needed to re-enroll in order to retain their coverage for 2015 (in most states, auto-renewal was possible, but since Oregon switched to Healthcare.gov, everyone needed to re-enroll).
As of February 22, 2015, a total of 113,219 Oregon residents had enrolled in private plans through the exchange.
In addition, another 102,232 people enrolled in ACA-compliant private plans outside the exchange in Oregon. Off-exchange plans have to follow all of the same rules as on-exchange plans, but premium subsidies are not available outside the exchange.
So including both on and off-exchange plans, more than 215 thousand Oregon residents enrolled in ACA-compliant individual private plans during the 2015 open enrollment period. That total had grown to 220,500 by April 21, although the latter number didn’t break out on-exchange versus off-exchange enrollments.
As of April 21,2015, Moda Health had the largest market share of ACA-compliant individual plans, with 101,370 members, including on and off exchange. The second-leading carrier was LifeWise, with 37,000 members. LifeWise had the lowest rates for 2015, and saw significant growth in membership during the 2015 open enrollment period.
Lower rates for 2015
Although rates are going up considerably for 2016, that was not the case last year. PricewaterhouseCooper LLC tracked 2015 rates throughout the fall of 2014, and comparing them with 2014 rates. In Oregon, the weighted average across all 13 carriers (on and off-exchange) was a rate decrease of 2.5 percent.
And the Commonwealth Fund conducted an analysis of rates for a 40 year-old non-smoker, and found an average rate decrease of 5 percent in Oregon.
But for the cheapest silver plans from 2014, most areas of the state saw a rate hike of around 10 percent for 2015. Consumers willing to shop around and switch to the new cheapest silver plan saw smaller increases – generally in the range of 6 percent.
Oregon opted to expand Medicaid (Oregon Health Plan) under the ACA, and by mid-October 2013, 56,000 people had already signed up for Medicaid coverage, reducing the state’s uninsured population by 10 percent just two weeks after enrollment began on October 1.
But the state used a system known as Fast Track to enroll many of the newly-eligible people in 2014, basing their eligibility on enrollment in other programs like SNAP. All of those newly-enrolled people had to re-apply at the end of 2014, which created a backlog of about 43,000 applications being processed by Oregon Health Plan.
Despite the backlog of enrollments, Medicaid expansion in Oregon has certainly been an overall success. As of September 2015 total enrollment in Oregon Health Plan stood at 1,055,198. As of June 2015, 386,000 Oregon Health Plan members were newly eligible under the expanded guidelines, and the majority of them had completed their enrollment through Cover Oregon. It’s notable that Oregon had predicted about 222,700 newly-eligible enrollees by June 2015, so the actual enrollment number has far surpassed expectations.
Previous efforts to revive Cover Oregon
After a disastrous first open enrollment period, lawmakers were generally in agreement that the 2014 model for a fully state-run exchange needed to be revamped via legislative action. But they also did not want to simply turn the exchange over to the federal government, because losing the state-based aspect of the exchange could have potentially meant tens of thousands of people losing their subsidies if the Supreme Court had ruled that subsidies are only legal in state-run exchanges (in June 2015, the Supreme Court ruled that subsidies are legal in every state, so that is no longer an issue).
In mid-June, 2014 (after the exchange had decided to switch to Healthcare.gov for enrollment) Cover Oregon announced that they had selected a new executive director, Aaron Patnode. The hiring of Patnode, who was previously a Kaiser Permanente manager, indicated that the exchange was still thinking long-term, given Patnode’s reputation as a problem solver and “turn-around artist.” In early December 2014, when lawmakers were already discussing the process for doing away with the exchange, Patnode announced that the exchange was working to offer a website for small businesses to purchase group coverage.
In addition to Patnode, the state also hired “corporate turnaround expert” Clyde Hamstreet in 2014 in an effort to right the failed exchange. Hamstreet and two assistants worked throughout the summer and the exchange spent upwards of $600,000 on their services. In a scathing report written in late August, Hamstreet noted that Cover Oregon was “in serious disarray” and had numerous organizational and leadership problems.
But Hamstreet also said that if Cover Oregon continued to exist, “its strengths will flourish.” One of the possibilities suggested by Hamstreet was for the state to partner with a neighboring state to split the cost and administration of state-run exchange technology.
In February 2015, amid news that Governor Kitzhaber was resigning, reports surfaced that indicated Hamstreet worked closely with Patricia McCaig, who was a top adviser for Kitzhaber’s reelection campaign last year. It’s unclear whether the decision to shut down Cover Oregon was tied to the governor’s reelection strategy, but the issue is currently being investigated by a congressional committee.
2014 progress despite challenges
Although the Cover Oregon website was largely regarded as a technological disaster in 2014, things are going much better in the 2015 open enrollment period that is utilizing Healthcare.gov.
Despite myriad technological problems, Cover Oregon had enrolled 105,661 people in private plans by November 3, 2014 (not all of those policies are still active; some enrollees never paid their premiums, and others have cancelled their coverage at some point during the year; significant attrition is always expected in the individual insurance market – the final total was likely somewhere between 65,000 and 77,000 in early November). Of the private plan enrollees, roughly 53 percent were uninsured prior to obtaining a policy through Cover Oregon.
And even with the tremendous technological difficulties experienced by the exchange, Oregon had the seventh highest drop in uninsured rate during the first half of 2014 according to a recent Gallup poll. The state’s uninsured rate was 19.4 percent in 2013, and had fallen to 14 percent by mid-2014.
Uncovering what went wrong
The FBI and federal prosecutors have launched investigations into the failed exchange – which cost $300 million in tax dollars and was never able to enroll applicants entirely online. In early June 2014, Governor John Kitzhaber asked Oregon Attorney General Ellen Rosenblum to take legal action against Oracle – the creator of the Cover Oregon website – in order to recover funds spent on the site.
But Oracle is fighting back, saying that officials at Cover Oregon and Oregon Health Authority are to blame for the debacle. Both sides have sued each other, and the issue is highly contentious. Following Clyde Hamstreet’s less-than-glowing report about the myriad problems at Cover Oregon, Oracle’s CEO Safra Catz has pointed to the report as evidence that Oracle is not to blame for the exchange’s catastrophic failure in 2014. Catz asked Oregon’s lawmakers to assist with ending the lawsuit against Oracle, noting in late October that litigation is “not in the best interest of the state or its citizens.”
All things considered, the legal battle between Cover Oregon and Oracle appears to be one that is likely to drag on for quite some time. As of the end of February 2015, there were four separate legal cases involving Oracle and Cover Oregon.
On February 18, 2014 four and a half months after open enrollment began, Cover Oregon’s website was finally functional enough for insurance agents and navigators to be able to process enrollments start to finish online. Although the site was never fully functional for the general public to complete the entire enrollment process online, the availability of some electronic enrollment was a huge improvement after months of relying solely on paper applications.
Despite the fact that Cover Oregon was the only exchange relying solely on paper applications for the first four months of open enrollment, its total enrollment numbers for 2014 were around the middle of the road when compared with enrollment in other states – all of which were using much more efficient online applications for months.
Exchange worked to cover risk pool members
The Oregon Medical Insurance Pool – a state run high risk pool – closed at the end of December 2013, but the state implemented a temporary medical insurance program that automatically covered risk pool members who were not able to enroll in an exchange plan with a January 1 effective date.
The temporary plan remained in force until March 31, 2014 but ceased operation at that point. Insureds who were still covered under the temporary program lost their coverage at the end of March, but the risk pool had been working closely with members to get them transitioned to new policies, so there were very few people still on the temporary program at that point.
Cover Oregon’s history
The Oregon legislature authorized a state-run health insurance exchange in 2011, and the exchange developed a formal business plan, which the Legislature approved in February 2012 as a final go-ahead for the exchange. The U.S. Department of Health and Human Services (HHS) gave conditional approval to Cover Oregon in December 2012. The exchange has a 2014 budget of $105.7 million, which will be covered with federal grant money, and $62.4 million budget in 2015 according to a Cover Oregon spokesperson.
Cover Oregon was overseen by a nine-member board of directors, two of which are non-voting members. The board received input from the Individual and Employer Consumer Advisory Committee. The 19-member committee held monthly meetings, which were open to the public. The Consumer Advisory Committee was mandated by the legislation that established the state’s exchange.
Before its dissolution, Cover Oregon acted as “active purchaser,” meaning it limited the number of health insurers that could participate in the exchange. Participating insurers were required to offer a bronze, silver and gold plan and had the option to offer additional plans.
Contact the Oregon exchange
Healthcare.gov (call center: 1-800-318-2596)
More Oregon health insurance exchange links
State Exchange Profile: Oregon
The Henry J. Kaiser Family Foundation overview of Oregon’s progress toward creating a state health insurance exchange.