I thought government regulation was for consumer protection

This is an obscure but publicly available bit of information from the Oregon Department of Consumer and Business Services who recently announced:

Final health insurance rate decisions lower 2020 premiums by $44 million

The Oregon Division of Financial Regulation issued final rate decisions for small businesses and individuals who buy their own health insurance.

“Our collaborative rate review process has been key to building a stable health insurance market that enabled us to limit the individual market rate increase to an average of 1.5 percent,” said Insurance Commissioner Andrew Stolfi. “The Oregon Reinsurance Program has also continued to show its value, keeping individual rates 6 percent lower than they would be without the program. We are grateful to the legislature for passing and our stakeholders for supporting the six year extension of this important program.”

They could have kept the average rate increase even lower had they not insisted that one company increase their rates:


Notice the last row? Regence requested a rate increase of 3.9% with a rate of $445. Oregon decided that wasn’t enough and set the rate they must actually charge customers at $452 which is a 5.5% increase.

So why is the state of Oregon, by force of law, increasing prices to consumers more than that requested by the company providing the service?

One could postulate this is to protect other companies which are unable, or unwilling, to compete at the same price point, $445, as Regence. But BridgeSpan, Kaiser, and PacificSource are all allowed to price their product at or below $445.

I thought government regulation was supposed to be for consumer protection. This looks to me as if it is random exercise of power.


5 thoughts on “I thought government regulation was for consumer protection

  1. Generally, the State wants to make sure that rates are not too low as to be destructive to competition or to ensure that a company does not become insolvent. If they become insolvent – the state’s Insurance Dept. Guarantee Fund will usually step in and assume the obligations of the insurance company (you pay a surcharge for this on most of your policies). It’s rare to see a rate higher than the request be approved, but it does happen and it should happen based on the regulatory scheme.

    • “Destructive to the competition” can’t be the answer here because of all the other insurance companies which are priced at or below what they requested. I don’t think concern over insolvency can be the answer here. For example this:

      our annual A.M. Best financial strength rating (FSR) and issuer credit rating (ICR) of “A” (Excellent) and our “stable” outlook were affirmed for each of our Oregon, Utah and Washington health plans

      Also this for 2018:

      On gross revenue of $1.97 billion, Regence Oregon had a net gain of 3.2 percent, equal to about 3 cents per premium dollar. This net gain was driven by lower than expected claims costs and responsible cost stewardship. Over the past 10 years, Regence’s net gain has averaged 2.2 percent.

    • And let’s not leave out the possibility of malice. They could be intentionally providing Regence’s competitors with a slight edge. Or, equivalently, removing a competitive edge that Regence holds because they do a better job of running their company.

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