The country’s largest health insurance company might be on track to catch a break from the Oregon Legislature.
Oregon lawmakers are considering delaying financial penalties for insurers and health care providers found to have unjustifiably raised costs. The delay was requested by insurers and hospitals who warned penalties under a state law intended to shield patients from runaway medical expenses will backfire. The groups cited a worsening financial situation further strained by policy changes from the Trump administration.
But UnitedHealthcare stands out in benefitting from a pause in penalties. The company is the insurance arm of a sprawling health care conglomerate with hundreds of billions of dollars in revenue. State regulators have already cited UnitedHealthcare twice for unjustifiable increases in their Medicare Advantage plans. A third strike next year could result in financial penalties — unless lawmakers hit the pause button.
“Rising health care costs are crushing working families, and promises aren’t enough — we need a real plan to keep care affordable and hold the system accountable,” Matt Swanson, political strategist for Service Employees International Union Oregon State Council, said in an email. “This proposal doesn’t meet that mark or this moment.”
On average, Oregonians spend almost 40% more on health care than they did in 2015: more than $9,000 per person as of 2023, according to a recent state report. Even though almost all Oregonians had health insurance last year — 97% — about 11% struggled with medical bills and 15% waited on getting care due to the cost, the report found.
That’s why the state implemented a program intended to help rein in runaway health care costs. Oregon’s Health Care Cost Growth Target Program is designed to help people afford medical care by limiting the annual increase in per-person spending on health care to 3.4%. The program has already begun, and regulators now have the authority to put companies on performance improvement plans.
Financial penalties are set to take effect in 2028.
Now, Oregon’s effort to hold health care companies accountable for rising costs is colliding with federal policy changes that are expected to strain safety net programs while increasing health care costs for hundreds of thousands of Oregonians. Insurers and hospitals say their financial problems are going to get worse.
The Hospital Association of Oregon, along with Kaiser Permanente and six insurers, asked the Legislature for a 10-year moratorium on enforcing the program. The cost of prescription drugs and health care providers is beyond the control of any single insurer, the organizations wrote. Meanwhile, hospitals have laid off hundreds of workers, according to the letter.
“Oregon is facing a perfect storm that has shifted the cost growth target program from a program with laudable goals to one that is counterproductive to maintaining health care access for Oregonians,” the organizations wrote in an October letter to state Rep. Rob Nosse, chair of the House Health Care Committee.
But patient advocates say this is no time for a pause.
A group of nine advocacy groups and labor unions — including OSPIRG, SEIU, the Oregon Education Association, the Oregon Consumer Justice and others — told lawmakers in a November letter that pausing enforcement of the program would give “the wealthiest parts of the health system another pass on accountability while families face higher premiums, deductibles, and debt.”
The letter cited state figures that more than 111,000 Oregonians will pay up to $450 more a month for health insurance after the expiration of federal enhanced health care subsidies.
That debate will play out during the Legislature’s upcoming 35-day short session as lawmakers consider a forthcoming bill that would modify the program.
Nosse, a Portland Democrat, said he became concerned about the program after a group of Salem doctors approached him, worried they would be scrutinized because of what a local hospital charged patients for their services.
Nosse said he will use the forthcoming bill to investigate whether there should be changes to the program. He said he remains concerned about accountability.
“But if (the program) is too rigid and it doesn’t respond to the real world, then it’s also not useful to us,” he said.
Room for improvement
Before its accountability mechanisms took effect, the Health Care Cost Growth Target Program focused on analyzing data on health care spending. Its most recent report found that health care spending has exceeded the 3.4% target every year except 2020, when patients received less care due to the COVID-19 pandemic.
Per-person health care spending in Oregon rose 5.2% in the most recent 2022-2023 reporting period, according to the report. It also found that the increase was not driven by more people going to the doctor or receiving health care but by costlier hospital stays, prescription drugs and other expenses.
The program reached a milestone this year when regulators used their new authority to direct United Healthcare, St. Charles Health System and insurer PacificSource to submit “performance improvement plans” outlining how they’ll reduce expenses after each company was found to have excessively raised costs.
Eight states have similar programs, starting with Massachusetts, which in 2012 adopted a target aimed at keeping health care spending growth in line with the overall economy.
Rachel Block, program officer for the Peterson-Milbank Program for Sustainable Health Care Costs, which advises states, said Massachusetts has seen success with its program, which required Mass General Brigham Hospital to work with state regulators to find factors driving up costs.
Beginning in 2028, Oregon regulators can impose penalties on companies that exceed the 3.4% annual growth target in at least three out of five years. The penalties will be based on how much the company went over the target during the five-year period. If a company reduced their costs during that time, their penalty would also be reduced. Money collected from fines is intended to benefit affected patients.
Sean Kolmer, executive vice president of external affairs for the Hospital Association of Oregon, said in an emailed statement that his group supports the initial intent of the program, but he added that it is “not meeting the current moment.”
In recent years, Oregon hospitals have reduced services or announced closures. Vibra Specialty Hospital of Portland, a long-term acute care facility, announced it was closing next year. Ashland Community Hospital is also ending inpatient and obstetrics services. Earlier, PeaceHealth closed its University District hospital in Eugene.
Hospital executives have cited increased costs coupled with inadequate payments as well as shifts in patient needs for the closures.
“A hospital that shuts down will have zero cost growth, but residents of that community will have no access to care,” Kolmer said. “Surely this can’t be considered success, yet we see no discussion of access to care.”
Mary Anne Cooper, lobbyist for BlueCross BlueShield of Oregon, told lawmakers during a hearing last month that the insurer is already facing “significant rate increases unlike anything we’ve ever seen before from hospitals.
“If you add a penalty on top of that, that is going to flow back to consumers,” she said.
If enough penalties pile up, companies will just leave the market, she added.
But Block said it’s “a little premature” to call for the elimination of penalties when the state hasn’t completed its processes of requiring companies to find ways to reduce costs.
“Also, it’s a little hard to accept that any of these entities don’t have room for some improvement, right?” she said.
‘Not currently at risk’
Oregon’s program allows companies to spend more than the 3.4% target —if it’s for an acceptable reason. Those reasons include changes in state or federal law, benefit mandates, tax hikes, new treatments, as well as “macro-economic factors” and “Acts of God.”
Oregon lawmakers in 2023 added increased wages for frontline medical workers as an acceptable reason.
The number of companies subject to the program has shifted over the years. But the program evaluated the spending of 36 insurers and 53 health care providers during its 2022-2023 reporting period.
So far, just six companies have been found to have exceeded the target for an unjustified reason. St. Charles Health System made the largest hike, with regulators determining that the central Oregon-based hospital system increased costs by 26% for patients with commercial insurance.
“The vast majority of payers and providers in Oregon are not currently at risk of financial penalties,” Clare Pierce-Wrobel, director of the state’s Health Policy and Analytics Director, said during a legislative hearing last month.
Charlie Fisher, state director of the Oregon State Public Interest Research Group, or OSPIRG, said that’s a sign the leniency built into the program is working as intended. He said it’s also notable that the company most at risk of penalties is not an Oregon-based company, but a subsidiary of UnitedHealth Group.
“It just makes no sense for the Legislature to take away a program that is just really getting started and is intended to at least slow the growth of health care costs,” he said. “Consumers shouldn’t be the ones forced to pick up the tab for increasing costs of health care.”
United Healthcare, the company’s health insurance arm, was cited by regulators this year for a 6.3% price hike for its Medicare Advantage plan. That’s the second time the company has been cited for an excessive increase for the plan since the 2021-2022 reporting period. A third strike against United Healthcare next year could result in financial penalties — unless the Legislature implements the 10-year delay.
Jess Kostner, a spokesperson for UnitedHealthcare, defended the company in an email saying it provides high-quality, affordable coverage to Medicare beneficiaries in Oregon, and its plans are in compliance with federal regulations. The company has reviewed regulators’ findings and has filed a petition for reconsideration, she added.
Broken?
The upcoming legislative session is expected to focus on cuts to federal spending from the so-called “Big Beautiful Bill” signed by President Donald Trump.
Notably, the bill cuts Medicaid spending by $10 billion. That’s alarmed policymakers in Oregon, where about a third of the population is covered by the Medicaid-funded Oregon Health Plan. An estimated 460,000 Oregonians could lose Medicaid coverage.
In their letter to Nosse, the Hospital Association of Oregon and health care companies wrote that hospitals have struggled with low payments from Medicaid that cover half of the cost of care. That’s meant more pressure on commercial insurance to help cover that gap, they wrote. Additionally, the cost of prescription drugs and health care providers is beyond the control of any single insurer, the organizations wrote.
Jessica Adamson, lobbyist for Providence, told lawmakers during a hearing last month that health care providers were at risk of being penalized for factors outside of their control and for spending that happened in the past.
“I don’t know how a (performance improvement plan) that you implement this year is going to go backwards and fix what happened in 2023-2024,” she said. “It’s already on the books.”
State Rep. Cyrus Javadi, D-Tillamook, also remarked during the hearing that the 3.4% target was “broken” because it doesn’t reflect the cost of care. He and other lawmakers noted the disconnect between the state Division of Financial Regulation’s approval of insurance rates that reflect costs exceeding the state’s 3.4% cost growth target.
Block, of the Peterson-Milbank Program, said that other states are starting to take this disconnect into account. For example, she said that Rhode Island does not allow insurance plan rates to rise above the state’s target, which she said has shown success in slowing the rise in health care spending. Officials in Vermont and Massachusetts have also begun limiting the price increases sought by insurance companies.
“I think what we are seeing around the country is the recognition that the way in which insurance rates are set, whether you have a cost growth target program or not, it’s just not addressing affordability effectively,” Block said.
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This article appears in December 17, 2025.