Double-digit premium rate increases proposed by insurers for individual and small-group policies are getting attention across the country. Some states--such as New York, Massachusetts, Maine and California--are currently embroiled in actions designed to limit or even reject rate hikes, while other states, including Virginia and Wisconsin, have allowed significant rate increases to move forward, reports the American Medical News.
In New York, the insurance market offers some insights into how the "adverse selection death spiral" (i.e., healthier people leaving plans due to high premiums, resulting in a pool of high-cost beneficiaries) could impact national health reform efforts if the Patient Protection and Affordable Care Act's individual insurance mandate isn't enforced adequately, according to the New York Times.
In 1993, New York deregulated its insurance market but required insurers to provide individual or small group coverage to people with pre-existing illnesses, as well as requiring regional health plans to charge the same rates for the same benefits without regard to beneficiary risk characteristics (e.g., smoking status, age, sex, etc.). Now Gov. David Paterson wants the state to back off deregulation and again require prior approval of rate increases for small group and individual plans because a slew of premium rate increases have priced many buyers out of the market. Currently, some 31,000 people have comprehensive individual policies through New York health plans--down from 128,000 in 2001, according to the State Insurance Department. In addition, New York as of mid-2009 had the highest average annual premiums for individual policies (double the national average): $6,630 for single people and $13,296 for families, according to America's Health Insurance Plans.
However, insurers are against implementing prior approval. The lack of an enforceable insurance mandate, not rate deregulation, is the core problem, says Mark Wagar, president of Empire BlueCross BlueShield. Only 88 people in the generally healthy 18-to-26 age group have bought individual insurance policies through Empire, which insures 6 million people statewide, he notes.
Gov. Paterson also proposes lowering the state-mandated insurance company profit margins to 15 percent for both small-group and individual plans. Margins are currently set at 25 cents per dollar for profits and administration in small group plans, and 20 cents for individual plans. From 2000 to 2007, insurers reported exceeding those margins 3 percent of the time and refunded $48 million to policyholders. However, insurers should have refunded more than triple that amount, according to Insurance Department investigations.
In Massachusetts, a Suffolk Superior Court judge did not grant six Massachusetts health insurers a preliminary injunction that would have allowed them to institute 235 proposed rate increases that had been rejected by the state's insurance commissioner, reports the Boston Globe. The insurers had planned to increase premiums on April 1 by an average of 8 to 32 percent for some 50,000 policies covering 200,000 small business and individual policyholders, and contended that failure to implement the rate hikes immediately would cause too much damage to the insurance industry, forcing a collective loss of more than $100 million this year alone. However, Judge Stephen Neel ruled that the insurer's didn't present "compelling evidence" that their businesses would be "irreparably crippled over the next few months if injunctive relief is denied," reports the Gatehouse News Service for the Daily News Transcript.
While any Division of Insurance appeals filed by insurers are under way, 2009 small-group market bases are supposed to be in effect. However, not all insurers are complying. The state Division of Insurance has filed a motion in Suffolk Superior Court to require Harvard Pilgrim Health Care and Fallon Community Health Plan to resubmit rejected premium rates using April 2009 base rates. The two health plans had filed revised quotes for individuals and small businesses, as required by the state, but they used March 2010 base rates, which are lower than the rejected rate proposals but higher than what the state wants. State Insurance Commissioner Joseph Murphy issued a letter telling the companies they could be fined up to $5,000 a day--plus $1,000 for each person who couldn't buy insurance at approved rates--if they don't submit revised quotes using April 2009 rates.
To find out about premium rate increases in multiple states:
- read this American Medical News article
To learn more about New York premiums:
- read the New York Times article