Transcript Protecting Consumers Through Insurance Regulation Commissioner Sandy Praeger State of Kansas October 3, 2008

Protecting Consumers Through
Insurance Regulation
Commissioner Sandy Praeger
State of Kansas
October 3, 2008
State Regulation Plays a Number of Roles in
Protecting Consumers
State oversight of insurers works to ensure:
• Licensure and fair marketing practices
• Insurer insolvency is avoided
• Products are described accurately and include
certain benefits
• Premium rates are based on actuarial principles and
comply with state laws
• Disputes between consumers and insurers receive
fair hearings and quick resolution
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Individual Market: While State Approaches
Vary, Kansas’ Rules Are Typical
• Guaranteed Renewability: All policies are renewable at the
option of the policyholder
• High Risk Pool: High risk persons unable are guaranteed
access through a high risk pool
• Rate Approval: Carriers are required to submit requested rate
increases that the insurance department then reviews
• Pooling: Carriers must pool the experience of all their products
together, even if they are no longer selling certain products
• No Re-Underwriting: Policyholders cannot be singled out for
premium increases because they got sick after buying coverage
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Individual Market: All States but 7 Have an
Access Mechanism for High Risk Individuals
No Mechanism
(7 states)
WA
MT
ME
ND
Guaranteed
Issue (5 states)
ID
Blue Only GI
(3 states)
NH
WI
SD
WY
NY
MI
PA
IA
NE
NV
High Risk Pool
(32 states)
VT
MN
OR
OH
IL
UT
WV
KS
MO
KY
VA
OK
NM
MD
NC
TN
AZ
RI
CT
NJ
DE
IN
CO
CA
MA
AR
SC
MS
AL
GA
TX
Other
(3 states)
LA
FL
AK
Only AL, AZ, DE, GA, FL, HI, and
NV lack high-risk mechanisms
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Individual Market: High Risk Access
Mechanism Overview
• High Risk Pools: Most states (32) use a high risk pool to ensure
high-risk individuals can obtain insurance coverage. The programs
provide subsidized coverage. Typically, the coverage is:
– 150% or less than the average premium
– Comprehensive lifetime maximum of at least $1 million
– These pools are too often underfunded and provide limited, but very
expensive options to high risk person
• Guaranteed Issue: Only 5 states use a pure GI approach where
individuals cannot be denied due to health status.
• Other: A small number of states (6) use other methods such as
Blue Cross Blue Shield open enrollment, allocation among all
carriers, etc.
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Small Group Market: While State Approaches
Vary, Kansas Reflects the Typical State
1. Kansas has implemented Federal HIPAA
requirements for small group coverage:
– Guaranteed issue
– Guaranteed renewability
– Limits on pre-existing condition exclusions
2. Kansas, like other states, has adopted the NAIC
small group premium rate model law
– Claim experience of all small employers pooled together
– Premium variations based on health status are limited
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HIPAA Regulation
1. Guaranteed Issue:
All small group carriers must –
– Offer coverage to all small employers, regardless of their
employees’ health status
– Accept all eligible employees
2. Guaranteed Renewability:
– Insurers must allow all small employers to renew coverage,
including any of their employees
3. Limits on Pre-Existing Condition Waiting Periods:
– Insurers may impose a maximum 12-month waiting period for
employees with pre-existing health conditions
– Insurers must credit prior coverage so continuously insured
employees will not face waiting periods
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NAIC Rating Rules
Most States (27) use rating rules similar to the 1993 NAIC model
– NAIC rules ensure that claims are pooled across a broad pool of
small employers purchasing coverage
– Under the NAIC rules, insurers can only increase the average
premium by 25% for groups with very sick employees and can
decrease the average premium by 25% for very healthy groups
– At renewal, premiums cannot be increased more than 15% for
declining health status of any group
– Combined with other rating characteristics (such as, age,
geography, class of business, industry) this can lead to a wide
disparity in rates
The current NAIC model limits variation further
–
Rates may not vary based on health status
–
Other factors that can be used are age (limited to 2:1 ratio), geography
and family composition
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Variation in Rates Allowed by State Laws
NH
ME
VT
WA
MT
ND
MN
OR
WI
SD
ID
RI
MI
WY
UT
CA
CO
IL
OH
IN
OK
NM
NC
TX
MD
DC
SC
AR
MS
HI
VA
KY
TN
AZ
DE
WV
MO
KS
CT
NJ
PA
IA
NE
NV
MA
NY
AL
GA
LA
FL
AK
Rating Band Variability:
Community Rating
Adjusted Community Rating
No Rating Structure
13:1 or less
13.1:1 – 19:1
19.1:1 – 25:1
25.1:1 or greater
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Helpful Resources
Contacts at the NAIC
Brian Webb
Manager Health Policy and Legislation
[email protected]
202-471-3978
Josh Goldberg
Health Legislative Analyst
[email protected]
202-471-3984
Website
NAIC Health Innovations Working Group Web Page
http://www.naic.org/committees_b_state_innovations.htm
– Includes NAIC catalog of State health innovations and presentations from health
reform hearings
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