The Lull In Health Insurance Reforms

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The two biggest health insurance producer associations, the National Association of Health Underwriters and the Association of Health Insurance Advisors, have spent a decade facing wave after wave of state bills seeking to reshape the small-group health insurance market.

This year, security concerns and budget deficits have forced state lawmakers to put off most discussions about health insurance.

NAHU and AHIA are using the lull to promote their own legislative agendas, to take advantage of their members reputation for understanding how the health insurance market really works.

At NAHU, “the big issue is affordability,” says Jessica Waltman, the groups state government affairs director. “We are looking for health insurance market reforms that will lower costs for the consumer and increase competition for the carriers.”

The Arlington, Va. association is starting by calling for the formation of high-risk health insurance pools in the 22 states where no such pools exist.

Risk pools provide coverage for people with health problems. Setting up a risk pool helps the sick buy coverage while protecting private carriers against adverse selection, risk pool advocates say.

Waltman points to Rhode Island as an example of the importance of risk pools.

Rhode Island requires carriers selling individual health coverage in the state to accept all applicants, no matter how sick. That approach has forced most individual carriers to abandon the state, leaving Blue Cross and Blue Shield of Rhode Island as the states lone individual carrier, Waltman says.

Problems in the individual market are of critical importance to brokers who sell small-group coverage, because individuals in a state with a dysfunctional individual market soon spread the rot to the small-group market by repackaging themselves as members of one-person or two-person groups, NAHU experts say.

To fight the lack of competition in Rhode Islands individual market, NAHUs chapter there is lobbying for the creation of a risk pool.

Other key battleground states for the establishment of risk pools are Arizona, Maine, Michigan, North Carolina and Ohio.

NAHUs Florida chapter will be lobbying to reopen the states risk pool, which has been closed for 10 years.

At AHIA, a division of the Falls Church, Va.-based National Association of Insurance and Financial Advisors, members will be working this election cycle through next year to reverse some of the “insurance reforms” that state governments have enacted over the past few years.

“The effects of many of the reforms have killed off insurance markets in many states,” says Gary Sanders, AHIAs associate general counsel.

One key target: community rating and modified community rating laws, which limit insurers ability to consider small groups own claims experience, or likely experience, when writing coverage.

Advocates say community rating systems protect employers unlucky enough to have sick employees, but AHIA and other insurance groups view community rating as a system that forces a large number of healthy groups to pay unreasonably high rates to subsidize a few sick groups.

AHIA, which reaches state legislatures through NAIFAs state and local chapters, is also trying to loosen the strict limits on pre-existing condition exclusions that have been passed by a number of state legislatures in recent years.


Reproduced from National Underwriter Life & Health/Financial Services Edition, August 19, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.