FOUL PLAY

Insurance company mistreatment

As more people lose their jobs, they may have to rely on COBRA or the individual insurance market to get health insurance for themselves and their family. But with insurance companies raising premiums by double digits, most will not be able to afford it.

COBRA is the federal law that allows people who were working for employers that have 20 or more employees to keep their employer-sponsored group coverage after they leave their job by paying the full premium themselves (plus an administrative charge). Ironically, COBRA is unaffordable to many people who lose their jobs and thus have no income.

The individual health insurance market offers little protection as well. Washington state, for example, has seen such huge increases in individual health insurance market premiums that it passed a law allowing the state insurance commissioner to oversee premium increases. The Seattle Post-Intelligencer reports that:

“After eight years of unregulated insurance company control over health insurance cost increases, the Legislature -- concerned over double-digit annual rate rises--has returned control of health care premium increases to the state insurance commissioner...

“A similar bill was proposed last year, but leading Democrats, with assurance from health care providers that rates wouldn't increase, killed it. But rates did increase--in some cases by as much as 40 percent. And the increases were set to a backdrop of record profits by insurance companies.” [Emphasis added]

Nationwide, state oversight of the individual insurance market varies widely, and few have the power or ability to oversee that premium increases are reasonable and appropriate. A Families USA report found that:

“Not every state ensures that premiums are reasonable by reviewing premium rate increases before insurers impose them. And few states require that at least 75 cents of every dollar collected in premiums be spent on medical services rather than administration and profit.

• In 20 states and the District of Columbia, insurers can set and raise premiums without adequate oversight.
• In 45 states and the District of Columbia, insurers can spend less than 75 cents of every premium dollar on medical services.”

The fact is federal oversight and competition from a public plan is needed because states are not well equipped to ensure health insurance companies are not gouging consumers. Findings from a study of seven states’ oversight published by the Commonwealth Fund, “Insuring the Healthy or Insuring the Sick? The Dilemma of Regulating the Individual Health Insurance Market,” make that clear. Below are some of its findings:

“Carriers can sometimes exploit differences in regulation among states to evade regulatory requirements. Regulators have struggled over policy issues related to associations that are exempt--or claim to be exempt—from individual market reform. Some associations have been able to medically underwrite and reject applicants even in highly regulated markets.”

“Regardless of regulatory approach, affordability of coverage is a major problem in every state. In each study state, premiums are often unaffordable compared to the family income level of the country’s uninsured population, even for the young and healthy…the most popular individual products in our seven state sample would represent a high percentage of income for both older adults and younger adults with health problems in all the states represented, regardless of regulations.”

“State high-risk pools are not an adequate alternative to stricter regulation. Despite being the only source of coverage for many older and less-healthy consumers, the high-risk pools in the less-regulated states cover very few people. They also offer coverage that is very expensive, generally from 125 percent to 150 percent of the rates charged by carriers in the individual market, and there is as much as a threefold variation in premiums for the same product based on age.”

“In the seven states we studied, there is very little active monitoring of the individual health insurance market, in part because there is very little information available to allow monitoring. Inadequate reporting systems and limited analytical capacity of regulatory agencies make it difficult, if not impossible, for policymakers to get an accurate and comprehensive picture of the individual health insurance market, or to fully understand the impact of regulatory reforms.”

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