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Protecting Consumers Through Insurance Regulation Commissioner Sandy Praeger State of Kansas

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

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Protecting Consumers Through Insurance Regulation Commissioner Sandy Praeger State of Kansas

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

  2. 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

  3. 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

  4. WA ME MT ND VT MN OR NH MA ID WI NY SD RI WY MI CT PA NJ IA NE NV OH DE IN IL UT MD CO WV VA KS MO CA KY NC TN AZ OK AR SC NM GA AL MS TX LA FL AK Individual Market: All States but 7 Have an Access Mechanism for High Risk Individuals No Mechanism (7 states) Guaranteed Issue (5 states) High Risk Pool (32 states) Blue Only GI (3 states) Other (3 states) Only AL, AZ, DE, GA, FL, HI, and NV lack high-risk mechanisms

  5. 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.

  6. Small Group Market: While State Approaches Vary, Kansas Reflects the Typical State • Kansas has implemented Federal HIPAA requirements for small group coverage: • Guaranteed issue • Guaranteed renewability • Limits on pre-existing condition exclusions • 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

  7. HIPAA Regulation • Guaranteed Issue: • All small group carriers must – • Offer coverage to all small employers, regardless of their employees’ health status • Accept all eligible employees • Guaranteed Renewability: • Insurers must allow all small employers to renew coverage, including any of their employees • 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

  8. 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

  9. NH VT WA ME MT ND MA NY OR RI SD ID MI MN CT WY NJ WI DE IN IL NV PA UT CO IA CA DC OH MD NE NC WV VA OK AZ NM MO KY KS AL TN HI TX GA SC AR FL MS AK LA Rating Band Variability: 13:1 or less Community Rating 13.1:1 – 19:1 Adjusted Community Rating 19.1:1 – 25:1 No Rating Structure 25.1:1 or greater Variation in Rates Allowed by State Laws

  10. Helpful Resources Contacts at the NAIC Brian Webb Josh Goldberg Manager Health Policy and Legislation Health Legislative Analyst bwebb@naic.orgjgoldberg@naic.org 202-471-3978 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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