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This article first appeared in the Mar/Apr 2010 print issue of PA TIMES.
As the federal government and the states explore options for controlling increases in the cost of insurance premiums, high-risk pools may offer a model which states can use for a government body to set standards for acceptable rate increases.
The rising cost of health insurance premiums and how best to control them is at the heart of the debate sparked by the Democratic plan to reform the American health care system. In February, David Herszenhorn reported in the New York Times the Obama administration’s plans to grant broad authority to the Secretary of Health and Human Services, in conjunction with state regulators, to annually review insurance rate increases.
The HHS secretary could then block those rate increases deemed to be unreasonable, possibly over the objections of state regulators. Furthermore, the new provision also calls for the creation of a group of health policy experts to set standards for what constitute acceptable rate increases. This new body, the Health Insurance Rate Authority, would consist of consumer representatives, an insurance industry representative, a physician, as well as economists and actuaries.
The federal board’s responsibility is to provide guidance to the states as to whether rate increases are justified. It will be up to the states to act on the recommendations. Twenty-five states already have insurance commissioners with the power to regulate rates, so for the federal board to truly have a meaningful influence the remaining states will need to empower their insurance commissioners to do so as well. Alternatively, states could establish their own Health Insurance Rate Authority. A useful model for this state board would be the governing boards of state high-risk health insurance pools.
The high-risk pools are nonprofit entities created by the state to insure those denied coverage due to a pre-existing condition or other federally-mandated groups. These pools are governed by a board of directors that oversees the operation of these pools, including the approval of premium levels and eligibility requirements.
As noted in the NASCHIP publication Comprehensive Health Insurance for High-Risk Individuals: A State-by-State Analysis, the composition of the governing boards varies considerably from state to state. In most of the states that have implemented high-risk pools, the membership of the board is appointed by the governor or the insurance commissioner. However, the pools differ in the degree to which the state government is actively involved in the operations of the governing board.
An example of a board with limited government involvement would be the Minnesota Comprehensive Health Association. According to NASCHIP, Minnesota’s pool, one of the oldest high-risk pools in the country, has a board consisting of six directors selected by the insurance industry and five directors chosen by the insurance commissioner. Of those directors selected by the insurance commissioner, two should be enrolled in the plan, two should represent employers who are assessed fees by the state to cover program costs, and one represents insurance agents.
Among those states with significant government involvement, the Illinois Comprehensive Health Insurance plan has a 10-member board appointed by the governor and approved by the State Senate. The board also consists of a representative from the governor’s Office of Management and Budget, a representative from the attorney general’s office, with the insurance commissioner or their designee serving as chair. Four legislators serve on the board as ex-officio, non-voting members.
The State of Kentucky is a unique case in that the pool is operated directly by the Kentucky Department of Insurance. It does have an advisory committee consisting of the Commissioner of Insurance, Secretary of the Cabinet for Health and Family Services, four members of the Kentucky legislature, the deans of two of the state’s medical schools, two representatives of Kentucky health care providers, and four at-large citizen members.
In addition to the level of government and insurance industry involvement in the governance of the high-risk pools discussed above, the involvement of public members such as those covered by the pools, advocates for consumers, advocates for the uninsured, representatives of medical care providers and representatives of business interests varies from state to state. As noted in “Comprehensive Health Insurance for High-Risk Individuals,” Louisiana’s 13 member board includes members of state hospital association and medical society, a member of the Louisiana Consumers League, a representative of a group eligible for enrollment in the pool, and a representative of business interests in the state. Washington’s pool includes health professionals, small employers, large employers, representatives of health care consumers, while Wisconsin’s board includes a representative of small employers and a professional consumer advocate.
Not only could the high-risk pool boards serve as a model for the make-up of state health insurance rate authorities, but studying the performance of the various high-risk pools operating in the United States today could be instructive in evaluating the effectiveness of such groups. The purpose of the proposed Federal Health Insurance Rate Authority, according to Senator Dianne Feinstein as quoted in the New York Times, is “help make sure that people are not unfairly subject to arbitrary rate hikes.”
Studying the performance of high-risk pool boards could provide some evidence as to how effective boards with membership from a variety of sectors with a stake in health care can be in protecting consumers, particularly at-risk consumers, from unfair treatment. While many high-risk pools are constrained by statute in terms of the premium levels (according to NASCHIP the National Association of Insurance Commissioners model suggests 125-150 percent of average individual rates), the state pools do vary in terms of deductibles, differentiating premiums based on variables such as age, gender, and prior health experience. Important insight may be also gained by studying how the composition of the governing boards is related to the fiscal health and sustainability of the program.
Examining the effectiveness of these boards in protecting consumer interests while guarding the sustainability of health care at the state level may provide some useful evidence for how effective we can expect state or federal rating authorities to be.
Can advocates for consumers and small businesses really have equal status on such a board alongside insurance companies and health care providers in the face of rising health care costs, which even the current health reform proposal may do little to curtail? While conservatives concern themselves with the question of federal health care regulation, an equally important question is ensuring effective consumer protection by a body such as this.
With Anthem’s recent premium increase, many have advocated for more regulation of insurance premiums increases. Whether or not a body like the Health Insurance Rate Authority is the best vehicle to do this deserves further research.
As the legislation is currently constituted, many states will have to empower an official or group of officials in order to implement any recommendations from the federal government. State risk-pool governing boards could serve as a model for creating such a group, and studying the effectiveness of the state high-risk pool governing boards could provide some evidence as to such a body’s potential effectiveness.
Nathan Myers is an instructor of political science at the University of Southern Indiana. Email: [email protected]