Tuesday, January 29, 2002

Health oversight bill
faces opposition

Proposal seeks access to insurer data
used for health plan rates

By Lyn Danninger

A state bill to increase oversight of the way health insurance rates are set is meeting stiff opposition from insurers, who say they are already over-regulated.

Siding with the state, small business owners, retirees and the self-employed say they are being kept in the dark by insurers who won't provide details on how their rates are calculated.

" We know quite a bit about why health care costs are increasing with one important exception -- we know almost nothing about how the near-monopoly insurance provider (Hawaii Medical Service Association) at its for-profit subsidiaries operate or what would be fair rates for them to charge," Larry Geller told the House Committee on Consumer Protection and Commerce and the House Committee on Health.

The committees met yesterday to consider an administration bill that would give the state insurance commissioner the power to review health insurers' rates to decide whether they are excessive, inadequate or discriminatory.

The bill would require insurers to submit a filing which justifies their rates by providing actuarial and underwriting data to support it.

If the rates are denied by the state Insurance Division for any reason, the specific grounds for denial must be detailed and a hearing must be held within 20 days of the denial. A judicial review of any adverse outcome of the hearing is also required.

State Insurance Commissioner Wayne Metcalf characterized the proposed legislation as a way to bring the insurers' premium setting "into the sunshine."

"Employers are severely disadvantaged in their negotiations with health plans since the rate-making methodologies of certain plans are guarded as tightly as the formula for Coca-Cola," he said.

Health insurers argue they are already overburdened with government oversight and any additional regulations would do nothing to solve the real problem -- the rising cost of health care.

"What the bill does is make the Insurance Division a regulatory superpower in the health care arena," said HMSA Government Relations Manager Jennifer Diesman.

Further, Diesman said, such a law could actually increase the cost of health insurance.

"The evidence shows that rate regulation does not lower health plan rates. In fact, experience around the country shows that rate regulation can actually increase premium rates," she said.

Kaiser Permanente Director of Government Affairs Chris Pablo asked whether the proposed regulations would take into account the differences between insurance companies that pay claims and a system such as Kaiser that provides care as well as coverage.

"When analyzing our operating margins and surplus, will the reviewers take into consideration the margin needed to maintain existing facilities or to expand our delivery system?" he said.

Paul Tom, president of consulting and actuarial firm Benefit Consultants Hawaii, said given dwindling competition and the dominance of Hawaii's two largest plans, HMSA and Kaiser, a strong case for some kind of government oversight can be made.

"The justification for rate oversight must be looked at within the context of the existing conditions of the local health insurance industry, which is comprised now of only one large health insurer and a group model health maintenance organization," he said.

Tom pointed to unsuccessful attempts in gaining adequate rating and actuarial information from HMSA about how rates are determined for small employer groups.

"H.B. 1761 would correct this problem by requiring full disclosure of the rate making process," he said.

Both insurers also argued that health insurance should not be considered the same as other lines of insurance, such as property and casualty or car insurance.

They also expressed doubts that any form of rate regulation or oversight could guarantee new competition.

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