|
|
|
 |
|
Home / Washington Business - March 2006 / Individual Insurance Market Resurrected |
|
|
|
 |
|
|
|
Individual Insurance Market Resurrected |
|
|
|
Written On: March 2006 |
|
|
|
Written By: by Paul Schlienz |
|
|
|
Washington's individual health insurance market is back after nearly being regulated out of existence. The market's comeback, however, has been slow and arduous. While individual health insurance is now available throughout the state, and there are an increasing number of plans and options, the market is currently dominated by three carriers. In contrast, other states have healthy individual insurance markets at much lower cost with many more providers.
Washington's market was like that, too, until 1993, when the state's Legislature passed a far-reaching measure called the Washington Health Services Act. Signed into law by then-Gov. Mike Lowry, this measure put insurers under strict regulations, including:
• A requirement to offer a basic health plan covering a set of benefits mandated by state government.
• Restrictions on premium variations.
• A prohibition on more than annual insurance adjustments except when the insured’s family composition or choice of benefits changed, or if laws were passed that affected premiums.
• Allowing insurers to exclude coverage of preexisting conditions only for 90 days prior to the date the insurance coverage would go into effect.
• Giving the Department of Insurance authority to approve or disapprove all insurance-related regulatory actions, including rate increases, benefit designs and community ratings.
In 1994, Insurance Commissioner Debra Senn announced a three-month open enrollment period when any of Washington's 600,000 uninsured could apply for individual insurance policies with state mandated rates. Thousands of state residents responded by signing up for insurance policies, although the mechanism for cost-sharing was not yet in place. Then everything collapsed.
Good Intentions Gone Bad
Congress, in 1995, refused to allow 1.4 million Washington residents, whose employers were insured under the federal Employee Retirement Income Security Act, to participate in the state's insurance cost-sharing program. Then the Legislature repealed most of WHSA's cost-sharing provisions, but did not repeal mandates on open enrollment, guaranteed issue and community ratings.
Soaring enrollments of frequently high-risk policy holders and limited ability to absorb the costs devastated Washington's insurance providers. Pierce County Medical, paying around $1 million a month more in claims against individual policies than it was receiving in premiums, raised it rates by 67 percent. At the same time, Principal Mutual had a deficit of about $12 million between its Washington claims and premiums—twice the average cost of claims elsewhere in the United States.
The results were devastating for Washington's individual market. Costs rose, premiums increased by double digits, enrollment declined, plans offered increasingly less coverage, and insurance providers packed up and left the state’s individual market en masse. Indeed, by 1999, individuals and families in 32 of Washington's 39 counties were without individual health insurance options. Ironically, in view of WSHA supporters’ hope that it would lead to nearly universal health insurance coverage, roughly 11 percent of Washington’s population—the same percentage that was uninsured before WSHA—remained uninsured.
In 2000, then-Gov. Gary Locke signed legislation designed to help bring back Washington’s individual insurance market. Insurers were allowed to return to risk-based underwriting; the insurance commissioner was no longer allowed to set rates, although providers were required to document a loss of money on claims before rate increases would be approved; insurers were allowed to exclude coverage for preexisting conditions for up to nine months; and employees who lost jobs through no fault of their own were allowed government health insurance after all other insurance sources were exhausted.
The Individual Market Returns
These reforms have helped bring back Washington's individual health care market. In contrast to the dire situation that existed six years ago, there are at least two individual health insurance providers operating in each of Washington’s counties. Since 2000, Premera BlueCross, one of the state's major carriers, has seen an 80 percent increase in individual enrollment, which is just below 18 percent of the total health insurance marketplace.
Nevertheless, the ill effects of the WHSA linger on.
"A lot of national carriers look at this state and ask 'Do we want to make an investment in selling and marketing a product in this state where every three or four or five years the Legislature makes changes to the marketplace that either might make it advantageous or less advantageous to do business in Washington?'" Jack McRae, of Premera BlueCross, said.
While premium costs have gone down considerably since 2000—$60 per month is the approximate average for individual plans—the state has continued to pile mandates on to health plans, which raise costs. And the requirements that Washington puts on insurers are heavier than almost any other state.
Among the cost drivers in Washington’s individual insurance market are regulations that prevent insurers from denying coverage, a prohibition against variations in insurance costs, and ratings laws that force healthier people to subsidize those who are less healthy.
"It sometimes seems like we want to make the whole system fail," Rep. Barbara Bailey, R-Oak Harbor, remarked. "Wouldn't it be better if we had very affordable prices in the health insurance marketplace that allowed those people who are uninsured right now to be able to afford their insurance without having to go to the state and receive subsidies?"
Nevertheless, Washington’s individual market is back and is starting to offer some very innovative products, including health savings accounts, which combine a high deductible health care plan with an individual savings account with a financial institution. In the view of an increasing number of policy makers, HSAs hold great promise in bringing down health costs. Already, HSAs, which have only existed since 2004, have seen costs decreased by 4 percent per year while standard plans have been increasing by 7 to 9 percent per year.
Despite the state's disastrous 1990s health care experiment, Washington's individual market is literally back from the grave. Barring any unforeseen state interference, Premera BlueCross’s McRae remains optimistic about the market's prospects for the future.
"If you give the market a chance to work, you will see innovation," McRae concluded.
|
|
|
|
|
 |
|
