Health coverage relief in N.H.: a historical view

When Gov. John Lynch signed into law Senate Bill 125 – a measure aimed at protecting small businesses from health insurance rates that have dramatically increased over the past five years – he called the event “a great day for small businesses in New Hampshire.”

The law — designed to temper the volatility of health insurance rates, specifically for small-business groups and spread risk more equitably — establishes a small employer health reinsurance pool to offer coverage to eligible employees. Any insurer issuing or maintaining health insurance in New Hampshire is required to contribute to the pool.

This mechanism allows insurers to look at health profiles of insured employees after premium rates are set for the purpose of ceding high-risk individuals into the reinsurance pool. This encourages entry into the state’s small group market by allowing new insurers with limited market penetration to transfer prohibitive costs into the reinsurance pool.

Costs in the pool are spread over the entire insurance market, thereby easing the financial burden that small-business employers encounter when one or two employees experience significant health problems. Sponsors expect this pool to increase competition in New Hampshire’s small group insurance market and stabilize health insurance rates for small businesses.

New Hampshire has a strong tradition of success with respect to similar insurance programs targeted at particular segments of the population. Similar to the newly established reinsurance pool, the New Hampshire Health Plan, New Hampshire Vaccine Association and New Hampshire Healthy Kids are examples of such legislative initiatives aimed at filling gaps in the private insurance market.

In 1997, the state Insurance Department established the New Hampshire Health Plan as an emergency response to the impending collapse of the individual health insurance market; the Legislature codified the program in 1998. NHHP operates a high-risk pool to provide health insurance to residents who are considered medically uninsurable and, as a result, have been declined coverage through the private market.

The high-risk pool is funded through premiums and a quarterly assessment on all companies authorized to write health insurance in New Hampshire. Since its inception, three new carriers have entered the market and, overall, the state’s individual health insurance market has dramatically improved.

Similarly, the New Hampshire Vaccine Association assesses carriers to provide private funding for the universal vaccination of New Hampshire’s children. Any insurance company that writes or maintains health insurance must contribute.

Established in 2002 by the Legislature, NHVA lowers the cost of vaccinations because it allows the state to qualify for significant federal discounts on all vaccines. In addition, universal vaccination provides systemic benefits by reducing the risks of disease to all residents and decreasing future preventable treatment costs. The state now has one of the highest childhood vaccination rates in the country, in part due to NHVA.

Finally, Healthy Kids is a nonprofit corporation established in 1993 to give working families access to affordable children’s health coverage. Funded through premiums reduced by state and federal subsidies, the program focuses on the unique characteristics of child health care, which tends to be more routine and preventative.

In its first three years, Healthy Kids reduced the number of uninsured children by almost 10 percent. As of 2003, Healthy Kids has provided insurance to more than 47,000 children, and New Hampshire now has the third lowest rate of uninsured children in the nation.

All three of these programs have succeeded in meeting needs that would otherwise go unmet. Similarly, although the new reinsurance pool will not, in itself, reverse underlying cost trends, it is designed to promote stability and equity in the small business group insurance market by spreading risk more efficiently.

Fred L. Potter, executive director of New Hampshire Health Plan and New Hampshire Vaccine Association, is a partner in the Concord law firm of Sulloway & Hollis. He was assisted in preparing this article by Beth E. Gatherum and Kelly Ovitt Puc. Potter can be contacted at FPotter@sulloway.com or 223-2816.