SB 110 reform face uncertain future in House

Small-business owners walloped by health insurance rate increases might be getting a break if a bill passed by the state Senate becomes law. But they shouldn’t hold their breath.

Senate Bill 429 reforms the health insurance reforms contained in last year’s SB 110 by capping insurance rate hikes at 25 percent a year over two years (and no higher than 50 percent for both years). But it is unlikely that the bill will make it through the House. And even if it did, it would be only a temporary measure.

After Jan. 1, when SB 110 went into effect, health insurance premiums for some businesses shot up, thanks to the end of community rating.

Under community rating, insurers had to charge small businesses the same rate no matter what the size, location, occupation or health of the work force. SB 110 – in an effort to attract more companies – allows insurers to take such factors into account, meaning that those working in particularly small businesses with a few unhealthy workers have seen their premiums go through the roof.

SB 110 also came with a 25 percent cap, but the cap only limited increases that came about because of the new law. Rates also have risen for other reasons, including age and utilization trend. And if an employer switched insurers, they was also no such limitation.

The result was that employers started complaining to the state Insurance Department and their legislators almost immediately about rates that were increasing by as much as 100 percent.

“We thought some companies were taking advantage of a loophole,” said Sen. Bob Flanders, R-Antrim, chairman of the Senate Insurance Committee and strong supporter of SB 110 of the insurance companies. “This is to shake them up a bit. Call it a payback.”

High or higher?

The cap came after Democratic senators tried to repeal SB 110 altogether. They were joined by a couple of Republicans, including Sen. John Gallus, who represents the North Country, where some of the rates have increased the highest. But the measure failed, 15-8, with Republican pleading for more time for SB 110. Flanders and others argued that it is already working, that Cigna just filed for lower rates starting April 1 and that 70 percent of the rates were down and that eight or more companies were coming into the market.

None of Flanders’ claims could be verified.

The Insurance Department has no real data on rate increases, and won’t for several months. Insurance Commissioner Roger Sevigny said he did attend a meeting of brokers who were favorable to SB 110. Several of those brokers said that 70 percent didn’t exceed the industry average, which was 10 to 15 percent. But none said a high percentage of the rates actually went down.

So far, four health insurers have announced that they are entering New Hampshire’s small-business market. Two are affiliated with Fortis Health, which markets high-deductible products, which would seem to primarily benefit groups with healthier workers.

Sean Lynch, New England district manager for John Alden — one of the Fortis companies – claimed that such a product, combined with a tax-deductible medical savings account, would benefit all workers, and that the company offers a PPO, but not the more common HMO product.

MVP Health, a Schenectady, N.Y., company, would compete against the big two (Anthem and Cigna) with a basic HMO package. But MVP officials said they were planning to come into the market anyway, and complications presented by the new law have actually put their plans on hold.

Cigna has filed for new rates in New Hampshire, said spokesperson Lindsay Shearer, but she could not find out what they were by deadline. The Insurance Department won’t release rate filings until they go into effect.

Shortly after the defeat of the effort to repeal SB 110, all of the Republican Senators joined together to co-sponsor the rate-cap amendment.

According to some senators, including Ted Gatsas, a Manchester Republican who introduced the amendment, the cumulative two-year, 50 percent cap would be retroactive. In other words, those who saw a 60 percent increase the first year would get a 10 percent decrease the second year. Or at least those with a 40 percent increase would be limited to a 10 percent increase the following year.

However, state insurance regulators said such retroactive rate caps would be hard to enforce. And the bill sunsets on Jan. 1, 2006.

‘Way premature’

There are other uncertainties surrounding the bill, including its uncertain future in the House.

“My first reaction is we don’t want to overact while we are still in the first quarter of its first year and do radical things, without giving the chance for the market to do its thing,” said Rep. John Hunt, R-Rindge, chair of the House Commerce Committee, which is most likely to hear the bill. “This is way premature. We don’t want to send the wrong signal that we are not willing to stay the course. We have to be willing to stomach these adjustments.”

Hunt noted that the rates of his own small business went down 12 percent, even though he has high blood pressure that was under control. He did add, however, that his insurance broker told him that Hunt was the only customer he had whose rates actually went down.

Industry advocates like Robert Nash, a lobbyist for the Independent Insurance Agents of New Hampshire, said that a move to cap rates was “understandable.”

“We were aware that age and industry rates could drive up rates more than 25 percent, but we are concerned and a little shocked at the size of some of these rate increases,” said Nash. “I can appreciate trying to stabilize the rating structure.”

Still, Nash said that appreciation did not necessarily translate into support. Nash said he would like to see the bill worked on, perhaps still allowing some increases past 25 percent, due perhaps to industry trend, or studied further.

“Capping it at 25 percent, including age and trend, is a little stringent,” he said. “When you start tinkering with rate caps, it does affect companies who might want to come into the market. And that’s the whole point of why we did this reform (SB 110) in the first place.”