Insurance Division Resists Legislation on Rate Increases

Sen. Chip Shields, the bill’s sponsor, questions why Teresa Miller, the Division’s administrator, opposes such a measure
The Lund Report

April 15, 2011--Sen. Chip Shields (D-Portland) is having a tough time getting the three bills he cares most about this session out of the General Government, Consumer and Small Business Protection Committee, which he chairs, and to a vote on the Senate floor. 

Shields is writing amendments to each bill, and has been waiting two weeks to receive information from the Legislative Fiscal Office on their fiscal impact. “That’s taking a little bit of time,” he said.
Senate Bills 717, 718 and 719 would give the Department of Consumer and Business Services more oversight over insurance rate increases for small business and individual plans. 
Senate Bill 717 would require insurers to notify the director of the Department of Consumer and Business Services of any insurance rate increases to life and health insurance policies. The director would conduct a public hearing on those increases, assuming the director agreed.

Originally, the attorney general was a party to the public hearing process, but Shields amended that out of the bill.

Senate Bill 718 requires the director to provide a public “detailed rationale” for approving rate increases that would be posted on the department’s website. It would also create a 30-day public comment period for the public to comment on proposed increases. Those public comments would also be posted online.

Senate Bill 719 makes it illegal under the Unlawful Trade Practices Act to engage in unfair claim settlement practices.

Shields said his intent is to make insurance rate increases more transparent, particularly for small businesses.

“These issues are too important to small businesses to happen behind closed doors,” Shields said. “Small businesses should have a seat at that table.”
Shields says the Insurance Division is attempting to stop the bills, in part by saying they’ll have a large fiscal impact of up to $700,000.
“That’s an absurd number,” said Shields who estimates the cost at $100,000, but is awaiting a fiscal impact study.
Teresa Miller, administrator of the Insurance Division, criticized all three bills during a April 11 hearing, saying they are unnecessary and will cost the Division time and money because of additional rate review hearings. The state already posts rate requests on-line for individual and small business plans with public comment periods that often last longer than 30 days. 
“The addition of more meetings would pose logistical challenges,” she said.
Having potential rate review meetings take place at the Department of Consumer and Business Services would take “a tool out of our tool box,” said Miller, who also expressed concern with holding public meetings.
“We do believe that our ability to have candid conversations with insurers without having competitors is beneficial to consumers, and assists in decision making,” Miller said. 
Consumers may not benefit from such hearings because insurance companies would be unwilling to participate. “They may underwrite policy for as long as possible to avoid the public meetings and hearings that could result,” Miller said.
Shields expressed surprise at Miller’s stringent opposition. “I can’t understand why [the Insurance Division] would have a problem, or why a public meeting would be controversial.”
The bills are scheduled for a work session April 18, three days before the deadline to have bills move out of committee and to a floor vote. If the committee refuses to take action, Shields intends to move them to the Senate Rules or to the Joint Ways and Means Committee.
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Good coverage! The problem with public hearings is that they are premised on the concept that rates are just a matter of negotiation between insurers and insureds. That is true of the 15% admin expense controlled by insurers, but the other 85% of premium goes to health care providers. What is the point of a hearing where the party responsible for 85% of the problem isn't in the room? If public hearings are to have value, it is in educating the public about why their health care costs are rising. Dig in to those trend factors, look in detail at why provider costs rise faster then inflation, quantify the cost of manageable conditions like hypertension, obesity and smoking. You won't get an insurer to sell a dollars worth of insurance for 50 cents no matter how many angry people you pack into the room. What you can do is tell those people why their health care costs are rising and what they can do to change them.

Over the years I have participated in over 35 rate hearings in eight different states and the honest answer to the question of impact is that it depends. In some cases the hearings are sterile, technical battles over the accuracy of statistical projections. That's where the Insurance Commissioner takes a a relatively narrow view of his/her mandate to assure fair, reasonable and affordable premiums. In other situations, hearings drill deeper into the insurance company's business performance-- increasingly with a focus on the management of cost and quality. That's where the Insurance Commissioner is unwilling to rubber stamp rates just because they are mathematically accurate. The active involvement of Attorneys General and consumer groups in the hearing process has been a key contributor of success. Larry Kirsch IMR Health Economics Portland

There are good reasons for holding hearings, such as publicly exposing rate bands which allow insurers to raise rates astronomically for older policyholders while holding down rates for younger, healthier insureds. The insurer then repeatedly requests increases to those higher rates, in essence using them as flow-through funding for health care. This is contrary to the whole point of insurance, which is risk pooling. The Insurance Division-endorsed practice of rate banding which breaks up the pool into narrow bands with widely-varying rates defeats this purpose. The reason insurers use rate bands is to entice younger, healthier policyholders into the pool, a reason that is remedied by mandatory participation.