As Washington, D.C., considers its next legislative move regarding health care reform amid a myriad of choices, Pennsylvania’s top insurance regulator says his state has a clear focus for change: the small-group health market.

Joel Ario

In his recent testimony before the Pennsylvania Senate Appropriations Committee, the state’s insurance commissioner, Joel Ario, warned legislators of the lingering impact of not addressing coverage for individuals and businesses with two to 50 employees.

“In these markets, consumers are at a severe disadvantage and access to coverage is steadily deteriorating,” Ario said, according to a copy of his testimony.

Ario pointed out that 48 states have better consumer protections against large rate increases and “other unfair rating practices” than Pennsylvania does and the time to act is now.

“The result of our failure to act is a very unstable, troubled market place in which consumers face a concerted effort by health insurers to use individual health questionnaires and other aggressive rating practices to impose large rate increases on individuals and small businesses, resulting in unaffordable coverage for the very people who need it the most,” he said.

The commissioner also noted “multiple signs” pointing to a pattern of rate increases well in excess of historical norms, which for the past decade have included annual rate increases of nearly 10%, and current rate spikes of 20% or more “cry out for legislative action.”

Ario said bills passed by the Pennsylvania House in 2008 and 2009 containing rate restrictions, information requirements and other consumer protections are useful models, but have stalled as Pennsylvania – like other states nationwide – await the result of a Congressional health reform solution.

“This was a reasonable argument until recently, but with federal reform stalled, it now appears that our efforts to protect small businesses against exorbitant rate increases will depend on Pennsylvania joining the other 48 states that have adopted small group rating reforms through their legislatures,” he said.

Further proof of potential problems

In his testimony, Ario also highlighted several indicators of a growing problem for Pennsylvania consumers – from abnormally large increases in individual rate filings to the increased use of underwriting tools and degregulated rates by the state’s Blues.

The Pennsylvania Insurance Department is in the middle of an in-depth investigation of its Blues – Highmark, Independence Blue Cross, Capital Blue Cross and Blue Cross of Northeast Pennsylvania – regarding possible anti-competitive actions. The review is to determine whether the plans, which share a combined health insurance market share of 60%, have engaged in any anti-competitive or other unfair business practices.

Ario pointed out that last fall, the four Blues all filed for “abnormally large” rate increases in the individual markets, some exceeding 40%. Following a review, the PID was able to approve rate increases in the 10% range instead, Ario noted.

The commissioner said all four Pennsylvania Blues, dating back to the 1990s, have formed for-profit subsidiaries and used them to offer products that are medically underwritten and more price competitive for the best risks.

“The department recently reviewed this history in determining whether there was legal authority in current law to prohibit Highmark from moving its small group business to a for-profit subsidiary outside our rate review jurisdiction, and concluded that there was no clear authority for such action and that any attempt to assert such authority would have implications for the other three Blues, all of which previously took similar action,” Ario noted.

In closing, Ario pledged the support of his department to aid state legislators, “achieve reforms that will provide improved consumer protections for Pennsylvania’s health insurance marketplace.”