Seven of Pennsylvania’s nine largest health insurers use health profiling tools for their small-groups, while the state’s two largest insurers, Highmark Inc. and Independence Blue Cross, do not.

Joel Ario

Joel Ario, the state’s insurance commissioner, said he fears that if Highmark and IBC, who collectively claim 55% of the state’s health insurance market, incorporate health profiling in their rate setting, it could cause a big shift in the current small-group market in Pennsylvania.

“If [the insurers] decide to become more aggressive in using health profiling tools to determine premiums charged to small groups, there could be a significant shift in the current market creating more uncertainty to consumers and more pricing segmentation, both count to the federal health reform efforts,” Ario said.

“However, there is nothing in Pennsylvania’s statutes or regulations that would restrict them from using medical and prescription information to develop rates on small-group business,” he said.

Speaking before the Pennsylvania House Insurance Committee and the Democratic Policy Committee, Ario released the findings of a report on the ratings and underwriting practices of the state’s nine largest health insurers writing small-group business. Gov. Ed Rendell sought the report earlier this year.

Ario said the profiling tools used include health questionnaires and prescription drug profiling, usually conducted at the time of the application. The nine insurers included in the study accounted for 89% of all group accident and health direct-written premium in Pennsylvania in 2008.

Ario urged state lawmakers to pass a law prohibiting health profiling and limit increases in health insurance rates between now and the implementation of health exchanges, scheduled for 2014 as part of federal health reform.

The insurance commissioner asked the General Assembly to set rate limitations, including a 2:1 band on rates with restrictions on the use of rating factors other than age, caps on premium increases, initiation of wellness accounts, development of standard health benefit plans and rate reviews by the department.

Ario said the bill (HB 746) can cure the problem by triggering a limit on the use of health profiling tools if adjustments to base rates hit certain specified caps.

Ario asked legislators to grant the Pennsylvania Insurance Department additional authority to request and obtain documents and information when handling consumer complaints, industry studies and surveys, and investigations of licenses.

He wants more transparency in rate filings to ensure consumers and “knowledgeable about the factors that affect premiums,” and he wanted “clearer guidance” in the rate spread/ratio in the small-group market leading to “less price segmentation,” Ario testified.