ISLAND VOICES
Government regulations are good once in awhile
By Richard S. Miller
University of Hawai'i-Manoa emeritus professor of law
Much of the discussion of health insurance premium regulation has overlooked the positive effect such regulation can have for small businesses. The tendency — at least before Sept. 11, Enron and the electric power debacle in California — has been to bad-mouth government regulation in all of its forms.
Thus, small business in Hawai'i, which includes most doctors' offices, has been reluctant to embrace state regulation of health insurance rates.
But small business is wrong! The fact is that small business takes it on the chin for premium rates for health insurance in comparison with large organizations, and that the differences are significant. There evidently are similar differences in rates even between small and large unions. Even if rates for organizations with many employees can spread risks better than small businesses with few employees, there is now no way to tell whether the differences in premiums are fairly arrived at or just a product of political clout.
And there is no one to complain to if you, as a smaller business or union, find that your rates for health insurance seem excessively high.
There also is a practice in Hawai'i through which the Hawai'i Medical Services Association, the state's largest health insurer, "experience rates" small businesses. If you have just yourself and a few employees, and one of you requires high-priced medicine, you can expect HMSA to sock it to you with much higher premiums in the following years.
One physician who developed breast cancer saw her HMSA business rates increase by more than 46 percent in the next two years, compared to an average increase of about 18 percent overall. She is now paying $890 a month for a family of three! How many small businesses can remain afloat if their mandatory prepaid health insurance rates increase to such an extent after an employee has a serious disease? If each small business is treated as a separate group, its premiums will skyrocket and possibly become unaffordable whenever an employee gets seriously ill.
It is one thing in auto insurance to penalize drivers guilty of bad driving by hiking their rates; it is grossly unfair to hike the health insurance rates of people who randomly suffer illnesses.
The health insurance rate regulation bill now under consideration by the Legislature does NOT give the state the right to fix insurance rates. It only allows the insurance commissioner to disapprove excessive, inadequate or discriminatory rates. It ensures, by using health actuaries, that rates are reasonable given the benefits provided in the plan. It also gives the commissioner the power to get the information needed to make that determination — information which, like the salaries of officers in HMSA, a nonprofit mutual benefit society exempted from state and local taxes, is not now available!
The authority to ensure that health insurance rates are not excessive, inadequate or discriminatory is similar to that exercised by many other states, even including New Hampshire, the highly conservative "Live Free or Die!" state. Furthermore, our proposed statute insures that health insurers will receive due process of law from the state Insurance Division.
Health insurance premiums may become excessive when there are few competitors and when the giants are not terribly concerned about competition (consider Hawai'i gasoline prices). They may become inadequate, and cause inadequate reimbursement of health care providers or reduced health benefits to members, or both, when existing health plans seek to keep competitors from getting a foothold in the state. We will never know whether either of these situations exist without regulation.
The commissioner has authority to examine health insurers to protect against insolvency, but the commissioner does not have authority to protect against the kind of anticompetitive pricing that may occur when the largest health insurer in the state, HMSA, builds up a huge surplus in excess of legal requirements.
Health insurers that are fairly setting reasonable rates that are not excessive, inadequate or discriminatory have nothing to fear from the proposed rate regulation. But those small businesses who rightly fear excessive or discriminatory health plan rates desperately need the protection that the regulation will provide, as well as the ability to place a complaint about rates before an agency that can and will do something about it. The Insurance Division's success in keeping auto rates and workers compensation rates down is clear evidence of the efficacy of insurance rate regulation.
Small businesses, protect your 'okoles. Call your legislator now and tell him or her that you are in favor of health insurance rate regulation as set forth in HB1761 or SB2302.
