Q&A on Senate Amendments on LD 1333
Q & A – LD 1333 AS AMENDED BY COMMITTEE AMENDMENT (H-186), SENATE “H” (DIAMOND) & SENATE “I” (SCHNEIDER)
Q: DOES IT FIX THE RULE 850 PROBLEM (TRAVEL RESTRICTIONS)?
A: NO. Proponents state that policyholders can still go to local providers and LD 1333 won’t prohibit that. Yes, they can go and pay out of pocket; but Rule 850 is still repealed, including all language saying there are any limits on how far policyholders can be made to travel. Fuzzy language about incentives added in Senate H doesn’t change this. Note current law allows plans to create incentives to travel, if approved by the Bureau of Insurance (BOI), but this language is repealed.
Q: DOES IT FIX THE PROBLEM WITH RATE SPIKES CAUSE BY MOVING TO AT LEAST A 3:1 RATING FOR AGE, GEOGRAPHY, OCCUPATION WITHOUT PROVIDING ANY SUBSIDIES OR CUSHION FOR PEOPLE MOST AFFECTED?
A: NO. The bill as amended neither waits until the Affordable Care Act (ACA) subsidies kick in as of 2014, nor provides any Maine-based subsidy. Some people could see their rates go up hundreds of dollars, not counting the new premium tax.
Q: DOES THE “REINSURANCE POOL” GUARANTEE THAT NO ONE WILL FACE A RATE SPIKE AS A RESULT OF THE CHANGES IN LD 1333?
A: NO. The reinsurance pool has nothing to do with the rating bands and any rate spikes due to geography, occupation and age. LD 1333 creates the reinsurance pool as an alternative mechanism to help pay for insurance to people who have pre-existing health conditions. The pool will pay insurance companies for the costs of expensive claims because of health conditions. Whether you are in the pool or out of the pool, if your insurance goes up due to geography, age or occupation, the money in the pool will not go to cushioning the financial impact or paying your claims.
Q: HAS THE SENATE FIXED THE PROBLEM OF BIG RATE INCREASES DUE SOLELY TO WHERE YOU LIVE?
A: ONLY PARTIALLY. Senate Amendment H removes geographic area from subsection C that would have allowed it to be used on an unlimited basis in individual policies. However, people in rural Maine will still see big rate increases because of where they live, because Senate H allows insurers to use geographic area as a separate, additional rating factor on a 1.5 to 1 basis; this would be added or stacked on top of the expanded rating on the basis of age which can go to 3:1 next year. For example, before applying the family membership rate factor (which is not specified), if the lowest rate were $100/month, then the highest rate (based on age plus geography) could be $100 x (1.5 + 5.0) = $650/mo.
Q: IS IT TRUE THAN ANYONE CAN KEEP THE INSURANCE THEY HAVE AND NOT BE SUBJECT TO THESE NEW RATING FACTORS?
A: THEY CAN, AND THEY WILL LIKELY BE EVEN WORSE OFF. LD 1333 allows insurers to “close the book of business” on the old policies once they start writing the new insurance policies. Anyone who would benefit from the changes and see a rate decrease will jump at the chance to buy the new cheaper insurance. People who will see a rate increase of course won’t want to get the new policies. But, if they keep the insurance they have in the “closed book of business,” because the only people left are the older, more expensive policyholders, their rates could go up as much as 170% in three years, according to the BOI.
Q: DOES THE AMENDED LD 1333 STILL GIVE INSURERS UNLIMITED AUTHORITY TO PAY THEMSELVES THROUGH PREMIUM INCREASES IN ORDER TO FUND THE REINSURANCE POOL?
A: NO, BUT THE CAP ON THE TAX IS NOW VERY HIGH. Senate Amendment I restricts the liability for costs beyond the “$4 per member per month” (i.e., net losses by the reinsurance association) to an additional $2 per member per month. The Committee Amendment had set no limits, leaving the decision on any increases solely within the discretion of the insurance company-controlled reinsurance association board. The upper limit set by Senate I is still a lot of money, an increase of $72/year on everyone’s premiums (except state employees including legislators!), as much as $288 annually for a family of four.
Q: IS THE STATE HEALTH PLAN AND HEALTH CARE COST-CONTROL ADVISORY COMMISSION (ACHSD) STILL ELIMINATED?
Q: IS THE REINSURANCE POOL BOARD FIXED SO CONSUMERS ARE REPRESENTED?
Q: DOES THE AMENDED LD 1333 STILL VIOLATE FEDERAL LAW?
A: PROBABLY. Although the Committee Amendment restored compliance with guaranteed issue there remains a concern that rescissions may result from disputes over the health status questionnaire, that is, policies could be rescinded or claims rejected, according to BOI analysis. This problem is made worse by changes in LD 1333 that allow new prior authorization provisions to be added without BOI review or approval.
The amended bill still allows regional insurers to market and sell policies that do not comply with Maine law, and without enforcement authority to make sure claims are paid, pursuant to LD 1333’s out-of-state insurance provisions. BOI says this violates federal HIPAA requirements as well as the ACA. The ACA allows purchase of out-of-state insurance only after 2016 and only pursuant to an interstate compact. LD 1333 is inconsistent by allowing purchase in 2014 without the ACA protections.
New language in Senate Amendment H “as permitted by federal law” means the 4:1 and 5:1 rating bands, which are in violation of the ACA, won’t be enforced if inconsistent with the ACA. This language acknowledges reality, which is that these provisions violate federal law. The new language may avoid the federal government suing the state to enjoin implementation of the illegal rating bands.
Q: DO ANY OF THE SENATE CHANGES ACTUALLY MAKE LD 1333 WORSE FOR CONSUMERS THAN THE VERSION PASSED BY THE HOUSE?
A: UNFORTUNATELY, YES.
· New language in Senate H makes it easier for an insurance company to sell or offer noncompliant regional policies through a “corporate affiliate” rather than a “subsidiary.”
· New language removes a provision that would have resulted in more refunds to small group policyholders by limiting the time in which an insurer could meet the 78% loss ratio to 12 months rather than 36 months in current law.