House committee considers small group reform

Pennsylvania is one of only two states that provides no rate protections for small employers buying health coverage for their employees.  As a result, health insurers have almost unlimited freedom to compete for the business they want: employee groups with a low risk of needing medical care.   Small employers, on the other hand, are suffering in Pennsylvania's relatively unregulated market due to the unpredictability and unaffordabilty of rates.  Many have dropped coverage as a result, thus adding to the number of uninsured.

State Representative Tony DeLuca, chair of the House Insurance Committee, hopes to change that with a bill (HB 746) that would end the use of medical underwriting and gender in setting premiums for small group plans, limit the difference between the highest and lowest premium within a band of 2:1 or 3:1, limit an insurer's profit and administrative overhead to 15 percent of premium revenue, and give the Insurance Commissioner the authority to reject rates that fail to reflect best practices in regard to wellness promotion and chronic disease management.

On March 12, the House Insurance Committee held a public hearing on DeLuca's bill.

Lori Michael, the owner of a home care agency in Schuylkill County, testified in support of the bill.  "As I see it, the bill would spread risk more broadly, end rate spikes and the unpredictabilty year-to-year in the cost of group plans, reduce waste within the insurance industry, end the use of gender and medical history in the pricing of plans, and give employers better ability to compare plans when shopping for best value."  Michael, whose workforce consists mainly of women who work in private homes with ill patients, has found coverage to be prohibitively expensive.  But without a health plan in place, her employees are constantly looking for other jobs that provide coverage.  This contributes to high employee turn-over.

Testifying in opposition to HB 746 was Sam Marshall, president of the Insurance Federation of Pennsylvania.  He said the bill would make it more expensive for insurers to compete in the Pennsylvania market. 

Joel Ario, Pennsylvania's Insurance Commissioner, emphasized the fact that Pennsylvania is one of only two states that hasn't brought more equity and predictability to the small group market.  "At a minimum," Ario said, "we ought to set some limit on the amount that a premium can jump from year to year." 

Ario also responded to Marshall's testimony on the impact of the bill on competition.  Currently around 200 health insurers sell small group policies in Pennsylvania, said Ario.  Only nine companies have at least a 1 percent market share, and those nine companies control 85 percent of the small group market.  If HB 746 were to become law, Ario said he is prepared to exempt the 191 companies that have less than a 1 percent market share.  That would relieve those companies from any expense created by the bill.  Committee chairman DeLuca expressed strong interest in Ario's proposal. 

Employers with fewer than 50 employees should closely monitor the progress of House Bill 746 and communicate their views to their state senator and representative.