Insurance and Real Estate Committee

JOINT FAVORABLE REPORT

Bill No.:

SB-11

Title:

AN ACT CONCERNING THE RATE APPROVAL PROCESS FOR CERTAIN HEALTH INSURANCE POLICIES.

Vote Date:

3/10/2011

Vote Action:

Joint Favorable Substitute

PH Date:

2/17/2011

File No.:

203

SPONSORS OF BILL:

Insurance and Real Estate Committee

REASONS FOR BILL:

The bill creates greater transparency in the process for approval of health insurance rate increases. It establishes procedural requirements for rate filings, notice to policy holders of a requested rate increase, a public comment period, and factors that must be considered when evaluating whether a rate is excessive. The bill also specifies that the Attorney General and the Healthcare Advocate be a party to any such hearings, and it stipulates the amount of time the Insurance Department is required to retain certain records.

REASON FOR SUBSTITUTE LANGUAGE:

The Substitute language changes the scope of what types of insurance and rate increase requests the bill covers.

RESPONSE FROM ADMINISTRATION/AGENCY:

The CT Insurance Department submitted written testimony, stating “Connecticut does have a very cost-effective, efficient and transparent method for reviewing rates, one that invites and accepts public comment. Our rate review system has been singled out by HHS as an effective process. However, Commissioner-designate Leonardi clearly recognizes the concerns raised… [and] respectfully requests that the committee delays moving forward with the bill at this time to give him the opportunity to conduct a top-to-bottom review of the rate review process.”

Victoria Veltri, Acting Healthcare Advocate, Office of the Healthcare Advocate (OHA), testified in favor of the bill with some suggestions for revision. She stated, “OHA believes that last year's bill that passed the House should be the starting point for negotiations on a workable rate review bill. When we first came to the Legislature seeking some form of public participation in rate review we requested that only individual policies be subject to the proposed bill. We think that that is still the proper scope.”

She also stated, “Further, we suggested that there not be a hearing unless we request one. The failure to have a trigger and not to further require OHA or the AG to request the hearing would make the hearing process overwhelming and unnecessarily complicated for the Insurance Department.”

In concluding her testimony she stated, “We suggest that the committee substitute the language from last year's bill, H.B. 5090 as amended. It contains the protections we sought to ensure a fair rate review process.”

NATURE AND SOURCES OF SUPPORT:

Senator Martin M. Looney, 11th District, submitted written testimony in support of the bill. He stated, “I believe that our state would benefit most if Connecticut's rate review system met the federal requirements such that Connecticut would be permitted to perform its own rate review rather than having the reviews done by HHS.” He also stated, “It might be advantageous for Connecticut to create a trigger for the rate review which is compatible with the federal regulation.”

Jamie Mott, a Connecticut resident, testified in support of the bill. She stated, “I grew up middle class, I went to a good college, graduated with honors, but I ended up getting a chronic repetitive strain injury towards the end of my time at college. I'm currently still not able to use my hands for work. I can only work part time and that means I can't get insurance through my job. I'm here to represent myself and my many disabled friends who don't have medical insurance and can't afford it, directly because of their disability.”

She also stated, “I moved to Connecticut strictly to get on Section 8 housing so I could pay a portion of my income for rent, but now I have a lot of medical related debt because of the disability” and cannot afford to pay health insurance rate increases.

In concluding her testimony she stated, “I think that this bill is incredibly important because it does create transparency in the process of rate increase and accountability. I think there's a very big disconnect between the people that are raising the rates for business reasons if it is just to increase profits, and the people that are being affected.”

Jennifer Hatch, program associate with the Connecticut Public Interest Research Group (ConnPIRG), testified in support of the bill. She stated, “Our sister organizations in Oregon and California have been instrumental in establishing rate review processes to use at the state level. And we found a couple of principles which protect consumers and also with a view to really bringing down the overall cost of our health care system. Firstly, regulators must have strong standards and help to push insurers to lower premiums, and also improve the quality of coverage. And we think regulators should have the authority and the mandate to take a lot of considerations into account, and to make sure that that information is available to health regulators.” She also stated that in her written testimony she included the language from the California law enacted in September. “It enumerates 24 items that insurers are to provide when proposing a rate increase, which speaks to sort of the variety of factors that we think are most beneficial,” she stated.

Karen Schuessler, director of Citizens for Economic Opportunity, testified in support of the bill, stating that it is important for several reasons. “Even though the Affordable Care Act is bringing relief to people all over the country and providing affordable health care to millions, insurance companies are still raising their rates and making health care coverage unaffordable to many. To rectify this problem, Health and Human Services (HHS) has proposed new rules starting next year; every time a health plan proposes a premium rate hike of ten percent or more for individual or small group plans, they must submit them to the federal agency with actuarial justification.”

She also stated, “If the rate increase is not justified, federal regulators will advise the state to block the increase. However, HHS has no power to block an increase. The state will be the one determining whether to block an increase. That's why this legislation is so important. It needs to be done on the state level.”

She concluded her testimony by stating, “Connecticut has received a grant from the Department of Health and Human Services to ensure a more transparent rate review process. And one of the goals of the grant is to hold insurance companies accountable for unreasonable rate hikes, which means that this grant could be used for public hearings.

Tom Swan, executive director of the Connecticut Citizen Action Group, testified in support of the bill. He stated, “Last year's fiasco around the Anthem proposed rate increases proved the need for both an approval process, but also a need for us to strengthen it. The fact that one day one commissioner could rubber stamp it and the next day somebody actually looked at it and rejects the rate increase because of the work of our health care advocate and Attorney General is very important.”

He also stated, “We are concerned with the opt out within the individual market for this bill for plans that reach medical loss rates here. We do think that it should cover both the individual and group markets, especially as reform evolves and is implemented in the state. The Affordable Care Act gave us new tools and incentives for moderating and reviewing claims.”

In concluding his testimony he stated, “I think at this time we should limit this bill to health insurers and some of the other policies should be exempt. Secondly… just because the health insurers say that the reason for the increase in costs is because of rising health care costs doesn't make it true.” He described information included in his written testimony, stating that the data shows the cumulative rate growth in both health insurance premiums compared with inflation as “97 percent increase from 2000 and 2008 for family premiums [and for] single premiums, [a] 90 percent increase. Spending on health care by private insurers, by the insurers themselves, how much they spent, went up 72 percent. The medical component of the consumer price index went up 39 percent. The insurance companies truly have been charging more last year. The five largest insurers had record profits, had nearly three percent fewer people enrolled within their plans and a much lower utilization of health care because of the economy and other factors.”

The following also submitted written testimony in support of the bill:

Lindsay Farrell, CT Working Families

Lori Pelletier, CT AFL-CIO

CT ENT Society, et al.

Jennifer Jaff, Advocacy for Patients with Chronic Illness

NATURE AND SOURCES OF OPPOSITION:

Brian Quigley, regional director for America's Health Insurance Plans, testified in opposition to the bill while acknowledging the need for more transparency and the concerns about ever increasing rates. He stated, “We are attempting to do things to help ameliorate those rate increases, but the underlying cost driver for health insurance is the cost of medical care. And our concern is that the level of regulation in this bill is excessive and very expensive and unnecessary given the Department's current review process, which we believe to be robust and satisfactory.”

He also stated, “It's my understanding that last year's version of this, Senate 194, was intended by the Healthcare Advocate to only apply to medical expense coverage and not to the other lines of business. And we would urge that those lines of business be removed from this bill. Federal reform and federal rate reform exempts those other lines of business from that law, and we believe it would be appropriate here as well.”

In concluding his testimony he stated, “This bill, unlike last year's which was individual, addresses group coverage. Most group coverage is experience rated and it would not make much sense to have a public hearing on rates that are determined on the basis of experience of that particular customer. The length of notice is very problematic. If a carrier filed today with the Department, [with] experience and factors that were 120 days old,” they would be told that more current experience data is required. “But this bill would force you to use information that is out of date by the time it becomes effective. So we're very concerned about that.”

Robert Kehmna on behalf of the Insurance Association of Connecticut, testified in opposition to the bill, stating that it would “apply new rate approval provisions that you'll find in Section 6 to all types of health insurance as defined in Connecticut statute. That definition includes long term care and disability insurance policies. This would create a whole host of problems that would be detrimental to those two marketplaces. By requiring a filing to be at least 120 days in front of the effective date, you're setting up a situation where there is an extraordinarily long gap from the filing to implementation, and that would only serve to complicate the actuarial determinations that have to be made in that filing.”

He also stated, “We know of no other state in the Union that requires public hearings on rate filings for disability income or long term care insurance. Members of the public will certainly take the opportunity to comment they don't want their rates to go up. But we really don't think that should be dispositive relative to the legitimacy of the filing, the facts and actual science on which that filing is based. Those filings are highly complex, containing various actuarial documents and formulas. Judgments are based on the facts presented and should be made in the provenance of the regulator who has the background and experience to consider filings objectively. Subjective input from the public could really do little to add to proper consideration of the filing.”

In concluding his testimony he stated, “By requiring the posting of all the filing information on the Internet, this bill would improperly require the exposure of an insurer's proprietary information, which could compromise the competitive position of that insurer in the marketplace. This would only serve as another disincentive for insurers to write disability income or long term care insurance in this state. We would suggest that the best interests of purchasers of long term care and disability insurance products in this state would not be served by the passage of [the bill] in its current form.”

Susan Halpin on behalf of the Connecticut Association of Health Plans, testified in opposition to the bill, while also recognizing the desire for oversight and transparency regarding rate increases. She stated, “As we have said in the past on similar bills, we would be happy to continue our conversations with all interested parties about how best to accomplish these goals. We believe it is of paramount importance that any rate review process be based on actuarial soundness and not some arbitrary analysis. In order for insurance companies to deliver on the promise of coverage, premiums need to be priced appropriately. Otherwise they will cease to exist and we urge the Committee to move cautiously. We do believe the potential for unintended consequences is fairly significant.”

The following also submitted written testimony in opposition to the bill:

American Council of Life Insurers

Anthem Blue Cross-Blue Shield

Reported by: Sheila McCreven

Date: March 28, 2011