Washington’s insurance commissioner will again ask state lawmakers to restore his authority to oversee insurance companies to rein in rates for people who buy health insurance on their own rather than through company-sponsored plans.
Similar attempts failed during last year’s legislative session. This year, however, Insurance Commissioner Mike Kreidler comes armed with statistics that show rates have climbed by an average of 16 percent a year since the Legislature stripped his office of regulatory power over the relatively small market eight years ago.
Across the country, about 10 percent of the insured have individual coverage, compared with 60 percent who are covered through their employers.
“This individual coverage program is for the people who don’t get insurance through their employer, or sometimes people in business for themselves,” said Stephanie Marquis, spokeswoman for the insurance commissioner’s office. “They don’t have any negotiating power to help get a fair rate.”
Regence BlueShield, the state’s largest carrier of individual health policies, calls the unregulated Washington market a success, pointing to this fact: There are 250,000 people signed up for individual coverage compared with 100,000 when the insurance market collapsed in the late 1990s as 34 carriers exited the business in Washington.
Individual health insurance suffered amid reforms and under what the insurance industry calls overzealous and onerous regulation by former Insurance Commissioner Deborah Senn.
Regence lost $33 million in the individual insurance market in the late 1990s before working with then-Gov. Gary Locke and the Legislature to strip Senn’s office of regulatory oversight. That agreement included conditions for the carriers, including that they would stay in the market; could jettison only the sickest 8 percent of applicants to the state’s high-risk insurance pool; and waiting periods for pre-existing conditions would increase from three months to nine months.
The idea was that if these changes were made, new carriers would come to the state and offer competition.
Nancy Ellison, director of legislative and regulatory affairs for Regence, said more people are signed up for individual health coverage than ever.
“Rather than leave it in the hands of a subjective process,” she said, “the compromise in 2000 allowed the market to flourish.”
But Marquis said little competition exists in the individual market. She said the top three carriers, Regence, Premera Blue Cross and Group Health Cooperative, hold most of the market share.
Kreidler said the deregulation aspect of the experiment has failed.
It’s time to bring back moderate checks on individual health insurance markets to ensure fairness and affordability for customers who have limited choices at a time when insurers are posting record profits, he said.
Together, the three big carriers had about $2.3 billion in net worth as of 2006, the most recent year for which figures are available.
“Consumers are mad, and I don’t blame them,” Kreidler said in a press release. “As long as this market remains unchecked, they’ll continue to pay a hefty price.” Especially troubling, he said, was that Regence raised rates 19 percent just after working to defeat his proposal last year.
Insurers insist they are not profiteering on Washington’s individual health insurance market. During the past eight years, Ellison said, Regence and the other carriers have averaged a 5 percent annual profit.
She called last year’s rate increase a “poor piece of timing” that was tied to an earlier schedule.
Financial documents from 2006 shows that Group Health Cooperative reported a $4.8 million gain and Premera Blue Cross and its subsidiary LifeWise Health Plan of Washington showed a combined $15.6 million gain on individual insurance lines of business. Regence and its subsidiary Asuris Northwest Health lost a combined $1.5 million or so on that business.
Ellison said individual health insurance programs in other states allow carriers to off-load up to 25 percent of the sickest patients rather than Washington’s 8 percent.
Furthermore, she said, insurers fund the high-risk pool, not taxpayers.
As for the pre-existing condition language, it was necessary to prevent people from jumping in and out of coverage based on urgent medical needs, including pregnancy, Ellison said.
“It’s a real challenging line of business,” Ellison said. “What we have right now is working.”