Suit spotlights expanding health insurance coverage

State and local business associations sued Washington Insurance Commissioner Mike Kreidler last week, claiming an advisory issued in December could deprive members and their employees of low-cost health insurance just as the federal and state governments are searching for ways to expand coverage.

Associated Industries filed its lawsuit Tuesday in Spokane County Superior Court. On Wednesday, Association of Washington Business directors voted to throw that organization’s considerable weight behind the litigation.

Although the Insurance Commission estimates about 68,000 workers and their families would be affected initially by the December Technical Assistance Advisory, AWB President Don Brunell says that number could eventually swell to as many as 248,000 workers, or as many as 500,000 people if family members are included.

AWB plans insure 2,300 companies with 17,000 employees. Plans sold by Associated Industries, which has offered health coverage to members since 1954, cover 140 employers with 2,800 employees.

The litigation is the regrettable end to months of negotiations over proper interpretation of a 1995 state law intended to extend health and dental insurance to more employees of small companies. The law helped them hire and retain employees who might otherwise have moved on to bigger companies that offered attractive benefit packages.

The legislation worked, as the above statistics attest. So Brunell and others are disappointed by Kreidler’s advisory, which has pushed the matter into court.

At its core, the dispute rises from disagreement over community rating versus experience rating when pricing insurance. Community rating sets prices according to claims filed by all members of an association, or any defined group, without making any distinction between companies with lots of claims and those who have few. All members pay the same rates.

With experience rating, member premiums reflect their claim history. More claims, higher premiums.

The advisory says Washington law forbids experience rating within an association, the practice followed by the 12 groups the commission says are out of compliance. Brunell says those groups, including AWB, comply with the parameters of the 1995 law as it was passed.

In the meantime, however, Congress enacted the Health Insurance Portability and Accountability Act. How that law’s prohibitions against changes in insurance ratings for individuals might apply to small groups is unclear.

Brunell says the division between complying and non-complying plans may not be based on any difference in the plans themselves, but in the way different insurance carriers responded to a questionnaire about small-group coverage. Most of the non-complying associations are insured by Premera. Group Health insures most of the complying plans.

But there is little difference, if any, in the plans themselves, says Brunell, who adds that the associations were surprised the commissioner released the lists of complying and non-complying plans. The latter could be damaged by the perception members are not treated fairly.

“To assert that we are somehow discriminatory is very, very disturbing,” Brunell says. “Both of these plans are doing basically the same thing.”

AWB and other groups have tried for a year to convince Kreidler that he is misinterpreting the 1995 law, Brunell says.

The suit also alleges Kreidler overstepped his authority with the TAA.

Insurance Commission spokeswoman Stephanie Marquis says the lawsuit was expected.

“It would be safe to say we were at an impasse,” she says, adding that Kreidler had hoped the aggrieved associations would ask the Legislature, not the courts, to clarify the 1995 law.

Associated Industries President Jim DeWalt does not rule out a legislative remedy, but says the dispute would go away if Kreidler simply abided by the law as it has been interpreted for a decade.

“We don’t see where we have to go to the Legislature,” he says, noting that the lawsuit is the first Associated Industries has filed against any government agency in its 93-year history.

“This is the doomsday scenario, getting involved in litigation with our own government,” DeWalt says.

A little overstated, perhaps, but the controversy reflects the increasing national debate over expanding health insurance, the role of business in providing that coverage, and whether community or experience rating — or both — will figure in the allocation of costs.

In this case, it would be highly unfortunate if the result was less coverage, not more.