by Marion Davis

as appeared in the Providence Business News on February 28, 2005

A package of bills sponsored by state Sen. Marc A. Cote and backed by a national health insurance brokers' group aims to make health coverage more affordable by giving carriers what they want most: substantially less regulations and a way not to cover the worst risks.

The bills, drafted with the Rhode Island Association of Health Underwriters are modeled in part on New Hampshire's recent reforms, which are strongly supported by business and the insurance industry, but opposed by consumer groups.

Cote (D-Woonsocket), who has been working on his package for a year; said Rhode Island's health insurance market urgently needs more competition and this would produce it.

"Without a competitive market," Cote said, "we have a situation where, basically a single insurance company can get away with charging high premiums, allowing administrative costs to balloon and giving doctors reimbursements so low that many feel they must move out of the state to remain in business."

Last year's reforms of Blue Cross & Blue Shield of Rhode Island - which let to the denial of a 17 percent direct pay rated increase in December - were a "necessary" step, Cote said. But "if we want lower insurance rates and more diverse insurance products," he added, "the next step is to move beyond reforming one insurer to make our regulations more inviting to all insurers. We need to have a greater number of companies competing for our business."

Cote's package includes five bills, all of which have counterparts in the House sponsored by Rep. Elizabeth M. Dennigan (D-East Providence):

The first bill (S-0428) would eliminate a requirement that the Department of Business regulation review any premium rate change before a carrier can institute it. It also eliminates the need for public notice and a hearing for any direct-pay rate hike that exceeds the previous year's rate of medical inflation.

The bill doesn't specify what the DBR would do instead but Cote said it would have to set up a "file and use" system in which carriers would still notify the DBR of any rate changes, but not be subject to the review of the rates fell within certain guidelines. New York's file and use law, for example, allows loss rations between 80 percent and 105 percent for individual direct pay policies.

"The whole idea is that the insurance commissioner can focus on the rogue carriers that are not following the rules" said Emily Harding principal of Health Plan Specialists, a co-founder of RIAHU and the main local driver behind Cote's reform package. "It ends up costing the consumer a lot less money than in 'file and approve' states"

The second bill (S-0424) would exclude the preferred provider orrganizations (PPOs) from the state Health Care Accessibility and Quality Assurance Act, which requires insureers to submit details of each plan they offer to the Department of Health for approval, regulates how provider networks are set up and holds carriers accountable for how patients are cared for.

Harding says the law is fine for health maintenance organizations which can be heavily involved in patient care decisions, but it makes no sense for PPOs which just pay the bills.

"This is perhaps the most important bill" Harding said"because three years ago, when John Alden left and Celtic stopped marketing their plans here, they made it clear this was the primary reason they left the Rhode Island market"

A third bill (S-0423) would create a high risk pool for people who can't get coverage in the individual market - not an issue now because Rhode Island requires carriers to take all comers, but an end to that guarantee is implied.

To qualify for the pool, individuals would have to have been denied coverage by at least two carriers (or if only one is available, as is now the case, just that one) due to their health status, or have one of several still to be determined diseases - but also have had coverage within the last 18 months. Premiums would be adjusted annually but would start at 125% to 150% of the top of the individual rate being offered in the regular market for Direct Blue now, for example, it's $471.38 per month premium for an individual under 65).

Cote said the bill is based on an American Legislative Councils model act that has been customized and adopted by oither states. the pool would be partly financed by a $2 monthly charge on all health policies, to be adjusted up or down as needed in the future.

To hold down costs and discourage people from waiting untiol they're sick to get coverage, treatement of pre-existing conditions wouldn't be covered for a whole year - a limit that is now illegal in Rhode Island. Routine physical exams would also be excluded.

A fourth bill (S-0421) would allow carriers that have left Rhode Island but want to come back to return within three years of leaving instead of the current five.

The fifth bill (S-0423), which isn't part of RIAHU's long standing agenda, but is supported by the group would exempt high deductible health plans eligible for health savings accounts from the state's extensive coverage mandates. Rhode Island is the only state where HSA-eligible plans are illegal, though several other states will have to change their mandate laws to continue having HSAs after next Jan.1.

Cote's is the third bill introduced to deal with the HSA issue. United Healthcare of New England has proposed a short-term solution that would allow it to offer HSAs this year; while Governor Donald  Carcieri's proposal would exempt any high deductible plan eligible for state or federal tax preferences from state coverage mandates. Cote's bill would limite the exemption to HSA-eligible plans in particular.

Cote said he expects his bills to be heard around mid-March and in the mean-time, he's sent copies around to health policy experts and various stake holders. Harding's group, of course is enthusiastic. Blue Cross spokesman Scott A. Fraser said company officials are still reviewing the package, but expect to support come aspects and oppose others.

Christopher F. Koller, the Neighborhood Health Plan of Rhode Island CEO who in March will become the state's first health insurance commissioner, said Cote is addressing some "important" questions but he express concern about key parts of the package.

Switching to "file and use" rate-setting system, for example would be a substantial shift from Rhode Island's traditional approach to health insurance, with far less oversight that "what many people feel is necessary in a highly concentrated market."

When the governor asked him for a plan to reduce costs, lower the rate of uninsured Rhode Islanders, and improve quality, "I'm not sure this is  what he had in mind, "Koller said.

Cote said he's just "trying to facilitate the dialogue between the industry and the General Assemply" but he does hope even the more dramatic reforms will be seriously considered.