Is it finally time to count health insurers’ excess reserves when reviewing annual rate requests?
NFIB/Washington State Director Patrick Connor reports from Olympia on the small-business agenda for the legislative week ending June 16
This week, the state Senate held several committee hearings and approved a handful of bills. There was little of consequence for small business, aside from passing Senate Bill 5239, its version of a “Hirst fix,” for the third time. The House has yet to vote on that bill.
For those unfamiliar with the topic, the Department of Ecology has summarized the state Supreme Court’s Hirst decision and its impact on counties issuing building permits. Republicans have so far insisted a Hirst fix be enacted before a capital budget will be adopted.
Meanwhile, operating budget negotiations continue.
Of greater importance to job creators, paid family and medical leave negotiators announced a tentative agreement this week. While NFIB is barred from distributing details at this time, its leadership council will be discussing the proposal at its June 21-22 meeting in Spokane. A bill is expected to be introduced in the Legislature next week.
NFIB remains opposed to any new paid family and medical leave program that requires small businesses or their employees to participate, or that taxes employers to pay for any of the plan costs. NFIB may be the only business group to formally oppose the measure. Proponents have threatened to file an initiative if the Legislature fails to enact this new leave benefit this year.
Several legislative committees and work groups are scheduled to meet next week, during the last three days of the second special session. Wednesday, June 21, will be the 30th and final day the Legislature can meet without a third special session being called.
On June 19, the House Health Care & Wellness Committee will hold a work session regarding “access to health insurance in the individual market.” It will also conduct a public hearing and is scheduled to approve House Bill 2222, “protecting information obtained to develop or implement an individual health insurance market stability program,” during that same meeting. The bill was requested by the insurance commissioner; a companion Senate Bill has also been introduced but is not yet scheduled for action.
The bills appear to be part of a broader effort, led by the state Health Care Authority, to seek a federal 1332 waiver to establish a state reinsurance program similar to that underway by the state of Alaska. In that case, Alaska funded its own $55 million reinsurance program to hedge steep rate increases by Premera, the only carrier operating in Alaska’s individual health insurance market, and has asked for federal assistance to continue it. Interestingly, Premera posted a higher-than-expected $18 million profit for 2016, prompting a state review of the firm’s finances. Despite its 2016 windfall, Premera claims a three-year loss of $7.7 million for its Alaska individual market book of business.
Why might this be a concern for Washington small businesses?
- Higher premiums.
- Fewer choices.
- Lack of coverage options.
- Cost-shifting to other state programs funded primarily by assessments on small businesses and working families.
While 2018 health insurance rates have not yet been finalized, there has been much speculation that some carriers in this state, including Premera, will request substantial increases. “Uncertainty” about changes to the federal Affordable Care Act, as well as prescription drug costs, have been fingered as the culprits for pushing rates ever higher.
Moreover, health insurers used these apparitions to justify jettisoning two counties – Grays Harbor and Klickitat – from any individual market coverage next year. As a result, nearly 3,350 people will be shifted into WSHIP, the state’s high-risk health insurance pool. You may recall that assessments on small businesses and working families provide nearly three-quarters of WSHIP’s funding — $34 million in 2015, with only 431 individuals in its non-Medicare program that year.
NFIB fought efforts in the Legislature to expand and extend WSHIP during the last two years. It warned that doing so would invite carriers to drop coverage in less profitable markets. NFIB was right. Next year, WSHIP’s non-Medicare enrollment could jump nearly eightfold!
While the almost 3,350 health-insurance refugees from those two counties won’t be nearly as costly to cover as the current WSHIP population of chronically ill cancer, kidney, and HIV/AIDS patients, small businesses and working families will almost certainly see a sizable jump in assessments on their health plans.
NFIB won concessions on this year’s WSHIP bill, including limiting it to a five-year extension and requiring a work group to consider options to broaden the funding source. Nonetheless, it is galling to know that our members will almost certainly see their health insurance costs rise, and state government is scrambling to cobble together a reinsurance program to “stabilize” the individual health plan market, yet the state’s three largest health insurers – Premera, Regence, and Kaiser (which recently acquired Group Health) – have amassed $3.5 BILLION in “excess reserves,” according to 2016 year-end reports on file with the Office of the Insurance Commissioner. Excess reserves by carrier:
- Premera — $1.5 billion
- Regence — $1.1 billion
- Kaiser — $ 917 million
Excess reserves are essentially cash surpluses beyond all actuarially estimated claims costs and other liabilities. Under current law, these excess reserves cannot be considered as part of the annual rate-approval process. In years past, Insurance Commissioner Mike Kreidler sought legislative authority to include excess reserves when reviewing annual rate requests, a change supported by 54 percent of NFIB members responding to the 2015 state member ballot (33 percent were opposed, 13 percent undecided).
These latest developments, which will add cost and reduce coverage options for small-business owners and the families they support, may well shift small-business sentiment even further in favor of counting excess reserves in rate-setting … and in determining eligibility for other taxpayer-supported programs, like reinsurance.
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[Tile photo courtesy of the Washington State Legislative Support Services]