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Update 12/99 - Group carriers are taking drastic action to defend their blocks of small group health. Some carriers will be increasing rates as much as 100% to existing clients to make sure that groups
with health conditions leave the carrier as of July 2000. Here’s why. As of July 2000, all legitimate groups in Illinois will be offered coverage at pricing not greater than 25% above standard rates.
Currently there is no rate protection in Illinois with maximum ratings of 400-500% commonplace. For groups with rates in excess of the maximum rating, there is a 3-year grandfather clause. During that
3 year period, the carrier can add 15% each year. After the grandfather clause, the rates must be brought back down to maximum rates. Let’s take a specific, theoretical, look at a group that
has some significant health problems. This group has on average $50,000 in annula paid claims.
- Normal Premium - $1000 per month
- Current Premium $2000 per month.
- Renewal Premium pre-7/00 - $4000 per month
- Post 7/00 - New Business rate - $1250 per month.from alternate carrier.
The existing carrier will force any loss group to change carriers as of 7/00. Companies that attract the most unhealthy groups will experience siginifcant losses and greatest rate instability going
forward. .
UPDATE - 7/99 -
Health Reform Legislation passes with revised max/min. Effective 1/1/00, group health rates will be limited to a +-25% rate band. ( six month phase in puts
actual effective date of law to 7/1/2000) No more than a 25% discount for the healthiest groups and 25% rate up for the greatest risk. With factors of .75 to 1.25, this essentially translates to a 67%
maximum rating. We consider this to be a positive development. The 67% is enough that insurance companies will not be abandoning the State. The rating is small enough to allow groups with health
problems to get competitive pricing. Mark Gurda 7/7/99.
By Mark Gurda May 4, 1999HEATH REFORM ILLINOIS - 2000
Illinois businesses need to be prepared for another tax hike. This hike will be
coming in the form of additional health insurance price regulation. If your business has insurance and has been paying in for years, and having good
claims, your rates will rise so that people with significant health problems can get coverage at a rate of no more than 25% above the best rates.
Out of committee this week will come legislation, endorsed by that National Association of Insurance Commissioners and several insurance companies will
be legislation that will limit the amount of good health discount that an insurance company gives to its healthiest customers.. The Illinois
Manufacturers Association and Blue Cross and Blue Shield of Illinois have lobbied that all rates for all groups be equal. This would favor their respective organizations.
Interestingly enough the Illinois Department of Insurance opposes this Bill. HB-2271. They believe that the market should control the market. We at
Castle Group do not agree with that position either. The Illinois Dept. of Insurance estimates that as many as 5% of residents could lose their health
coverage if HB-2271 were to pass. Younger families would be priced out of coverage and the economic incentive would be to only buy insurance when there is a problem.
Castle Group Health believes that all residents should have access to reasonably priced coverage. Additionally, we argue that the best way to hold
rates down is to get as many healthy people on the roles of the insured as possible. Healthy people pay in to the system, stay healthier longer, and hold
down the rates for people who need coverage desperately. While current spreads of 500-1000% ratings are not in the best interest of Illinois residents, spreads of 60-80% are.
Here is an example that dramatizes the current and new laws. ( If you had 600 theoretical identical companies, 500 healthy and 100 not healthy small
groups. Actuarially, a premium of $5,000,000 was needed to insure all the groups.) What would each group pay in order to meet that amount.
Current Law - (No price restriction, 500% market will bear rate up)
- Healthy Groups pay $5,000
- Not so healthy pay $ 25,000
Proposed Law ( 25% max. rating)
- Healthy Groups pay $8,000
- Not So healthy groups pay $10,000
Our Preference - ( 75% max rating)
- Healthy Groups pay $7,410
- Not So healthy groups pay $12,950
This is a dramatization of what could happen, but make no doubt about it, rates will rise significantly for healthy groups who have shopped their insurance.
There are additional side-effects that will undermine coverage as well. People with health conditions will be drawn to the best plans. Thus, all insurers will
start to lessen their benefits as to not have too good of an insurance policy and a non-representative smattering of the high health risks.
The social argument is that protecting the weak is worth the extra funds, but live studies with states such as New York have shown that restrictive pricing
denies the ability of many healthy people to get insurance while increasing the access for the ill. This is not such a bad idea except that we currently have a
law that allows guaranteed access to a state sponsored and insurance funded policy. It seems apparent that this law will pass and that the great majority of
Illinois residents will pay much higher group health insurance rates in the near future .
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