September 23, 2020

Small businesses get insurance boost > Law makes coverage more accessible

AUGUSTA — Starting this week, small Maine businesses seeking group health insurance may no longer be turned away or forced to accept higher rates simply because their employees are more likely to file claims.

The law, which takes effect Thursday and will be felt through the next year as policies come up for renewal, is expected to raise the bargain rates enjoyed by employers who are considered low risks and decrease premiums for higher-risk companies, industry and state officials said Tuesday.

“It won’t happen all at once,” Rick Diamond, a life and health insurance actuary for the state Insurance Bureau, said of the rate changes.

“I think it represents a major step that the state is taking to address the issue of health-care reform,” said Karen Foster, chief marketing executive for Blue Cross-Blue Shield of Maine, which lobbied for the bill’s passage last year.

Blue Cross complained that commercial carriers have been “skimming” the most profitable clients — those that employ low-risk people like young males — and leaving high-risk groups like women and older people for non-profit Blue Cross to insure.

“The commercial insurance carriers have been avoiding risk, as opposed to managing it,” said Foster, whose company insures about 30,000 people through group policies covering about 5,000 small businesses.

The Maine general manager of New York Life Insurance Co., one of Maine’s largest group insurance carriers, acknowledged that the law is likely to nudge rates up to offset the additional risk insurers must absorb.

“I know nobody wants to hear it, but insurance companies are in business to make a profit,” said Tim Miller.

The new law affects companies with fewer than 25 employees. It requires all insurance carriers to provide coverage to any employer that applies, so long as at least three-fourths of the employees who are not covered by other insurance want to participate.

Each of the 10 or so commercial carriers also must set a “community rate” for such policies. Actual rates may vary by 50 percent above or below that level to reflect age, gender, industry and geographic area, but cannot be modified because of health status, claims history or policy duration.

Legislative action will be required to continue the new policy beyond the first year. If the policy is continued, the allowable variance from the community rate will drop to 33 percent next year, 20 percent in 1995, 10 percent in 1996 and zero in 1997, Diamond said.

Blue Cross has traditionally embraced the community-rate philosophy, and the new law is not expected to have much effect on its rates, Foster said.

Although commercial carriers have not fulfilled warnings that the new law might drive them out of the market, they have been slow in filing their community-rate statements, Diamond said. Thursday is the deadline.

“Most of them seem to be waiting till the last minute,” he said.

The Maine law is modeled after a stricter 1992 Vermont law that limits rate fluctuations to within 20 percent of the community rate. The number of insurers active in the small-group market there has not changed.

“We’ve had a very active small group market,” said Banking, Insurance and Securities Commissioner Elizabeth Costle. “I don’t think it’s been a major issue. I think it’s worked fairly well.”

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