|
March 2007 — Vol. 85, No. 2
SMALL BUSINESS
Health care reformers should
Preserve Connecticut’s
small-case reforms
State’s 14-year-old reforms have increased access to health care
By Eric George
CBIA associate counsel
In their drive to adopt health care reforms, Connecticut lawmakers shouldn’t run over the small-case reform law that has been safeguarding health insurance for thousands of small businesses and their employees since 1993. Those reforms turned around a previously unstable and costly system.
Once volatile market
Before the state enacted the sweeping reforms, small employers faced an unstable and unpredictable health insurance marketplace. Insurers were able to select the lowest-risk employers and provide them with lower premiums at the expense of higher-risk employers, a practice known as cherry-picking.
Consequently, small companies that had either large claims or less-healthy employees were seeing premium increases of more than 100% in some instances. The unpredictable availability and high cost of insurance led small employers that most needed it to reduce coverage or stop offering it to their employees at all.
The reforms evened the playing field by requiring all health insurers that offer insurance to small employers to establish their rates on the basis of an adjusted community rate. Insurers had to pool the risks of all the small employers they insured, spreading the risks across the broadest possible base so that no single small employer experienced a dramatic increase in premium rates.
Abandoning or compromising these reforms would again make small businesses with older workforces, pregnant employees or employees who have health issues vulnerable to the dramatically higher insurance costs that would result from cherry-picking.
What the reforms do
Connecticut’s small-case reforms have several components, including guaranteed issue, guaranteed renewability, a reinsurance pool for high-risk cases and adjusted community rating.
The first two make sure that individual small-employer groups are not denied access to health insurance by guaranteeing that they will be issued policies and that those policies will be renewed.
The reinsurance pool is aimed at encouraging a competitive marketplace. Adjusted community rating addresses the double- and triple-digit-percentage increases in health care costs that some small employers faced because of their employees’ health profiles or claims experience.
The most significant reform
While each of these components has helped stabilize Connecticut’s small-business market and reduce cost increases, the most significant reform has been adjusted community rating.
Adjusted community rating limits the number of factors that insurance companies can consider when setting their rates for small employers. Those factors are age, family tier, gender, geographic area, size/expense adjustment and type of industry.
A recent state law allows the state — which sells a state-run health insurance plan to small employers as well as other groups — and certain associations to opt out of Connecticut’s adjusted community rating system and into a limited pure community rating system. However, adequate safeguards prohibit carriers from covering only the best risks under this optional pure community rating system, and the rules of adjusted community rating still generally apply to the broader market.
Using an adjusted community rate for the small-business insurance market encourages businesses with younger and healthier participants to stay in that market, thereby improving the overall health profile of the small-employer group and reducing costs for everyone.
Connecticut’s small-case reforms and adjusted community rating successfully stabilized a once volatile insurance market, increasing access to health care for employees of small businesses who may have had more significant claims histories than others.
Because of the reforms, more people in Connecticut have had access to quality, affordable health insurance over the past 14 years. Since increasing access to health insurance is the aim of policy-makers this year, legislators should not eliminate these reforms.
[back to top]
|
