Refunds that almost didn't happen

By today all health insurance companies were to have notified individual policy holders and small businesses about premium refunds or credits they were due thanks to Obamacare.  In my July 18^th blog I talked about these refunds and how they could finally demonstrate to the public that healthcare reform was working to make health insurance more affordable.

Obamacare required insurance companies to spend at least 80% of premiums on medical services.  The other 20% could go toward all forms of administration including advertising, profits, taxes and CEO salaries.  If the companies didn’t reach the 80% threshold, they had to give back the difference to the policy holders thus giving consumers more bang for the health insurance premium buck.

Over 105 thousand South Carolinians will get refunds totaling $15.3 million and scores of small businesses will get a total of $4.3 million. 

Nationally 12.8 million Americans will receive over $1.1 billion in health insurance refunds.

But South Carolinians almost didn’t see any refunds. 

Back on July 15, 2010, the South Carolina Department of Insurance (DOI) asked the U.S. Department of Health & Human Services (HSS) for a waiver from the 80/20 rule.  Without any public input (but plenty from insurance companies such as Blue Cross Blue Shield of South Carolina) our Commissioner of Insurance argued that requiring carriers to spend 80% of individual policy holders’ premium dollars on medical care would be too difficult for insurance companies to comply with.  As a result, he said, some of our smaller carriers serving South Carolina might leave the state thus reducing consumer choices.  Our DOI suggested that for South Carolina the rule should be 65/35 for 2011. 

Seven states actually did get a waiver on the 80/20 rule out of the 15 that tried.  On behalf of the South Carolina Small Business Chamber I sent a letter to HHS opposing our Department of Insurance request. 

Fortunately our state’s request for the waiver was not granted.  The dire consequences that our DOI warned might happen didn’t happen.  And the biggest hunk of the $19.6 million refunds to South Carolinians will most likely come from the state’s biggest insurance company that was whispering “waiver” in our insurance commissioner’s ear, Blue Cross Blue Shield.

Court victory for small businesses

The wheels of justice turn slowly but they do turn.

On Wednesday a ruling by the South Carolina Court of Appeals found in favor of the state’s Consumer Advocate in an extremely important issue affecting workers’ compensation insurance premiums.  Our own Department of Insurance was fighting to keep the Consumer Advocate, the S.C. Small Business Chamber and other parties from having the ability to challenge data used by the National Council on Compensation Insurance (NCCI) to justify its proposals that result in premium increases or decreases.

Here is the background (don't let your eyes glaze over).

Currently the law prescribes that proposed average increases in workers’ compensation insurance loss costs rates must be approved by an Administrative Law Judge in a public hearing if requested by the S.C. Consumer Advocate.  The “loss cost” is a vital part of how insurance companies determine future rates for businesses.  This open process is an opportunity for the Consumer Advocate and business community to challenge in court any proposed rate increase that will effectively raise premiums.  However, if the workers’ compensation insurance industry proposes an average decrease in overall loss costs, no matter how slight, the state’s Consumer Advocate and businesses community cannot challenge the proposal before a Judge even if a much more significant decrease is warranted.  That was how the Department of Insurance interpreted the current law—so much for transparency.

In 2009 NCCI proposed a 0.3 percent overall decrease in loss costs.  Even though many of us felt that the data might justify an even greater decrease, there was no ability to review the data and possibly show that a bigger decrease was justified.  The Small Business Chamber, which has intervened numerous times to fight rate increases, and the Consumer Advocate were blocked out of the process.

That’s why Senate Bill 31 was introduced last year--to allow the Consumer advocate to review all NCCI data and request a public hearing before a Judge for any proposed change (increase or decrease) to workers’ compensation insurance loss costs.

But the Consumer Advocate didn’t wait for legislation to help small businesses.  Elliott Elam challenged the Department of Insurance and NCCI in court arguing that while NCCI did propose a 0.3 percent average decrease in loss costs, there were businesses categories that were recommended for an increase.  This, he argued, meant that he should be able to review all the data and interested parties be allowed to challenge the NCCI filing in Court even if the overall average loss costs is a decrease in rates.

Yesterday the Court of Appeals agreed with the Consumer Advocate—a victory for small business.  (See the WorkCompCentral story below.)

So now the question is whether S.31 is needed.  The jury is out on that and will probably depend on whether our Department of Insurance wants to keep protecting the insurance industry’s ability to hide data from the consumer by appealing this Court ruling.  Stay tuned.

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WorkCompCentral
February 23, 2012

Court Upholds Consumer Advocate's Right to Review Rate Filings

The South Carolina Consumer Advocate has a right to inspect loss-cost data from the National Council on Compensation Insurance, even if NCCI is calling for an overall average decrease in rates, the South Carolina Court of Appeals ruled on Wednesday.

The court reversed a decision by the Administrative Law Court that prevented the advocate, who operates under the Department of Consumer Affairs, from reviewing NCCI rate filings when they call for an overall decrease.

The court pointed out that loss costs are just one element of the total rate that is approved by the Department of Insurance. Even when the average rate decreases, loss-cost changes filed by NCCI can result in increases for individual classification codes.

"In this case, the NCCI's filing contains increases in many classifications," the appellate court said in its opinion. "Had the Legislature intended to make publication a requirement only for overall increases, it could have amended Section 38-73-910 to specify it is only concerned with 'overall' increases as it did in other paragraphs of Section 38-73-910."

NCCI has submitted loss-cost filings that call for overall rate decreases in each of the past three years, so Consumer Advocate Elliot F. Elam Jr. has not been able to review the data to form an opinion as to whether the decreases were adequate given insurers' loss experience. For 2010, however, NCCI has called for an average increase of 7.3% to take effect July 1. The Insurance Department has not yet approved the filing.

Bi-partisan action on health care

This week I had the opportunity to talk with David Black, South Carolina’s new Director of the Department of Insurance. First impression—he’s very tall. Second impression—congenial, intelligent, and well informed on issues in spite of only being on the job for a few weeks. Did I mention his height?

Mr. Black made it clear that his agency was moving forward with the nearly $2.5 million in planning grants it has received from the U.S. Department of Health and Human Services for implementing some of the requirements of the Affordable Care Act (ACA). I talked about these grants in my February 25th blog.

This is very good news and reflects Governor Haley’s recent comment that the ACA is the law of the land.

We found common ground on the health insurance exchange the ACA instructs to be in place by 2014. A healthy public discussion on how the state should establish a transparent market place for individuals and employees of small businesses to purchase health insurance is productive. Even if the ACA didn’t exist, a South Carolina health insurance exchange is a good idea.

This leads me to the biggest legislative health care news of the week. A House Ways and Means subcommittee yesterday voted unanimously (yes, that means a bi-partisan vote) to send a bill creating a health insurance exchange to the full Committee. The bill that will go before the full Committee probably next week is a slightly amended version sponsored by Republican Brian White. The original bill, filed on February 24, was sponsored by Democrats Harold Mitchell and Gilda Cobb-Hunter. Now 23 other Republicans and Democrats have signed onto the bill including Ways and Means Committee Chairman Dan Cooper (R-Anderson).

This fast action on a well designed bill in the House is significant because a health insurance exchange needs to be operating by the middle of 2013 so that it can meet the January 1, 2014 deadline set in the ACA. Important and controversial bills usually take 3 or more years to be enacted. We simply do not have that much time.

The House should be congratulated for its quick action. If it can move the bill to the Senate soon, the subcommittee hearing process in that body most likely will allow for that healthy public discussion of how the insurance exchange should operate for our state. Passage of a bill early next year (or possibly even this year) would put us on track to provide South Carolinians with an exchange that should increase competition in health insurance and help us make better informed decisions as to the coverage we want.

Good news for business—well maybe or maybe not

There appears to be some good news for South Carolina businesses with workers’ compensation insurance. On good authority I have been told that the National Council on Compensation Insurance (NCCI is the state’s workers’ comp rating organization) has filed for a 3.7% overall decrease in a key component of rates called the loss cost.

The loss cost is the actual difference between the premiums received and the cost to the insurance companies for claims and directly related expenses. A proposed decrease means that the carriers have collected too much in premiums just for those purposes. (Carriers get compensated for administration, taxes, profit, etc. through another component of premiums called the loss cost multiplier.)

But before business owners get all excited in possibly saving some money on their workers’ comp premiums, their insurance companies aren’t obligated to use the new numbers if approved by the S.C. Department of Insurance. They can just go on using their current rates.

That will change if a House Bill 3111 is passed. The bill, which I testified in support of last week at a House Labor, Commerce and Industry subcommittee, will require insurance carriers to use the latest approved loss costs approved by the state. This much needed legislation is sponsored by Representatives Tom Young and Bill Sandifer (chairman of the LCI Committee).

And there’s another problem. We should have no confidence that the proposed 3.7% decrease is enough. Maybe it should be a 5%, 7% or 10% decrease.

Why should we be suspicious?

NCCI is the same organization that had claimed that the insurance companies absolutely needed increases in loss costs of 32.9% in 2005 and 23.7% in 2007. The S.C. Consumer Advocate and The South Carolina Small Business Chamber of Commerce went to the Administrative Law Court to argue that these increases were not justified by the data. The Judge agreed and reduced the increases to 18.4% and 9.8% respectively.

So why aren’t the Consumer Advocate and SCSBCC reviewing the data supplied by NCCI in their rate filing to see if the business community deserves more of a decrease?

The current state law doesn’t require that NCCI’s filing be shared immediately with the Consumer Advocate and the public. As of late last week we had only heard of the proposed reduction through parties that were shown the reports. Obviously this needs to be changed.

Even more troubling is that the law only gives the Consumer Advocate the ability to ask for a public hearing before an Administrative Law Judge if the filing is for an increase.

Senator Glenn McConnell has filed legislation (S.32) to require a public hearing on any NCCI filing.

Until both H.3111 and S.32 are passed, the business community needs to be very wary of any “good news” from NCCI.

UPDATE:  Shortly after this blog was posted, NCCI provided the Consumer Advocate with a copy of the filing in question.