Q&A talks about the changing environment in insurance with Thomas B. Leonardi, commissioner of the state Department of Insurance.
Q: Your department has been busy with hearings for Medicare supplement insurance rate increase requests. What's the impact going to be from these rate requests?
A: The fall is usually a busier time for rate reviews because companies want to have the rate in place by Jan. 1. The rate increases on private Medicare supplement plans may result in more individuals gravitating toward Medicare Advantage Plans, which are often less expensive and are contracts between the private company and the federal Centers for Medicare & Medicaid Services. The department has no jurisdiction over rate setting for those contracts but does regulate the licensing of the companies and their brokers.
Q: What percentage rate increases are being awarded?
A: The increases have ranged from 2.5 percent to just over 12 percent and in some cases there have been rate decreases. The hearings for those rate reviews and the decision are all posted on our Web site.
Q: What do you think is driving the trend to lower rate increase requests? As the Hartford Business Journal reported last week, nationally, employer health care costs are expected to rise 5.9 percent in 2012, a noticeably lower rate than the 7.6 percent increase a year earlier, according to the 2011 Towers Watson Health Care Trend Survey.
A: There are probably a few factors at work. The medical loss ratio (MLR) mandated by the federal health care reform law requires insurers to spend at least 80-85 percent on costs associated with medical services. The MLR is a built-in consumer protection because if they don't meet that threshold, they have to provide a refund to the consumer. There is also data that shows that actual utilization of medical services is down a bit. Federal health care reform has also established a process for reviewing "unreasonable" rates, those that meet or exceed 10 percent. Carriers have to provide the state and the U.S. Health and Human Services with more information. As a result, we have started to see some companies come in with rate increase requests of just under 10 percent.
Q. The percentage of Connecticut residents who get their health care benefits from their employer is on the decline. Is there anything your department can do to reverse that trend or is it the market at work?
A. It is the market and economy at work. This really depends on the employer's needs and their bottom line. Some of the factors are what benefits can they afford to offer, what their contribution and co-pay strategy is, etc.
Q: You came on the job in February with a commitment to consumer protection. What are some of the steps you have implemented for consumers at the insurance department?
A: We have enhanced transparency and greater consumer education and outreach now. Insurance can be a difficult issue to understand and keeping consumers well-informed will help them make the choices that are most important to them. We have done a complete overhaul of our Web site to make it much easier to navigate. All the rate filings are posted when we get them and we provide an outlet for public comment. We now aggressively use social media to reach more audiences and have been very proactive in our approach. For example, days before Tropical Storm Irene struck, we activated our emergency licensing program and worked with companies to license thousands of out-of-state adjusters, who were ready to hit the ground once the storm has passed. We have also gone paperless in our licensing department. Not only do we save on costs but have much easier online process for brokers and producers to apply for, verify and print their own licenses. Consumers can easily check on our Web site whether their agent is licensed or has any enforcement action against him or her.
Q. What's coming down the road for your department in the near future? What are some of the issues you'll be addressing that may not be on the common radar yet but businesses should know about?
A: Certainly the federal health reform law is something our agency has been very busy with in helping the Malloy Administration implement the new law. We have served as technical advisors and have made sure our regulations are in compliance with the federal law, including processes for rate reviews and external appeals. Also:
The department will also have a greater role in regulating the bail bonds industry in the state beginning Oct. 1. The new state law (Public Act 11-45) gives us greater oversight of records through audits and monthly reports required from the industry.
We also now have licensing jurisdiction over third party administrators of health plans, giving us another consumer protection tool.
In the aftermath of Tropical Storm Irene, the department will be tightening the triggers for hurricane deductibles that will be based on the occurrence of hurricane force winds in the state, which did not happen with Irene.
There are also a number of issues that are being debated on the international level that could have a significant impact on Connecticut companies and consumers. One of the issues is having the U.S. regulatory process recognized as equivalent by our European counterparts. If our state-based regulations are not recognized as equal, U.S. insurers would have to put up more capital, potentially weakening consumer protection and the stability of our insurers.