State regulators, baffled themselves by many of the intricacies of the Kassebaum-Kennedy law, are bracing for complaints from consumers, many of whom are unaware that the new law only guarantees better access to health insurance, not necessarily that it will be affordable.
³Unfortunately, the expectations of what this bill does are significantly different than what the bill is likely to deliver,² says Kansas Insurance Commissioner Kathleen Sebelius, vice chair of the National Association of Insurance Commissioners (NAIC) working group helping states comply with the law. Besides the cost issue, the law does little to help uninsured individuals did not previously have group
coverage.
The new federal portability standard requires states to amend their laws to ensure that individuals who have had group coverage for 18 months have guaranteed access to the individual market and are not subject to pre-existing condition waiting periods.
Regulators, who are awaiting rules on how to implement the law, are confused about how to ensure that their own market reforms are consistent with federal minimum standards. States have the option of using several alternative mechanisms to meet the access requirements for
individuals who previously had group coverage, including expansion of their high-risk insurance pool.
Bruce Vladeck, administrator of the Health Care Financing Administration, sought to reassure regulators at an NAIC meeting last month that HCFA would be flexible in monitoring compliance with the Health Insurance Portability and Accountability Act of 1996 until HCFA publishes its rules by April 1.
³Any reasonable explanation² of the law will be accepted until then, Mr. Vladeck said in prepared comments. ³States experiencing difficulties will be given an adequate opportunity to amend their mechanisms to conform with the new requirements.²
The HCFA administrator acknowledges that regulators may be particularly confused by such issues as ³what constitutes sufficient choice of coverage or how comprehensive a policy must be to be approved.²
Thomas Van Cooper, director of insurance regulation in Vermont, says his state and a number of others that already have sweeping reforms in place are, nevertheless, ³amending their laws so that they match up more closely with the language and statutory scheme of Kassebaum-Kennedy.²
Changes in individual market
Vermont, which along with a dozen other states already has guaranteed issue in the individual market, wants to assure consumers and insurers that state law will continue to set policy and will not be pre-empted by the federal law, Mr. Van Cooper says.
In Kansas, Insurance Commissioner Sebelius says she hopes to do better than the federal law¹s standards for people who leave jobs and their group coverage. Ms. Sebelius wants anyone who had group coverage, no matter for how long, to have access to the individual market. The point is to further eliminate ³job lock.²
Wisconsin, like some other states with high-risk insurance pools, may amend its statutes governing its high-risk pool to put it in compliance with the Act¹s requirements to broaden access in the individual market. One key change: pregnant women will no longer have a pre-existing condition exclusion. The insurance pool ³is the least regulatory of the alternative mechanisms," says Commissioner Josephine Musser, NAIC¹s vice president. ³That tends to be the way Wisconsin regulates everything, including insurance.²
In Utah, the state and insurers have agreed to increase caps on how many uninsured and ³uninsurables² the insurers must cover to meet requirements of the federal law.
Definition of small group market
Many regulators don¹t expect to encounter major problems adopting or even exceeding the federal law¹s requirement that insurers issue small-group policies to employers with 2-50 workers. Vermont, for example, defines a small group as 1-50 employees.
Kansas Insurance Commissioner Sebelius hopes to join those states going a step further than the federal law with a proposal to expand her state¹s definition of a small employer group (now 3-50 employees) to include employers with 1-50 workers. Ms. Sebelius says the change is designed to give self-employed individuals, including Kansas farmers, access to group coverage and its better rates.
Impact on ERISA plans
In principle, at least, Kassebaum-Kennedy also extends to consumers enrolled in ERISA-exempt health insurance plans the same kind of accessibility and portability protections it offers to the rest of the small group market. However, Ms. Sebelius stresses that ³we won¹t have, at the state level, any more ability to make sure that the plans meet those standards.²
³My hope is that the Department of Labor will significantly increase its consumer protection efforts, because, right now, they are woefully inadequate.²
Kassebaum-Kennedy also is having an impact on long-term-care policies offered in the states. New tax rules take effect Jan. 1, 1997, and many commissioners are rushing to make sure the policies in their state are tax-qualified. In California, Insurance Commissioner Chuck Quackenbush issued a bulletin instructing insurers on how long-term care insurance products can comply with state law and meet the federal Act¹s standards for tax qualification.
Other state commissioners say they are concerned that consumers may be buying long-term care policies marketed as ³tax-qualifying,² only to discover later that the policy does not meet the Act¹s requirements for tax benefits. Ms. Sebelius and Mr. Van Cooper say their states are considering requiring insurers to provide consumers additional disclosure beyond that required under the Act
Meanwhile, the Health Insurance Association of America is urging the Internal Revenue Service to rule that long-term-care insurance policies which are issued now and are ³based on reasonable good-faith interpretations of the statute² should not have to be amended after final federal regulations are issued. Requiring the policies to be amended would be too cumbersome and expensive, it says.
Bryan Pfeiffer
Contact Ms. Sebelius at 913-296-7801; Mr. Van Cooper at 802-828-3301; and Ms. Musser at 608-266-0102.
States move to improve individuals access to insurance, but brace for complaints
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