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As insurers face health care law requirements, customers face cancellations | News for Dallas, Texas | Dallas Morning News | Dallas Business News
[SIZE=+2]As insurers face health care law requirements, customers face cancellations
[/SIZE] [SIZE=-1]01:03 PM CDT on Wednesday, September 8, 2010
[/SIZE]Two months ago, Al and Jill Alcantara, both 63, of McKinney, got a letter from their health insurer saying their policy would not be renewed. n the letter sent to the Alcantaras and other customers, Grand Prairie-based National Health Insurance Co. said it could no longer offer individual accident and health insurance policies. It blamed its decision on the company's inability to meet requirements of the health care overhaul signed into law this year.
The cancellation highlights one way the new law is reshaping the health care landscape in North Texas and elsewhere. Some health economists say more small insurers may soon buckle under the weight of the law's mandates.
The law's biggest challenge for insurers is a requirement starting Jan. 1 that specifies "medical loss ratios" – the percentage of an insurer's premiums spent on medical services for its customers. For individual plans, the new law requires that at least 80 percent of premiums go toward paying medical expenses; for large group coverage, the minimum rises to 85 percent.
Insurers that fail to meet the requirement will have to pay rebates to customers.
"The fact is that there are a number of plans who won't be able to meet this requirement and will simply exit the market," said Jared Wolfe, executive director for the Texas Association of Health Plans, an Austin-based group representing concerns of insurers.
But Ben Gonzalez, spokesman for the Texas Department of Insurance, said, "There is always some movement in and out of the market by smaller players. We do not see a specific trend at this point."
The U.S. Department of Health and Human Services, which has the responsibility of writing the rules for what will qualify as a medical expense, said insurers like National Health may be acting prematurely.
"We have recently heard reports that some insurers are making decisions about participation in particular markets based on the effect of these requirements," Kathleen Sebelius, U.S. secretary of health and human services, said in a statement. "It is premature for insurers to make business decisions about participation in particular markets based on rules that have yet to be published, or to apply for exemptions to rules that have not yet been drafted."
Approval to cancel
On July 26, the Texas Department of Insurance gave National Health approval to stop offering individual accident and health insurance policies. National Health sent letters to the Alcantaras and other customers four days later.
"After careful consideration of the recent health care legislation, National Health Insurance Co. has determined that it will not be able to meet the requirements set forth by the [health care law] recently enacted by the United States federal government," the company said in its letter. "With this knowledge, NHIC has decided to cease distributing and renewing its medical expense plans."
National Health, which declined repeated requests for interviews, did not say in its letter which of the requirements in the 906-page law it has trouble meeting.
But Wolfe said the new medical-loss ratio requirements will be more of a hardship for smaller insurance companies like National Health than for larger companies.
"The individual market has much higher administrative costs than the large group market due to a number of factors, [such as] costs are spread across fewer lives, the cost of underwriting and the role of brokers," Wolfe said.
A company the size of Blue Cross Blue Shield of Texas – the state's largest insurer, with 3.8 million members, 400 hospitals and 40,000 physicians – can rely on name recognition to generate business. But smaller insurers have to heavily rely on insurance brokers, and the new medical loss requirements will hurt their commissions, Wolfe said.
And, as smaller insurance companies bow out under weight of the medical loss ratio requirements, larger insurers stand to increase their market share. Blue Cross Blue Shield of Texas says it sees an opportunity.
"Although we are actively evaluating all aspects of pending health reform definitions and regulations, including the implications of minimum medical loss ratio requirements, we believe that individual insurance is a valuable service and are committed to that market," said spokeswoman Margaret Jarvis.
Financial pressures
The new law is adding to the pressures felt by companies like National Health, which has had financial troubles for at least three years, according to the insurer's financial records kept with the Texas Department of Insurance.
Since December 2007, its assets have fallen 31 percent, from $36.7 million to $25.2 million in December 2009. Premiums from its accident and health division fell 27 percent during the same period, from $8.1 million to $5.9 million.
And since October 2009, the insurer has racked up penalties in several states for not filing health care cost reports or financial statements on time, according to records kept by the Department of Insurance.
The insurer plans to continue writing Medicare supplement policies and specified disease policies. But as a condition of stopping its individual health insurance business, National Health will not be allowed to re-enter that market until 2015.
For the Alcantaras, the loss of their insurance policy is major blow, but not a complete surprise.
They've been pleased with their high-deductible policy, which is tailored to cover Al's Type 2 diabetes and gives them access to all the doctors they want. Their policy will be terminated Feb. 1.
"I honestly believed this would happen," said Jill Alcantara, a critic of the new health law.
High-risk pool
The Alcantaras now plan to join the Texas High Risk Insurance Pool. The plans available range from a $2,500 deductible with $1,025 monthly premium to a $7,000 deductible with a $662 monthly premium. Jill Alcantara acknowledges that's expensive.
"But that's just what we're going to have to do," she said.
As insurers face health care law requirements, customers face cancellations | News for Dallas, Texas | Dallas Morning News | Dallas Business News
[SIZE=+2]As insurers face health care law requirements, customers face cancellations
[/SIZE] [SIZE=-1]01:03 PM CDT on Wednesday, September 8, 2010
[/SIZE]Two months ago, Al and Jill Alcantara, both 63, of McKinney, got a letter from their health insurer saying their policy would not be renewed. n the letter sent to the Alcantaras and other customers, Grand Prairie-based National Health Insurance Co. said it could no longer offer individual accident and health insurance policies. It blamed its decision on the company's inability to meet requirements of the health care overhaul signed into law this year.
The cancellation highlights one way the new law is reshaping the health care landscape in North Texas and elsewhere. Some health economists say more small insurers may soon buckle under the weight of the law's mandates.
The law's biggest challenge for insurers is a requirement starting Jan. 1 that specifies "medical loss ratios" – the percentage of an insurer's premiums spent on medical services for its customers. For individual plans, the new law requires that at least 80 percent of premiums go toward paying medical expenses; for large group coverage, the minimum rises to 85 percent.
Insurers that fail to meet the requirement will have to pay rebates to customers.
"The fact is that there are a number of plans who won't be able to meet this requirement and will simply exit the market," said Jared Wolfe, executive director for the Texas Association of Health Plans, an Austin-based group representing concerns of insurers.
But Ben Gonzalez, spokesman for the Texas Department of Insurance, said, "There is always some movement in and out of the market by smaller players. We do not see a specific trend at this point."
The U.S. Department of Health and Human Services, which has the responsibility of writing the rules for what will qualify as a medical expense, said insurers like National Health may be acting prematurely.
"We have recently heard reports that some insurers are making decisions about participation in particular markets based on the effect of these requirements," Kathleen Sebelius, U.S. secretary of health and human services, said in a statement. "It is premature for insurers to make business decisions about participation in particular markets based on rules that have yet to be published, or to apply for exemptions to rules that have not yet been drafted."
Approval to cancel
On July 26, the Texas Department of Insurance gave National Health approval to stop offering individual accident and health insurance policies. National Health sent letters to the Alcantaras and other customers four days later.
"After careful consideration of the recent health care legislation, National Health Insurance Co. has determined that it will not be able to meet the requirements set forth by the [health care law] recently enacted by the United States federal government," the company said in its letter. "With this knowledge, NHIC has decided to cease distributing and renewing its medical expense plans."
National Health, which declined repeated requests for interviews, did not say in its letter which of the requirements in the 906-page law it has trouble meeting.
But Wolfe said the new medical-loss ratio requirements will be more of a hardship for smaller insurance companies like National Health than for larger companies.
"The individual market has much higher administrative costs than the large group market due to a number of factors, [such as] costs are spread across fewer lives, the cost of underwriting and the role of brokers," Wolfe said.
A company the size of Blue Cross Blue Shield of Texas – the state's largest insurer, with 3.8 million members, 400 hospitals and 40,000 physicians – can rely on name recognition to generate business. But smaller insurers have to heavily rely on insurance brokers, and the new medical loss requirements will hurt their commissions, Wolfe said.
And, as smaller insurance companies bow out under weight of the medical loss ratio requirements, larger insurers stand to increase their market share. Blue Cross Blue Shield of Texas says it sees an opportunity.
"Although we are actively evaluating all aspects of pending health reform definitions and regulations, including the implications of minimum medical loss ratio requirements, we believe that individual insurance is a valuable service and are committed to that market," said spokeswoman Margaret Jarvis.
Financial pressures
The new law is adding to the pressures felt by companies like National Health, which has had financial troubles for at least three years, according to the insurer's financial records kept with the Texas Department of Insurance.
Since December 2007, its assets have fallen 31 percent, from $36.7 million to $25.2 million in December 2009. Premiums from its accident and health division fell 27 percent during the same period, from $8.1 million to $5.9 million.
And since October 2009, the insurer has racked up penalties in several states for not filing health care cost reports or financial statements on time, according to records kept by the Department of Insurance.
The insurer plans to continue writing Medicare supplement policies and specified disease policies. But as a condition of stopping its individual health insurance business, National Health will not be allowed to re-enter that market until 2015.
For the Alcantaras, the loss of their insurance policy is major blow, but not a complete surprise.
They've been pleased with their high-deductible policy, which is tailored to cover Al's Type 2 diabetes and gives them access to all the doctors they want. Their policy will be terminated Feb. 1.
"I honestly believed this would happen," said Jill Alcantara, a critic of the new health law.
High-risk pool
The Alcantaras now plan to join the Texas High Risk Insurance Pool. The plans available range from a $2,500 deductible with $1,025 monthly premium to a $7,000 deductible with a $662 monthly premium. Jill Alcantara acknowledges that's expensive.
"But that's just what we're going to have to do," she said.
