State Senators Battle Insurance Tactics

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Oct. 27, 2005--Employees who have serious medical conditions are discriminated against at small businesses because of an unfair law, state senators in Pennsylvania claimed in an ongoing campaign.

Pennsylvania state senators Robert Wonderling and Curt Schroder hosted a press conference in Harrisburg, Penn., to drum up support for two bills that would ban a controversial policy called medical underwriting. Insurers and actuaries say medical underwriting enables them to predict medical costs more accurately for small businesses. But several states like New York and New Jersey have banned the practice by arguing that medical underwriting raises insurance costs for small businesses and discriminates against employees with chronic health care needs.

Medical underwriting requires businesses to disclose chronic illnesses and prior health issues among their employees and dependents when applying for coverage.

Senator Wonderling said he is pushing for a ban on the practice because he says insurers use the information to justify higher health care premiums. His proposal, Bill 671, would eliminate medical underwriting for companies with fewer than 100 employees.

"We're trying to remove the conditions that make employers more likely to forgo the benefit of providing insurance to employees, or stop providing coverage altogether," said Wonderling in an interview.

In the past few years, said Wonderling, small businesses with fewer than 100 employees have seen their health care premiums rise between 35% and 55%. What's more, a recent report from the Keystone Institute found that the number of uninsured Pennsylvanians rose by 500,000, or 4% of the population, between 2000 and 2004.

For their part, insurers and actuaries argue that medical underwriting can actually hold down insurance costs and help keep insurers in state.

Mark Litow of Milliman Global, an actuarial consultancy, said that medical underwriting mitigates the cost of insuring small groups in which the health care needs of a few disproportionately drive up the rates charged to the entire group.

The practice is supported by the Council for Affordable Health Insurance, a non-profit research organization supported by insurance companies, doctors, actuaries and insurance brokers. J.P. Wieske, director of state affairs at the Council, said his group supports medical underwriting because of its ability to moderate premiums.

Most states allow prohibit medical underwriting, but several states have reversed course in recent years. In 1998, Kentucky repealed its ban on medical underwriting just four years after enacting it. The Council for Affordable Health Insurance reported that

Kentucky's ban drove 45 insurers out of the state and increased rates 30%-40% across the board.

Earlier this year, Texas passed a law allowing insurers greater flexibility to price plans according to current and prior health conditions disclosed at the time of underwriting.

Senator Wonderling said the insurance marketplace is too complicated to make state-by state-comparisons. "We've got to find the solution that's right for Pennsylvania," he added.