Enrollments Slow In State-Subsidized Health Insurance Plans

state insurance

As Congress debates a major health care proposal, Vermont's effort to extend coverage to the uninsured has hit some bumps.

Enrollment in state-subsidized insurance plans has slowed down in recent months. Analysts say the faltering economy made it harder for people to afford the premiums.

VPR's John Dillon reports:

(Dillon) Peter Sterling says there's tremendous interest in the Catamount health plan and other state insurance products.

(Sterling) "More and more people are going to our Web site. More and more people are going to the state's hotline, our hotline, more people are requesting applications from the state of Vermont, more people are calling the state's ombudsman, who are uninsured when they have questions about enrolling. Yet they're not signing up."

(Dillon) Sterling directs the Vermont Campaign for Health Care Security. It's his job to encourage people to get covered through the state plans.

But he says fewer people are signing up, probably because they can't afford even the state-subsidized premium.

(Sterling) "The rate in growth in enrollment in these programs has slowed significantly and we are concerned that this slowing in growth in enrollment has occurred at the same time that there is increased demand from the public for information about enrolling."

(Dillon) Steve Kappel is an independent health analyst who has also studied the numbers under a contract with the University of New England.

(Kappel) "The biggest surprise in what we're seeing with Catamount is just how many people cycle on and off the program. I think the original idea was it would be a place where people would sign on and maintain reliable coverage."

(Dillon) Kappel says people probably drop the Catamount coverage or fall back on another state plan when they can't afford the premius.

(Kappel) "These are folks who are living on pretty thin economic resources. So it may be that they can avoid the coverage for a couple of months, then the car breaks down. And that's why they drop off, and then they can recover from that, save back up again, get back on the coverage."

(Dillon) That matches what Peter Sterling says he hears on the phone when he talks to people about coverage.

(Sterling) "I would say everyday I talk to someone who says, ‘Well, I'm just going to have to think about this because I don't think I'm going to be sick, and I'm going to have to figure out how I'm going to afford this in the future.'"

(Dillon) Sterling says a subsidized Catamount plan for a family with household income of about $25,000 a year costs $110 a month.

(Sterling) "Which for health care, is really cheap for something that has an $800 out of pocket limit. The point is in real dollars. They're probably earning $13-$14 an hour. You take out taxes, that person's earning $10-$11 an hour. Where is that person supposed to come up with an extra $110? That's another 10 hours of work for them."

(Dillon) Catamount Health was launched in 2007 to extend coverage to the uninsured. The legislation had a goal of covering 96 percent of the state's population by 2010. It's very unlikely that the state will reach that target. And if the target is missed, the law requires the legislature to consider a public health plan and a mandate for individuals to get coverage.

The debate over an insurance mandate will also take place in Washington, as the national reform legislation comes up in the Senate.

For VPR News, I'm John Dillon in Montpelier.

State Farm will continue homeowners insurance in Florida, insurance commissioner predicts

state insurance

State Farm might not pull out of Florida's homeowners insurance market after all, Florida Insurance Commissioner Kevin McCarty said today.

McCarty said he's "cautiously optimistic" that State Farm will keep at least some of its homeowners policyholders in Florida. Bloomington, Ill.-based State Farm is Florida's largest private insurer of homes, and it said in January that it would stop writing property policies in Florida, where it covers 700,000 homes.

"We've really been having intense negotiations with the company at very high levels," McCarty said today in an interview with The Palm Beach Post.

Neither McCarty nor a State Farm spokesman offered details of the negotiations.

"We don't want to talk about it publicly until we reach an agreement," said State Farm spokesman Chris Neal.

McCarty predicted State Farm will stay in Florida but will have a smaller presence. That could be good news for homeowners, who have seen premiums soar since Hurricane Andrew roiled the state's insurance market in 1992.

"A leaner, smaller State Farm in Florida is better than no State Farm in Florida," McCarty said.

Bill Newton, executive director of the Florida Consumer Action Network, agreed that homeowners will benefit if State Farm stays in Florida.

"It increases competition in the marketplace," Newton said. "For them to drop all those policies would have been disruptive, and I'm not sure the market would easily have absorbed it."

Citing losses and the risk of hurricanes, State Farm said it needed a big rate increase to continue conducting business profitably in Florida.

The company last year asked McCarty to approve a 47 percent increase. McCarty rejected the increase, saying State Farm didn't justify the large rate hike. State Farm said in January that it would pull out of the property market in Florida, though it still will sell auto, life and health coverage.

State Farm has yet to drop any policies in Florida. If it pulls out of the homeowners insurance market in Florida, an exit plan must be approved by state regulators. An October hearing on State Farm's withdrawal was postponed.

Newton said it appears McCarty called State Farm's bluff — and won.

"I'm cynical, but I thought it was a poker game all along," Newton said. "State Farm has a good book of business. Why would they walk away from it?"

Fla. Tries to Escape Its Overexposure to Storm Damages

state insurance

Florida is launching a new assault on hurricanes -- with percentage points.

The state's vast public insurance program is seeking a 7.5 percent average increase for its riskiest policies, covering some 300,000 homes on exposed beaches and in wind alleys that have for years received discounted insurance.

The mathematical process might seem mundane. But it marks, perhaps, the end of a remarkable period in which the bull's-eye state eagerly provided artificially low-priced insurance in the most hurricane-stricken strip in the country. To many, that amounted to a head-on collision with a cranky climate that is producing more catastrophes worldwide.

"It's a virtual guarantee that Florida would destroy itself financially if it continued on the current path," said Robert Hartwig, president of the Insurance Information Institute, an industry group. "Florida is finally beginning to get serious about the financial vulnerability it has exposed its citizens to."

Florida lawmakers froze the public insurer's rates three years ago, hoping to provide a safety net to residents when private companies abandoned the state after hurricanes mauled the magnetic peninsula in 2004 and 2005.

The rate freeze helped homeowners fill their insurance gap, but it exacerbated the state's financial dilemma. The program didn't have nearly enough cash to cover the policies for the 1 million-plus houses, businesses, condos and mobile homes the state had sold. Florida became its own largest insurer, accepting nearly $500 billion in risk.

Addressing 'a pretty significant rate need'

Now the proposed rate hike is seen as the first step in a long effort needed to fortify Citizens Property Insurance Corp., the state's public underwriting program, against its potential storm damage exposure. Some estimates say the program might have to double the premiums on high-risk homes and businesses before it can begin to accumulate enough cash to pay claims like private companies. Right now, Citizens charges fees, or assessments, on nearly every insurance customer in the state -- including inland homeowners and motorists -- when its cash runs dry during a hurricane.

Even if rates did rise wildly, "we still have the major problem," said Republican state Rep. Bill Proctor, who notes that it could take years to collect enough cash to offset Citizens' exposure to financial loss.

"Even when you get them up to that rate, if a major storm strikes us, just because they have improved their rates doesn't mean they'll have accumulated the capital they need to cover their exposure," Proctor said.

Citizens is trying to correct itself, Paul Palumbo, the program's senior vice president of underwriting, told state regulators Tuesday. The public company has "pretty significant rate need," he said, adding that those price hikes are "fair" to policyholders.

The hearing focused on the program's high-risk account, which underwrites homes that no private company will insure. The program currently has about $1.4 billion in reserves derived from collected premiums. That's not much. High-risk homes accounted for nearly 60 percent of Citizens' potential loss last year, or $240 billion.

The reserves for that account would be depleted if a storm likely to occur once every eight years struck those high-risk homes, Palumbo said.

Lawmakers running hot and cold

The state Legislature has had mixed results when dabbling with Citizens' rates. Not long ago, it was rolling prices back, a move that many climate advocates say encouraged development in vulnerable areas on the coast. That, these environmentalists say, is the last thing that should occur as scientists warn of rising seas and stronger storms associated with higher levels of greenhouse gases in the atmosphere.

But the Legislature changed course in May, when it voted to allow Citizens to raise its rates by 10 percent every year until the program is on firm financial footing. But it's unclear if state insurance regulators will go along. Citizens' officials still need to justify their proposed increases with actuarial arguments -- precise mathematical calculations based on past experience that prove a rate hike is needed.

Regulators on Tuesday indicated that Citizens might have failed to do that. The program has been collecting a 15 percent surcharge for reinsurance since 1983. That amounts to about $100 million this year, but Citizens omitted that revenue from calculations showing its claims-paying ability.

Ken Ritzenthaler, an actuary with the Florida Office of Insurance, the regulatory body, said that's a "serious oversight."

The result could be a lower rate increase. Regulators ordered Citizens to recalculate its rate proposal under the assumption that it had an additional $100 million to pay claims. The result was a rate hike of 4.4 percent for high-risk homes, or less than half of what the Legislature approved. Regulators will make their decision on the rate case within a few weeks.

Weighing climate risks against poverty

Raising insurance prices is an explosive political proposition. The hearing was met with stout opposition from residents of the Florida Keys, who could see a 10 percent hike along their string of islands, which stretches 125 miles. They contend that the area's strict building codes, which can reduce damage, should lower insurance prices.

And while everyone agrees something must be done to heal the state's ailing insurance market, it's often unclear what that remedy should be.

"The solution for some is to let insurance companies raise rates ad nauseam," fumed Republican state Sen. Mike Fasano, who supports freezing rates. "Well, you can't do that. I challenge anyone who makes that suggestion to come down to my Senate district, and I'll take you through communities where homes are being foreclosed on, where people have lost their jobs, where they are barely being able to keep food on the table, let alone pay an insurance premium that is expected to go up 60, 70, 100 percent."

Higher insurance rates are designed to give the public program more cash to pay claims. That way, Citizens won't have to take on debt or apply statewide assessments that are often seen as a subsidy paid by inland residents to beach dwellers.

But that outlook might be too optimistic. It's possible that the state could never completely escape from its massive overexposure, said Sam Miller, executive vice president of the Florida Insurance Council.

"I don't know that you'll ever get to the point where there won't be assessments at all," he said skeptically.

Endicott man accused of insurance fraud

state insurance

An Endicott man was charged with insurance fraud in connection with a motorcycle that he reported stolen, according to the state Insurance Department.

Robert J. Wagner, 31, of Adams Street was arrested Nov. 6 by Endicott police following an investigation by Mark S. Howard of the Insurance Department's Frauds Bureau.

Wagner is accused of selling the motorcycle five months after reporting it stolen to State Farm Insurance Co. The fraud was discovered when another person attempted to obtain a title and register the motorcycle, the insurance department said. Wagner was never paid for the claim he filed.

Wagner faces up to seven years in prison if he is convicted. A hearing will be scheduled in Broome County Court.

State insurance regulators approve new way to value residential-mortgage bonds

state insurance

State insurance regulators yesterday voted in favor of using a new method to evaluate residential mortgage-backed securities that would allow them to reduce the capital requirements related to these investments.

The proposal was pitched by the American Council of Life Insurers, which sought to change the way state regulators evaluate insurance carriers’ holdings of the bundled mortgages, said Jeremy Wilkinson, a spokesman for the National Association of Insurance Commissioners.

Currently, the regulators rely on ratings agencies’ judgments of the securities to determine how much capital insurers should hold against the investments.

The life insurance industry has argued that ratings agencies focus on the probability of a loss inside of a residential-mortgage-backed security. That method fails to account for the severity of the loss and thus requires insurers to add more capital each time the investments are downgraded.

Instead of using the ratings agencies’ judgment when evaluating how much capital insurers need to back the securities, the NAIC will search for an independent third-party firm to estimate the size of the losses within the residential-mortgage-backed securities.

The American Council of Life Insurers applauded the decision. “The NAIC’s action is a step toward correcting a flaw in the way residential-mortgage-backed securities are rated for risk-based-capital purposes,” ACLI spokesman Whit Cornman wrote in an e-mail. “The new methodology will align better with the NAIC’s model for determining RBC [risk-based capital], which accounts for probability as well as severity of loss.”

Ratings agency Moody’s Investors Service determined last month that the change would improve financial flexibility for carriers

However, the proposal and the prospect of regulators adjusting their methodology bothers consumer advocates and advisers.

Birny Birnbaum, a consumer advocate and executive director of the Center for Economic Justice, protested the decision yesterday, urging regulators not to change their evaluations of the securities.

“There has not been improvement in the experience of home mortgages,” he wrote in a letter to regulators. “Rather, mortgage delinquencies, defaults and foreclosures are at record highs. It makes no sense to reduce capital requirements related to risk RMBS at this time.”

GOP Health Reform Bill Shifts More Costs to You

state insurance

The New York Times reported yesterday that:

"House Republicans have come up with an answer to Speaker Nancy Pelosi, drafting an alternative health care bill that would reward states for reducing the number of uninsured, limit damages in medical malpractice lawsuits and allow small businesses to band together and buy insurance exempt from most state regulation."

That, in a nutshell is the House GOP bill (PDF) to reform our health care system. Same old, same old. There is nothing new in their plan. It is a rehash of the Republican party's answer to every problem:

* Deregulate the industry involved as much as possible;
* Put the burden of cost and risk on consumers and taxpayers ("buyer beware"); and
* Protect business from injured consumers.

Here is how this tired Republican formula plays out in their health care reform plan.

Deregulate the Industry Involved as Much as Possible

The Republican bill calls for allowing insurers to sell insurance across state lines, making policies subject to laws in the company's home state but exempt from consumer protection laws, rating rules and benefit mandates in other states where the company sells coverage. It would also allow small businesses to pool their insurance buying power through association health plans, sponsored by trade and professional associations and chambers of commerce, which would be exempt from state consumer protection laws as well.

This would likely allow insurers to offer low-premium health insurance policies because they would have lousy benefits and leave people unprotected when they need health coverage most. What's the use of having insurance with a low premium if it won't pay for anything when you get sick? (Listen to me explain why allowing insurers to sell health insurance across state lines is a bad idea on the Rick Smith Show.)

To understand why circumventing state regulations is a problem, it is important to understand how insurance is regulated. States are the primary regulators of health insurance. The rules vary from state to state and also based on individual, small or large-group markets. The Employee Retirement Income Security Act of 1974, or ERISA, bars states from regulating employer-sponsored health plans. As a result of this federal law, coverage provided by employers that self-fund (i.e., pay for their share of employee health care costs out of their own general assets) is not subject to any additional insurance regulation by the states. Therefore, state laws generally apply to small-group policies sold to small employers with less than 50 employees and policies sold to individuals.

In general, state laws are more comprehensive than federal laws. Almost all states, for instance, provide limits on the amount by which all small group health insurers in the state can vary the premiums among small employer groups for the same coverage. In at least 10 of these states, insurers cannot consider health status at all in setting a small employer group's premiums (called community rating). In addition, many states require insurers to cover certain conditions or providers. States may also enact laws such as those that require insurers to permit physicians to make standing referrals and to have adequate provider networks.

Currently, health insurers are licensed in each state in which they operate and are subject to the insurance laws of those states, including laws regarding access to coverage, premiums, and scope of coverage. The proposed GOP plan would allow insurers to circumvent state health insurance regulations.

That gives insurers virtually unfettered discretion in their practices. This approach would mean that each insurer operating in a state could be subject to dramatically different standards. This will further fragment the health insurance market and eviscerate the viability of markets that guarantee access, restrict premiums, limit coverage exclusions, and/or mandate benefits, especially in states such as Maine, Massachusetts, New Jersey, New York, and Vermont which have the most comprehensive consumer protections. It will likewise undermine the laws of other states that have some protections and effectively bar these and other states from strengthening any protections.

And this is not a new idea. Republicans have proposed this time and time again. For example, they have repeatedly submitted the Health Care Choice Act (H.R. 4460) and the Small Business Health Fairness Act (H.R. 241), which would allow insurers to sell health policies across state lines, circumventing state regulations and consumer protections.

The Small Business Health Fairness Act would have created Association Healthcare Plans (AHPs), which allow small businesses to band together and buy insurance exempt from most state insurance regulations and consumer protections. According to the Drum Major Institute for Public Policy (PDF):

"Enhancing the ability of small businesses to offer quality health insurance would go a long way towards reducing the number of uninsured Americans. But the devil is in the details. By exempting AHPs from state regulations, studies indicate that this bill would increase average health care costs for small businesses and reduce the number of workers with health insurance. For example, state laws prevent insurance plans from cherry-picking only the healthiest people for insurance coverage, allowing businesses with relatively healthy employees to join for less money while charging higher rates to those with older and sicker workers. Exemption from these laws would destabilize the health care marketplace: state-regulated health care plans would see their healthy workers siphoned off to the AHPs, leaving them with a disproportionate number of older and sicker employees who are more expensive to cover. Health care premiums for all small businesses, except for those with the healthiest workforce would soar, and companies unable to cope with the increased costs would leave their employees at risk of becoming uninsured. For this reason, the Congressional Budget Office has projected that AHP legislation, if enacted, would result in higher premiums for four out of five small employers."

Even the National Small Business Association (NSBA) is against AHPs. Back in 2005, Todd McCracken, NSBA president said:

"AHP legislation would likely increase premiums for small employers and their workers and make it much harder, if not impossible, for small business owners with older, sicker workers to get access to affordable health coverage. We need a better solution for small businesses. This is not the answer."

In 2004, the National Governors' Association also came out against these types of plans writing that they:

"would seriously undermine states' ability to provide their citizens with access to affordable health insurance coverage by exempting AHPs from important state regulations. The legislation would raise already skyrocketing health care premiums on our most vulnerable populations while watering down states' existing financial oversight and consumer protection measures."

Such "pick-your-regulator" provisions were also central to John McCain's health reform proposals during his 2008 presidential campaign. (See my blog post "Deregulate, Baby, Deregulate: McCain's Health Reform Plan.")

Not surprisingly, allowing insurers to circumvent state regulations was also part of the reform proposal put out by America's Health Insurance Plans (AHIP), the lobbying arm of the health insurance industry. (See my blog post "Too Little, Too Late: The Health Insurance Industry Unveils a New Plan to Reform Health Care.")

(What are some of state-based regulations you could lose if health insurance companies are allowed to circumvent state insurance regulations? Find out here.)

Put the Burden of Cost and Risk on Consumers and Taxpayers ("Buyer Beware")

The Republican health reform bill would continue to allow health insurance companies to deny people coverage because of pre-existing medical conditions and, if they deign to sell them a policy, to charge people more based on their health status or exempt coverage for anything related to their pre-existing condition.

Instead the bill would provide funding to states to establish high-risk pools in which private companies cover people who cannot otherwise obtain coverage with subsidies from the state. It also offers states funding to establish reinsurance programs under which a state pays a large share of the cost of private health insurance companies if claims exceed a certain threshold. Both of these have the effect of shifting the risk and the cost of covering costly individuals to taxpayers, leaving the inexpensive healthy individuals to be insured by private insurance companies, thus privatizing profits and socializing risk .

High-risk pools are not new and experience with them shows that they make health insurance problems worse by further fractioning the risk pool. As this "Health Insurance: A Primer," (PDF) by Bernadette Fernandez of the Congressional Research Service puts it:

"The main objective of insurance is to spread risk across a group of people. This objective is achieved in health insurance when people contribute to a common pool ("risk pool") an amount at least equal to the average expected cost resulting from use of covered services by the group as a whole. In this way, the actual costs of health services used by a few people are spread over the entire group. This is the reason why insuring larger groups is considered less risky-the more persons participating in a risk pool, the less likely that the serious medical experiences of one or a few persons will result in catastrophic financial loss for the entire pool."

High-risk pools offer people a choice of private insurance plans with the state subsidizing a portion of the costly premium. The inevitable consequence has been that high-risk pools suffer from a myriad of problems that keep the medically uninsurable from accessing good, affordable health care. A study published in Health Affairs found that in most state high-risk pools:

"Coverage is expensive, the waiting period for coverage of pre-existing conditions is long, and benefits may be limited... most discourage enrollment in the high-risk pool in myriad ways and fail to ensure access to the individual market for persons with health problems."

Yet none of these deficiencies would be addressed by the GOP bill. Insurers offering high-risk coverage would continue to be allowed to deny people coverage for treatment related to the person's pre-existing condition--the very condition that made them eligible for the high-risk pool in the first place.

Nor does the House Republican bill help people pay for coverage if they cannot afford it. The bill does not offer any tax credits, subsidies, benefit guarantees or out-of-pocket maximum protections.

At least the bill does not force individuals to buy insurance they are unlikely to be able to afford. But that does leave us with just about as many uninsured as we have now since it also does not require employers to contribute to the system in any way. As The Washington Post reported today:

"The long-awaited Republican entry in the health care debate received its assessment late Wednesday from congressional budget analysts, who concluded that the proposal would barely dent the ranks of the uninsured....

"The measure would cover only 3 million additional people at a cost of $60 billion through 2019, according to an analysis by the nonpartisan Congressional Budget Office. It would leave more than 52 million Americans uninsured a decade from now."

Protect Business From Injured Consumers

The Republican bill's main plan for lowering overall health care costs is another of their health reform mainstays: "tort reform." The bill imposes new restrictions on patient lawsuits against doctors, hospitals, and makers of drugs and medical devices. It sets a $250,000 limit on non-economic damages for physical and emotional pain and suffering, establishes new hurdles for consumers to get punitive damages, and limits contingency fees for plaintiffs' lawyers. It does not put any restrictions on how insurance companies can set their premiums.

This focus on medical malpractice liability reform is due to the fact that conservatives believe frivolous lawsuits drive up health care costs and require doctors to practice defensive medicine that is costly and wasteful.

It is a bizarre place to focus on to lower costs, however, given that medical malpractice costs are only a small fraction of total health care costs in the U.S., two to three percent at most. Therefore, even large savings in medical malpractice premiums can have only a small direct impact on total health care spending.

In addition, judgments account for less than 4 percent of all medical malpractice payments, and the significant increase in premiums for medical malpractice liability insurance is not attributable simply to an increase in medical malpractice payments. Other contributing factors (PDF) include reduced competition among insurers and a decline in insurers' investment income.

CQ Today reported yesterday that the CBO believes the changes in the changes to medical malpractice laws "would reduce health care costs directly by reducing premiums for medical liability insurance and associated costs."

But that ignores evidence from the states that have already enacted tort reform:

"The Medical Liability Monitor... publishes the latest information on medical liability insurance rate. Its annual rate survey, reported by state and by medical specialty (e.g., internal medicine, general surgery, ob/gyn) reports the medical liability insurance rates of all the major insurers of physicians in the United States. Its data is the most comprehensive anywhere and is cited by government agencies, legislative bodies and major media. It found that:

* States with caps on damages have average insurance premiums that are 9.8% higher than insurance premiums in states without caps on damages. (Medical Liability Monitor, October, 2004)
* In the five states that recently passed new medical malpractice caps, premiums rose at nearly double the rate as states that did not pass a damage cap. Those states are: MS, NV, OH, OK and TX. (Medical Liability Monitor, October, 2004)"

Most importantly, as Tom Baker explains in his book The Medical Malpractice Myth, most people who are injured by medical malpractice do not sue:

“First, we know from the California study, as confirmed by more recent, better publicized studies, that the real problem is too much medical malpractice, not too much litigation. Most people do not sue, which means that victims—not doctors, hospitals, or liability insurance companies—bear the lion’s share of the costs of medical malpractice.”

The Bottom Line

The GOP health reform bill does very little to expand health coverage to more Americans, very little to lower overall health care costs, and very little to ensure people will be able to afford the health care they need when they need it.

So where's the reform?

Group divided on worker's comp privatization

state insurance

OKLAHOMA CITY — A legislative task force recommended Thursday that Oklahoma's workers' compensation agency be privatized, but it was divided on how to achieve that.

Following months of study, the Task Force on the Privatization of CompSource Oklahoma drafted a list of recommendations for the future of the agency that include mutualizing it, meaning it would be owned by its policyholders, or selling it outright.

Legislation that would authorize the state to sell the agency would likely result in a lawsuit challenging the state's ownership of its assets, said Rep. Dan Sullivan, R-Tulsa, co-chairman of the task force.

Officials familiar with Oklahoma's worker's compensation system have told task force members that the state Supreme Court has never clarified whether the assets of CompSource — created by the Legislature in 1933 as the State Insurance Fund — are owned by the state or its policyholders.

"We should first determine who is the owner," Sullivan said. Officials of a Chandler-based insurance company said last month that the state could raise between $150 million and $200 million if it sold the agency to the highest private bidder.

The state has been experiencing a deepening budget shortfall that has pushed tax revenue $388.3 million below estimated collections during the first three months of the fiscal year that began on July 1. State agencies have been forced to reduce their budgets by 5 percent.

Three members of the task force, including Sullivan and Sen. Cliff Aldridge, R-Midwest City, also co-chair of the task force, recommended that CompSource be sold. Five others recommended mutualization.

The recommendations will be forwarded to the governor and legislative leaders by Dec. 1. The statute that created the task force says lawmakers intend to privatize CompSource no later than Dec. 31, 2010.

State law requires employers to have insurance to compensate injured workers. CompSource, a nonprofit insurer, said it has 26,000 policyholders — including state, county and municipal government agencies — and writes 35 percent of the workers' compensation policies in the state.

The agency specializes in small firms or those whose workers have dangerous jobs in fields such as the oil and natural gas and construction industries, which private insurers will not take because the chance of paying claims is too high.

But CompSource has been criticized over the years by those who believe its status as a state agency gives it an economic advantage over private insurers and that the state should not be in the business of writing insurance.

Others, including members of the task force, have expressed concern that privatization could erode CompSource's status as the state's workers' compensation insurer of last resort and force dramatic increases in workers' comp rates.

Dan Ramsey, a task force member and president of the Independent Insurance Agents of Oklahoma, said he believes the task force should not recommend selling Compsource merely as a way of raising revenue for the state during lean economic times.

"I think that's shortsighted," said Ramsey, who favors mutualization. "I don't think that was the purpose that CompSource or the State Insurance Fund was founded on."

Mike Seney, a task force member and senior vice president of operations for The State Chamber, said he favors mutualizing the agency similar to how the workers' compensation agency in Texas was privatized in 2005.

"That is closer to maintaining the original purpose of CompSource," Seney said.

Stolen VW microbus turns up 35 years later at port

all state insurance

Federal customs agents at the Port of Los Angeles made a totally groovy discovery while inspecting a cargo container bound for the Netherlands, authorities announced Thursday.

A mint-condition 1965 Volkswagen microbus reported stolen 35 years ago from Spokane, Wash., turned up during a routine inspection of several vehicles on Oct. 19, according to Jaime Ruiz, a spokesman for U.S. Customs and Border Protection.

"It looks like the car was restored, or at least kept in pristine condition, and it still runs like a dream," Ruiz said. "It had about 70,000 miles on the odometer, but we don't know if those are the original miles, if they were rolled back or if it flipped and started over again."

Even more far out: The restored blue-and-white hippie-mobile has an estimated value of $27,000 to $30,000, at least 10 times what it was worth 35 years ago, said Officer Mike Maleta of the California Highway Patrol's foreign export and recovery task force.

The V-Dub microbus was reported stolen from a Spokane auto upholstery shop on July 12, 1974, the same time that city was hosting the World Expo and one month before the resignation of President Richard Nixon, said Officer Jennifer DeRuwe, a spokeswoman for the Spokane Police Department.

The owner, whose name was not released, filed a claim with Allstate Insurance Co., and the case went unsolved for decades.

"It's not every day that you solve an old stolen vehicle case like this," DeRuwe said.

The van turned up at the Port of Los Angeles when an Arizona-based restoration shop was trying to ship it to a car collector in the Netherlands, Maleta said. Authorities ran the vehicle's identification number and found that it was still listed as stolen.

The restorer was not considered a suspect and no arrests have been made, but the theft remained under investigation, according to Maleta and Ruiz.

"The person who most recently had the bus may not have necessarily known that it was stolen 35 years ago, and the bus may have gone through several hands before it ended up here," Ruiz said. "Maybe if the previous owner sees this in the news, he or she will come forward."

Authorities were unable to track down the original owner, so the bus was sent to Allstate, said Jim Klapthor, a spokesman for the insurance firm.

"It's too early to tell what will become of the vehicle itself," Klapthor said. "But the CHP and customs agents can point to a story like this showing what great lengths they make in tracking down stolen goods and we can't thank them enough for being so diligent in making this discovery."

Cigna CEO: Working With Senator To Clear Up Data Questions

state insurance

Cigna Corp. (CI) Chairman and Chief Executive H. Edward Hanway said Thursday the company will work to clear up questions raised by Sen. John D. Rockefeller IV (D, W. Va.), who this week said the company failed to accurately disclose some $5 billion of health insurance it sold in the commercial group market last year.

Rockefeller, chairman of the U.S. Senate Commerce, Science and Transportation Committee, sent a letter to Hanway on Monday questioning the way Cigna uses its members' health plan premiums and saying his panel found "serious inconsistencies" in the way the company discloses business information to the public and regulators.

"We are working very closely with him, we have furnished significant information to him and will be working though the questions he and his staff have" about inconsistencies between statutory filings, Hanway said during Cigna's third-quarter conference call. Cigna aims to clear up any confusion with the senator's committee, he said.

The small-group market that Rockefeller partly addressed in his letter "never has been a focus" for Cigna and comprises a small fraction of its membership, Hanway said.

Cigna, in regulatory filings, appeared to inaccurately account for a chunk of its business, failing to report its financial information in a manner consistent with five other major managed-care companies, Rockefeller said.

Rockefeller told Hanway that records show Cigna sold $5 billion in small- and large-group policies last year and failed to report it to state regulators, instead classifying the business in a catch-all "other group" category.

"This reporting does not appear to accurately reflect your company's operations in these two market segments, and it directly contradicts statements you made to the committee in a recent letter about your small business market," the senator wrote.

"This failure to provide accurate business information not only shows that your company is failing to comply with the requirements of state insurance law; it also undermines the efforts of regulators and policy makers to protect consumers from unfair insurance industry practices," Rockefeller said, noting state laws requiring insurers to disclose certain information. "Your company appears to have flouted these requirements and made it more difficult for regulators and consumers to hold you accountable for your conduct."

Rockefeller's letter came during the national health-reform debate and was part of a broader criticism by the senator that the nation's six largest health insurers are spending far less of every premium dollar on medical care than the 87 cents that an industry trade group estimates. The industry, he said, is withholding market segment-specific data on medical loss ratios--the percentage of premium revenue used for medical care--that could help consumers and small businesses make informed choices.

Rockefeller singled out Cigna and asked the company to produce accurate data by Nov. 9 showing its medical loss ratios for the last 10 years in the individual, small-group and large-group health insurance markets. He also asked how the company plans to amend its state insurance filings to accurately reflect its business activities.

CBO Analyzes GOP Health Proposal

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The House Republican health proposal might cut the federal budget deficit by $68 billion over 10 years, but it might not increase the percentage of U.S. residents who have health coverage.

Analysts at the Congressional Budget Office have published those conclusions in an analysis of an "amendment in the nature of a substitute" offered by House Minority Leader John Boehner, R-Ohio. If adopted as written, the amendment would replace the current text of H.R. 3962, the Affordable Health Care for America Act bill.

The amendment would ban annual and lifetime caps on medical claims, and it would tightly restrict insurers' efforts to rescind policies that are already in force. It also would expand reinsurance programs, to encourage health insurers to cover people with health problems, and it would increase subsidies for risk pool programs that insure people with health problems. Risk pools that wanted to get federal subsidies would have to eliminate the waiting lists that plague many existing risk pool programs and limit premiums to 150% of the standard rate.

The bill would permit small businesses to avoid state insurance mandates by buying coverage through association health plans, and it would permit an individual who lives in one state to buy health coverage from an insurer based and regulated in another state.

A medical malpractice provision would cap noneconomic and punitive damages and change the way liability is allocated.

If the amendment were implemented as written, it would increase spending by a total of $61 billion from 2010 to 2019, raise $52 billion in new revenue related to coverage provisions, reduce direct government spending by $49 billion, and increase tax revenue by $27 billion, CBO analysts estimate.

By 2019, "the number of nonelderly people without health insurance would be reduced by about 3 million relative to current law; leaving about 52 million nonelderly residents uninsured, " CBO Director Douglas Elmendorf writes in a letter summarizing the CBO's findings. "The share of legal nonelderly residents with insurance coverage in 2019 would be about 83%, roughly in line with the current share."

The CBO compared what private health coverage costs might be in 2016 in a current-law system and in a Republican amendment system. Elmendorf reports that costs might be 7% to 10% lower for small groups; 5% to 8% lower for individuals; and about 0% to 3% lower for large groups.

But some amendment provisions "would tend to increase the premiums paid by less healthy enrollees or would tend to increase the premiums paid by enrollees in some states relative to enrollees in other states," Elmendorf writes. "As a result, some individuals and families within each market would see reductions in premiums that would be larger or smaller than the estimated average reductions, and some people would see increases."

CBO believes the medical malpractice changes "would reduce health care costs directly -- by reducing premiums for medical liability insurance and associated costs -- and indirectly by slightly reducing the utilization of health care services," Elmendorf writes. Together, he writes, those effects could reduce $41 billion in spending over 10 years and generate about $13 billion in new tax revenue.

State Insurance Chiefs Urge Steps to Control Health Costs for Small Business

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Lower profit margins, the downturn in the economy and significant premium increases are among the reasons small business employers have more difficulty than larger competitors affording insurance coverage for their workforce, according to the National Association of Insurance Commissioners (NAIC).

Testifying before the Senate Committee on Health, Education, Labor and Pensions, Kansas Insurance Commissioner Sandy Praeger said state regulators support reforms that make small employer coverage more stable.

"The reality is that the cost and utilization of health care is rising rapidly, and insurance companies have little ability to address these issues," said Praeger, who is chair of the NAIC Health Insurance and Managed Care Committee. "Rates will continue to rise, and unless spending is brought under control, all state and federal reforms will shift the financial burden from one group to another without solving the underlying problem."

"The challenge moving forward," Praeger said, "will be to overhaul the delivery system to promote prevention, quality, and results-based care to encourage healthy lifestyles and to eliminate waste and fraud in the system. The difficulties in the small group market, as in the individual market, are ultimately the result of medical spending that has outstripped the ability of most Americans to pay for it."

Praeger said that more immediate transitional steps may be necessary to significantly reduce premiums in the coming years. "Subsidies, reinsurance, funding for high-risk pools and reducing cost-shifting from federal programs and the uninsured are a few things that could be considered," she said.

Allstate Focuses On Growth As It Swings To 3Q Profit

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Allstate Corp. (ALL) swung to a third-quarter profit as it benefited from far smaller catastrophe and investment losses than a year earlier.

With the issue of Allstate's financial strength "rapidly fading into the past," the company is focusing on keeping current customers and attracting new ones in a competitive insurance market, said Thomas Wilson, Allstate's chairman and chief executive, in a Wednesday interview. "I would like to see sustainable growth; that is what we are working on."

Shares dropped 2.1% to $29.00 after the insurance giant reported earnings slightly below expectations. The stock has more than doubled from a 14-year low in March but is still down 11% from its 52-week high in January.

For the latest quarter, Allstate reported a profit of $221 million, or 41 cents a share, compared with a year-earlier loss of $923 million, or $1.70 a share. Operating earnings, which exclude investment gains and losses, were 99 cents in the latest quarter, while the prior year had a 35-cent loss.

Revenue rose 3.6% to $7.58 billion.

Analysts estimated operating earnings of $1.01 on revenue of $8.5 billion, according to a poll by Thomson Reuters.

Property and casualty insurers have benefited from a mild hurricane season and rallying stock markets, though they have had trouble raising rates.

Allstate's homeowners and auto insurance premiums were about flat with the year-ago quarter, as policies in force dropped 1.3% in auto and 4.1% for homeowners.

In its auto business, part of the drop was due to fewer policies available to renew, while customer retention improved.

Premiums and deposits fell 45.5% for Allstate Financial. The unit, which sells life insurance and retirement products, raised prices on some products to improve returns.

Allstate, the nation's largest publicly held personal-lines insurer, continued to see its investments improve after earlier this year suffering more than many insurers from losses on mortgage-related securities.

Catastrophe losses sank 78% from $1.82 billion a year earlier because of Hurricanes Gustav and Ike.

The property and liability segment's combined ratio, the percentage of each dollar the company collects in premiums against what it pays out on losses and expenses, improved to 94.7% from 112.7%. A combined ratio of more than 100% represents an underwriting loss.

Auto premiums were flat, while homeowners' premiums declined 0.2%. The loss in Allstate's financial services division narrowed substantially.

Allstate's investment portfolio rose $4.2 billion during the quarter to $100.6 billion.

US Senate Probe Finds Medical Care Underspending By Big Insurers

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WASHINGTON (Dow Jones)--The six largest health insurance companies in the U.S. spent considerably less on medical care than that estimated by insurance industry officials, a U.S. Senate Commerce Committee investigation found.

A review of publicly available data on industry earnings and spending found that, of the total amount of money in premiums received by the six companies in the individual insurance market, 74 cents of every dollar were spent on providing medical care. Data also showed that they spent 80 cents on medical care in the small group health insurance market and 84 cents in the large group market.

Those figures are well below an industry-wide average of 87 cents of every dollar that America's Health Insurance Plans trade group estimates is spent on medical care.

The six insurers include Aetna Inc. (AET), Cigna Corp. (CI), Coventry Health Care Inc. (CVH), Humana Inc. (HUM), Unitedhealth Group Inc. (UNH) and Wellpoint Inc. (WLP).

The Commerce Committee report examines the "medical loss ratio," which shows the proportion of total company revenue to actual spending on medical care. The remaining money--13 cents on the dollar, according to AHIP--is spent on administrative expenses or tallied as profits.

Sen. Jay Rockefeller, D-W.Va., the chairman of the Senate Commerce Committee, criticized the companies in a statement.

"The data released in this letter reveals that while health-care costs are spiraling upwards, consumers are paying more and getting less, and the health insurance industry doesn't want anyone to know what they are up to," Rockefeller said.

While AHIP spokesman Robert Zirkelbach said in a statement that federal data show the medical loss ratios average 87 cents of every premium dollar, he discounted the importance of the statistic to the quality of medical care provided by insurers.

"[The medical loss ratio] is not an accurate measure of the efficiency or effectiveness of health plans," Zirkelbach said. "'Administrative costs include programs and services that help to improve care and reduce overall health-care costs for families and employers."

The report singles out Cigna, saying that it failed to report $5 billion in small group and large group insurance business to state regulators and instead reported it as "other group" business. Rockefeller said the report's findings on Cigna are "just another disturbing example of why we need more transparency and accountability in the health insurance industry."

Cigna in a statement said it would work with the Senate Commerce Committee and state regulators on the reporting methodology for its medical loss ratios.

"Cigna strives to submit its state insurance regulatory filings in a timely and accurate manner," Cigna spokesman Chris Curran said. "We have filed our data with state regulators in this manner since 2006 based on how we track the data internally."

Washington State Woman Pays State Farm

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A Snohomish County woman who admitted to forging thousands of dollars in receipts for an insurance claim has paid $69,610 in restitution to her insurance company, State Farm, according to the Washington State Insurance Commissioner, Mark Kreidler.

The case was investigated by the company and the Office of the Insurance Commissioner's Special Investigations Unit.

Juli-Anna Rowe, 45, of Issaquah, has signed a diversion agreement with the Snohomish County Prosecutor's Office. She agreed to pay full restitution of $66,610 �€" which she has done �€" and to attend a theft-awareness program and therapy. After three years, if Rowe completes the program as agreed, the insurance-fraud charge of "false claims or proof" will be dismissed.

The case stems from a 2005 insurance claim. On June 3, 2005, Rowe said, she loaded a rented U-Haul moving trailer with $85,370 in personal property and drove from her home in Washington toward her destination in California. In Oakland, Calif., she stopped to rest at a hotel. While there, she said the contents of the trailer were stolen.

State Farm paid Rowe $54,421 for the value of the property she said had been stolen. Her policy also allowed for nearly $31,000 in additional claims when she replaced some of the missing property.

In filing those additional claims, however, Rowe submitted numerous altered and forged receipts. In an interview with a detective from the state insurance commissioner's special investigations unit, Rowe admitted to altering receipts by cutting and pasting increased amounts onto them, photocopying the forged papers and submitting those to State Farm. She also admitted that she did not replace all of the items she claimed she had.

Under the terms of her policy, intentionally concealing or misrepresenting any fact involved in a claim voids the entire claim. So Rowe paid back the $54,421 that State Farm had paid out, plus $15,189 in investigation expenses incurred by the insurer.

Special Investigations Unit Detective Sgt. Dan Sharp praised the work of State Farm on the case.

"They identified the fraud and did much of the initial investigation, making it easier for us to move ahead with this case," he said.