[Congressional Record Volume 148, Number 136 (Wednesday, October 16, 2002)]
[Senate]
[Pages S10575-S10576]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
By Mr. GRAHAM (for himself and Mr. Fitzgerald):
S. 3119. A bill to amend the Public Health Service Act to ensure the
guaranteed renewability of individual health insurance coverage
regardless of the health status-related factors of an enrollee; to the
Committee on Health, Education, Labor, and Pensions.
Mr. GRAHAM. Mr. President, I am pleased to introduce the ``Health
Insurance Fairness Act of 2002'' and I am very pleased to have Senator
Fitzgerald join me as an original cosponsor. This legislation would
prohibit the insurance practice of reunderwriting at renewal, thereby
protecting the millions of Americans relying on individual health
insurance policies.
The need for this legislation was brought to my attention by an
excellent April 9, 2002 article in the Wall Street Journal that
documented the impact of reunderwriting on a married couple from
Florida.
Shaneen Wahl of Port Charlotte, FL was diagnosed with breast cancer
in 1996. At that time, she and her husband Tom were paying $417 a month
for health insurance. In addition to coping with cancer, the Wahls
began to face rapidly increasing premiums, and by August 2000 their
insurer informed them that their new rate would be $1,881 a month. This
premium increase wasn't due to non-payment of premiums or any other
action of the Wahls. It was the result of reunderwriting conducted by
the Wahl's insurance company.
Reunderwriting at renewal is a practice that forces people who have
become ill to pay substantial premium increases or lose their health
insurance. While most insurers evaluate an individual's medical history
only at the outset, some have adopted the practice of reviewing
customers' health status annually. The purpose of this review is to
determine if the individual has developed a medical condition or has
filed claims; if such a determination is made, the company raises the
individual's premium. This practice contributes enormously to the
instability of health insurance by making it difficult, it not
impossible, for people who have paid insurance premiums for years to
continue that health insurance at the very time they need it the most.
How does it work? Carriers reunderwriting at renewal charge
substantially higher renewal premiums to policyholders who have been
diagnosed with an illness or had medical claims than they charge other
policyholders. The carriers do this by transferring a policyholder to a
higher risk class than the policyholder was in when the policy was
issued or in some cases by manually adjusting the policyholder's rate
based on his or her medical claims. In either case, the individual's
premium is based on his or her claims or health status during the
policy year. For example, in another case from Florida, Bruce and Wanda
Chambers of St. Augustine saw their rates increase from $300 per month
to $780 per month in just one year after Wanda was diagnosed with
diabetes.
Consumers purchase insurance so that they will have access to health
care should they become ill, as in the example of Wanda Chambers. If
carriers are allowed to increase premium rates based on health status
at renewal, consumers face a choice between the very two outcomes they
had
[[Page S10576]]
planned to avoid by purchasing insurance in the first place: they can
drop the insurance policy and thus likely forgo access to health care
in times of illness, or they can pay the grossly inflated premiums and
thus face financial ruin.
The practice of reunderwriting at renewal violates the spirit of
health insurance guaranteed renewability requirements under state and
federal law. In the 1990's, the National Association of Insurance
Commissioners, NAIC, developed model laws to prohibit insurance
companies from canceling policies once an individual became sick. In
1997, the Health Insurance Portability and Accountability Act, HIPAA,
applied this requirement to all health insurance policies subject to
HIPAA. As a result, carriers can no longer cancel individuals because
of their medical claims.
Reunderwriting is a way to circumvent these requirements, and has
been justified as a means of holding down premiums, for the healthy.
However, a July 17, 2002 memo to all NAIC Members from Steven B.
Larsen, Chair of the Health Insurance & Managed Care (B) Committee
clarifies that the practice of reunderwriting is illegal under NAIC
Model Laws:
The committee also noted that the practice is contrary to
adopted NAIC policy, and is illegal under NAIC Model Laws
governing the individual market. The Small Employer and
Individual Health Insurance Availability Model Act (Model
#35) provides for adjusted community rating, and health
status is not one of the factors that can be used to set
rates. The Individual Health Insurance Portability Model Act
(Model #37) provides for the use of rating characteristics,
and health status is not one of the listed characteristics.
More specifically that model also provides that changes in
health status after issue, and durational rating, are not to
be used in setting premiums for individual policies.
Insurance companies should not be allowed to manage health-care costs
by targeting individuals for premium increases because an individual
was diagnosed with an illness or has had medical claims. Doubling or
tripling premiums for only the individuals who have been diagnosed with
an illness forces those individuals to drop their policies and is
functionally the same as not renewing coverage.
Not only is reunderwriting bad for consumers, but it creates a
competitive disadvantage to the many reputable insurance companies that
agree that this practice is contrary to the public interest and
undermines the theory behind insurance. Faced with the practice being
used by some companies, the Wall Street Journal has reported that other
carriers are ``closely watching'' this practice intending to adopt a
similar practice either to avoid a competitive disadvantage or to
improve their bottom line. While selective targeting improves the
profitability of the reunderwriter, it shifts the responsibility for
higher risk people to other insurers or employers or local and state
government health programs.
The legislation we are introducing today would make health insurance
more secure. The legislation would clarify that guaranteed renewal of
health insurance means that insurers cannot target individuals for
premium increases because the have had claims or a new disease
diagnosis. The bill would ensure that individuals will not be priced
out of the market for health insurance at the very time that they need
it most.
The goals of this legislation are simple: 1. To strengthen HIPAA's
promise of guaranteed renewable coverage and make private health
insurance more secure for millions of Americans, and 2. to hold all
insurers accountable to a level playing field of reasonable standards
so they can compete fairly without dumping customers when they get
sick.
The ``Health Insurance Fairness Act'' will help the many millions of
people who rely on the individual health insurance market: those that
are self-employed, those employed by small businesses unable to get
group coverage, early retirees who rely disproportionately on
individual health insurance if their COBRA runs out before Medicare
begins, and others whose employers don't provide health benefits.
I urge my colleagues to cosponsor the ``Health Insurance Fairness
Act'' and I thank the Chair.
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