Health Reform: More Work on the Horizon

In March 2010, Congress passed the Affordable Care Act (ACA) that promised to expand health insurance coverage to millions of Americans. Although the bill was characterized as “federal reform,” it is actually the states that are responsible for implementation and for ensuring compliance with federal law. To complete these objectives, the Florida Office of Insurance Regulation (Office) will have to commit substantial additional resources (personnel and IT) to meet the federal mandates, and to assist the Florida Legislature to pass laws that comply with the new requirements. Therefore, overhauling state health insurance laws will be one of the primary legislative objectives of the Office during the 2011 Legislative Session. One may ask why the Office, a non-partisan government agency, is making the overhaul of the Florida insurance code on health care issues a legislative priority. Certainly health care reform is a very politically contentious issue; some legislators around the country have openly advocated a repeal of federal health care. In addition, there are genuine legal questions surrounding the ACA, specifically, the constitutionality of requiring people to purchase health insurance. However, the ACA is currently the “law of the land.” As conscientious public servants, it is our responsibility to present Florida’s policymakers with the facts, which include logistical needs and considerations required to implement the current federal law. To understand the scope of our effort, it is important to review the chronological timeline for health insurance market changes under the federal law. One of the immediate impacts of the ACA was the creation of the Pre-Existing Condition Insurance Plan (or “High Risk Pool”) by July 1, 2010. This health coverage is intended for people who have pre-existing health conditions, and who cannot find traditional health insurance coverage because these conditions make them “uninsurable.” Our state, under the leadership of Gov. Charlie Crist, did not believe the money allocated by the federal government would be sufficient to run this plan effectively at the state level. Therefore, Florida was one of 23 states that “opted out” of this plan, which means our state is deferring to the federal government to run this pool. However, this does not mean Floridians cannot utilize this coverage. In fact, the federal government began accepting applications from Floridians at www.healthcare.gov on July 1, 2010. Another important date for federal health care implementation was September 23, 2010. Some of the key reforms that were automatically implemented on that date include: 1) no lifetime limits on health insurance benefits, 2) restricted annual limits on essential health benefits, 3) first-dollar coverage for certain preventative services, 4) strict limitations on rescissions, 5) dependent coverage up to age 26 (current Florida law allows dependent coverage up to age 25, with optional coverage up to age 30), and 6) the elimination of pre-existing conditions for children. Technically these benefits under the ACA are automatic upon renewal of a plan, but in practical terms, the Office has expended resources to review form filings for small group, individual, large group, and out-of-state group carriers that comply with the law. Major Changes for 2011 Perhaps one of the most contentious issues of health care implementation is the standards in the law for Medical Loss Ratio (MLR). Federal legislators wanted to ensure that a specific portion of the premium dollar is designated for direct medical benefits and quality of care improvement for consumers. The federal legislation establishes different ratios for large group (85 percent) than for small group and individual health coverage (80 percent). Although well-intentioned, this static formula does not take into account the importance of health insurance agents, who will need to be increasingly relied upon to help consumers navigate the growing complexity of health insurance. The Office conducted a public hearing in Orlando last May, during which we took testimony from agents, insurers, and consumer advocates. Consequently, I wrote letters to both HHS Secretary Kathleen Sebelius and National Association of Insurance Commissioners (NAIC) President Jane Cline expressing my concerns and advocating a delay in the implementation of these standards. Additionally, at the recent national meeting of insurance commissioners, the Florida delegation helped build a coalition that passed a resolution expressing the NAIC’s commitment to retaining the role of health insurance agents in the process of selecting health insurance. Furthermore, the Office is collaborating with the NAIC leadership to send a letter to Secretary Sebelius advocating a three-year phase-in period for these standards. Finally, at the state level, the Office intends to work with state policymakers, supporting legislation that sanctifies the importance of health insurance agents into the law. This could be achieved by exploring different methods of defining agent commissions while complying with federal law, and the definition of MLR. However, our major legislative effort in 2011 will be conforming legislation for the immediate changes, and to expand the Office’s authority to regulate rates for the large-group health and out-of-state group markets. Currently the rates charged by these health insurers are not regulated in Florida. Above and beyond the creation of new laws, the Office may need additional resources, including form analysts and actuaries, to implement these laws. The largest overhaul of the health insurance system will be in 2014 with guaranteed issue and the elimination of pre-existing conditions, as well as the establishment of the health-care exchanges for the individual and small group markets. The exchange would be a virtual marketplace to help insurers compete on a cost efficiency basis while complying with consumer protections. The goal of the exchange is to facilitate the purchase of health coverage by supplying an effective marketplace. Put simply: The expansion of health insurance to roughly 30 million Americans (and four million Floridians), will be incredibly expensive — and much of this expense will have to be borne by the states. The largest cost increases will be due to the expansion of the Medicaid program. Expanding the regulatory authority and reporting requirements for the Office should also be an important consideration for the Florida Legislature. The federal government did foresee some of these expenses and has agreed to pay for part of the Medicaid expansion. As for state insurance regulation, HHS awarded $1 million grants to states to enhance the rate review process. Florida applied for this grant, which was accepted; the money will be used to add personnel and expand IT resources. When President Barack Obama signed the final piece of the Affordable Care Act in March 2010 it may have marked the end of the legislative process, but it only marked the beginning of the implementation process. Since insurance is primarily regulated at the state level, that means states are charged with the responsibility of adopting new laws, finding new resources, and contributing more money for the expansion of health insurance to millions of Americans. While I have reservations about the legislation, the Office does not intend to be in the middle of a partisan political debate. The Florida Office of Insurance Regulation will act in the public interest by attempting to implement the current law of the land. We will inform insurance companies of important deadlines and assist Florida’s policymakers with the information they need to understand federal law requirements, which will enable them to make educated decisions as how to best implement these changes.