State seeks funds to beef up regulation

WASHINGTON-Connecticut’s Insurance Department was portrayed as something of a toothless tiger in a recent report that said regulators approved nearly every premium increase sought by health insurers in recent years.

State Insurance Commissioner Thomas Sullivan vigorously defended his agency’s work, but he’s also hoping the new federal health care reform bill will enhance his power to conduct more far-reaching probes into insurance company requests for rate hikes.

The state Insurance Department has applied for a $1 million federal grant, made available under the new reform law, to strengthen Connecticut’s insurance rate review process. The grant is part of a new $250 million federal effort to give state regulators more resources to rein in spiraling insurance premium costs.

Officials at the department of Health and Human Services (HHS) have said the grants, which could be announced as early as next week, will bring new public scrutiny to insurance company practices and will enhance sometimes spotty oversight of this critical part of the health care industry.

Without question, the grant would dramatically increase the resources available to state officials for rate review. Dawn McDaniel, a spokeswoman for the Insurance Department, said the agency’s current budget for insurance premium rate reviews is $163,000. So an extra $1 million would be a true windfall.

McDaniel said the commissioner has proposed to use the funds to develop an online application for rate filings, so the public has easier access to those documents and could comment on proposed increases, and to purchase new modeling tools that will help analysts better assess data submitted by insurance companies, among other steps.

“Right now, our systems are very outdated,” McDaniel said. She said that while insurance companies can file documents electronically, the public cannot access those items online. They have to go to the department’s office to review filings or ask for paper copies to be mailed to them.

In addition, the Insurance Department would hire some temporary staff to work on rate reviews, including a new actuary, an attorney, and an information technology specialist.

But just how much more aggressive the agency would become is still unclear.

The issue of rate increases became a political hot topic starting last summer, after Anthem Blue Cross sought a rate increase of as much as 32 percent for insurance plans in the individual market. A subsequent legislative analysis found that the state’s five largest insurance companies won almost every premium rate increase they asked for over a four-year stretch.

Against that backdrop, state lawmakers introduced legislation that would have mandated public hearings for proposed premium increases and required insurance companies to make their justifications for such hikes available to the public. In the face of opposition from Sullivan and the insurance industry, the legislation stalled.

Sullivan noted that he did not approve Anthem’s request, instead granting an increase of as much as 20 percent after negotiations with the company. He said that outcome–based on good analysis of actuarial date–showed that the system worked.

But others said the state had no ability to look at questions of affordability or other considerations.

“There were some shortcomings to the process,” said state Rep. Steve Fontana, D-North Haven, co-chair of the Insurance and Real Estate Committee that held a hearing earlier this year on the state legislation. He said that while state officials seemed to have the capacity to analyze how much an insurer spends on patient care, they are less able to examine how much goes to overhead, profits, and other items.

“That’s so much of what angers consumers, is when they hear about massive profits, marketing costs, or inflated executive compensation,” Fontana said. He said he’s hopeful that, if Connecticut snags the federal grant, officials will be better positioned to conduct more thorough reviews. He specifically said he thought the department’s focus on improving its IT capability was a good step forward.

“If you don’t have the right data, it’s hard to get answers to the right questions,” he said. This grant could give Sullivan “the tools he needs” to take a more forceful approach.