WHAT HAPPENED TO THE COVERAGE DIVIDEND? by John McDonough

People as old as I am may remember in the 1970s, as we faced the end of the Vietnam War, discussion of a “peace dividend,” a nice monetary boost from decreased military spending that could be used for education, health care, economic development – you name it. Well – 1974 turned into a big recession year followed by a staggering energy crisis, and pretty soon, everyone forgot about the “peace dividend.”

People not as old as I am may remember – during legislative discussions of health reform – talk by insurers and others of a “coverage dividend,” premium savings that would flow to businesses and individuals because expanded coverage would end cost shifting embedded in everyone’s premiums to finance care for the uninsured. Before we completely forget about it, I have to ask the state’s health insurers:

What happened to the “coverage dividend?”

We know health insurance premiums are increasing 8-12% next year, well about the national average increases of 6-7%. We know many businesses who are facing increases in excess of 20%. We know these increases are the most destabilizing force in undermining health reform’s success.

Forget about a “coverage dividend” … are we paying a “coverage penalty?” What’s going on here?

The promise of the individual mandate was lower costs as more young and health consumers entered the market. Why aren’t insurer’s rates reflecting increased enrollment from the mandate?

The merger of the small and individual markets (as of 7/1/07) is an easy excuse. But a special commission charged with studying the merger projected small group rate increases of only 1.4% on average as a result of the merger.

Some in the insurance community may view these comments as “insurer” bashing. I invite them to view these comments as a chance to explain what the heck is going on.

Also, it’s time for the Division of Insurance to use its regulatory authority for health insurance. While DOI obsesses on whether auto insurance premiums are falling 8% or 7.2% or 6%, many people paying health insurance premiums are being crushed by 25% rate hikes.

DOI has authority now to review rates. Insurers must file rates. In practice, there’s little oversight, and there has been little oversight for at least 16 years. DOI must do better. We need oversight. DOI should scrutinize the validity of rate increases. There should be a public, transparent process for reviewing rates. And we should not have to wait for Senate President Murray’s cost control legislation to get this in motion.

Chapter 58 created the infrastructure to do so – the Health Care Access Bureau to be staffed by a deputy commissioner, health care finance expert, actuary and research analyst. So far, the only staff on-board is Kevin Beagan, the deputy commissioner who also keeps duties as director of the state rating bureau (a full-time job on its own). The Division was allocated $600K in the FY08 budget.

Pending legislation also calls for increased oversight. HCFA’s cost control bill subjects any request for a premium increase of more than 7% to a public hearing. There are also similar provisions in the private insurance rating responsibility bill. This would require the DOI Health Care Access Bureau to review rate filings and subject any request for a premium increase greater than the increase in medical costs in the Boston area to a public hearing.

It’s time for the “transparency” spotlight to be focused on health insurance premiums. And it’s time for the Patrick Administration and DOI to take the lead.

John McDonough
Executive Director, Health Care for All