Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, June 28, 1993 TAG: 9306280060
SECTION: VIRGINIA PAGE: C-1 EDITION: METRO
SOURCE: TOM HOLDEN LANDMARK NEWS SERVICE
DATELINE: LENGTH: Long
The Virginia Beach-based company has risen above countless business cycles but now finds itself confronted with a problem that it has little control over: finding affordable health insurance for its 12 salaried workers.
But legislation working its way through the General Assembly - for the second time - ultimately may help companies such as Hathaway-Duke by changing the way insurance companies do business.
Backed by nearly every major insurer, business coalition and health-care company in the state, the bill is seen as an important first step in Virginia's efforts to reform the insurance market for small companies that employ between two and 25 workers.
The effort comes as the Clinton administration wraps up its work on overhauling the nation's health-care system - a plan now scheduled for release after Labor Day.
Not content to wait for federal decisions, many states have begun reform initiatives of their own largely because they expect to shoulder much of the administrative duties of reform.
"States will have right much flexibility on this," said state Sen. Stanley C. Walker, D-Norfolk, chairman of the Commission on Health Care, which directs the state's reform efforts.
"Used to be you didn't move until you heard from the government, but that has gone by the board," Walker said. "Now it's we do our thing and we'll see how it fits with what the feds do."
Any help at all would please Keith Hathaway, the building company's owner.
"You just can't survive these days without health insurance," Hathaway said. "If something catastrophic happens, what are you going to do? What if someone gets cancer, or a $200,000 medical bill? What are you going to do?"
For many insurance companies, the answer to Hathaway's question has been to pay the bill and then raise rates - often drastically - and to the point that premiums became prohibitively costly.
Complicating the problem, some insurance companies insured only those businesses with low-risk workers - a practice called "skimming" or "cherry picking" - while leaving the higher-risk or sicker patients to companies of last resort.
The result has been that even the largest companies have raised rates, leaving increasing numbers of people without health-care coverage.
The problem is enormous and a complex one to solve.
Virginia has about 1 million uninsured people, and roughly 60 percent of them work for small companies. More than half the state's companies - 57 percent - employ four or fewer workers. Nineteen percent of the state's companies with 10 to 49 employees do not provide insurance, while 43 percent of those companies with fewer than 10 workers have no insurance.
Last week, the Joint Commission on Health Care heard insurance executives and business leaders endorse House Bill 2353 because of the steps it will take to control these problems in the small-business insurance market.
The bill would require all companies that offer health insurance policies in Virginia to offer plans that have at least one of two basic benefit packages. One is called the "standard benefits plan," and the other is called "essential benefits plan." They are very similar, except the standard plan contains slightly more coverage, such as provisions for checkups and vision and dental care. Both cover hospitalizations, doctors' fees and laboratory tests.
In addition, the bill would require insurers to use a "modified community rating" system, which would limit the sharp increases in health insurance premiums that have left thousands of companies with policies that are "experience" rated.
The two provisions are important for different reasons. By asking insurers to offer a minimum level of benefits, consumers can have a basis on which to make decisions about the value of competing plans. Using value as a criterion forces companies to compete more for higher-quality service, not just service based on price.
Insurance pricing is based, in part, on how companies rate plans. A plan that is community rated bases its pricing on the claims of a large number of people in the plan and spreads its risks over a wide range.
Experience rating is based on the experiences of the plan. Companies that make expensive claims under an experience-rated plan would likely see increases in premiums the following year.
The bill under consideration would use a "modified community rating" plan that would reduce the shocks small companies feel when claims are made on their plans.
Last year, the same legislation was approved by the General Assembly but with provisions that required it to be reheard before it could become law in April 1994.
There is not agreement on whether the bill will work as its backers hope.
Patrick J. Rooney, chairman of the board of Golden Rule Insurance, said similar laws enacted in Connecticut caused increases in small-business health insurance by 30 percent.
And other insurance executives worry that no matter how well-intentioned a bill is, the ultimate effect is more regulation, more paperwork and higher cost.
"I'm not sure some of this will work," said Patrick Devine of the Hampton Roads Chamber of Commerce, which supports the bill. "But you can talk in the classroom until there's nothing but talk, and until you get out there and actually try something, you can't tell if it'll work.
"Otherwise, we could be sitting here and talking about what to do a year from now."
by CNB