States worry some health insurers are circumventing law Aim of act was to make coverage more available


WASHINGTON -- State officials say they see worrisome signs that some health insurance companies are circumventing a new law intended to make coverage more readily available to millions of Americans who change or lose their jobs.

Insurers have found ways of discouraging sales to eligible individuals and groups, sometimes by charging very high premiums or by penalizing insurance agents who sell coverage to customers with pre-existing medical problems, the officials said.

"There is some troubling behavior in the marketplace," said Kansas Insurance Commissioner Kathleen Sebelius, who was among those expressing concern.

Wisconsin Insurance Commissioner Josephine W. Musser, who is president of the National Association of Insurance Commissioners, agreed. "Carriers are attempting to circumvent the law" in various ways, she said.

And Jay Angoff, director of the Missouri Insurance Department, said: "Congress had good intentions. But if insurers can charge whatever they want, they won't sell many policies to the people Congress wanted to protect."

Some states already have laws that prohibit insurers from denying coverage to sick people or charging them higher rates for a particular product.

For example, New York passed such a law in 1992. In an interview last week, Gov. George E. Pataki said: "It's worked very well. We haven't seen the disruptions or the efforts to evade the new federal law that you see in other states."

When President Clinton signed the legislation Aug. 21, 1996, he said, "It will eliminate the possibility that individuals can be denied coverage" because of pre-existing medical conditions and "will require insurance companies to sell coverage to small employer groups and to individuals who lose group coverage." The law, he said, will benefit "as many as 25 million Americans."

But some insurers are shunning the very people who were supposed to benefit from the law, the Health Insurance Portability and Accountability Act.

For example, some companies have told agents that they will not get commissions for selling insurance to people with medical problems. In a recent bulletin to agents in seven states, American Community Mutual Insurance Co. of Livonia, Mich., said, "We as an industry have greater exposure to more high-risk groups" because of the new law. Accordingly, sales to such groups "will not be eligible for commission" payments.

Laura Quinn, a lawyer for the company, defended the practice, saying that agents would otherwise have had strong financial incentives to sell insurance coverage to people with serious medical problems. "Those folks do need coverage," she said, "but we were afraid we'd get an unusually high number of such cases."

Janet A. Stokes, director of state government affairs at the National Association of Health Underwriters, which represents 14,500 agents, strongly objected to the practice of limiting or eliminating commissions on sales to higher-risk customers. "It's not in good-faith compliance with the law," she said. "It's an attempt by some companies to control their share of the less desirable cases."

In a letter to the federal Department of Health and Human Services, Stokes described the practice as "a direct attempt to circumvent the law" and said the federal government should prohibit it. Otherwise, "companies that play by the rules will get more than their share of high-risk business, forcing them to increase premiums for all their customers."

Members of Congress who worked on the 1996 law and insurance industry representatives said they were surprised by the efforts of some insurers to get around the law.

"These kinds of abuses go contrary to the intent of the legislation," said Rep. Gerald D. Kleczka, a Wisconsin Democrat.

Pub Date: 10/05/97

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