HD14 - Classes of Occupations Deemed Ineligible for Health Insurance Coverage by Commercial Insurers
Executive Summary: Legislative Request House Joint Resolution No. 328 requested that the Bureau of Insurance of the State Corporation Commission .determine which groups of occupations and industries are most often deemed ineligible for health insurance coverage by commercial carriers. The resolution was a product of the Taxation of Insurance study as reported to the 1987 General Assembly by the Virginia Secretary of Finance in House Document No. 19. The purpose of the Taxation of Insurance study was to address the possible inequities in the current tax treatment of insurance companies and health services plans. After reviewing the study, the General Assembly stated that because: 1) Blue Cross/Blue Shield argues that the current tax exemption is justified because they insure high risk groups of employees who are declared "ineligible" for health insurance coverage by most commercial carriers, and that 2) actually determining which groups of employees and industries typically appear on some ineligibility lists is difficult due to the various underwriting practices of commercial carriers, and that 3) the groups of occupations and industries most often deemed ineligible for health insurance coverage need to be identified so that insurers who offer open enrollment plans will be equitably taxed, then the Bureau of Insurance is requested to determine which industries are being routinely denied health coverage by commercial insurers. Background of Study Blue Cross/Blue Shield plans operating in Virginia have always maintained a tax-preferred status. Until this past year when the General Assembly voted to tax the plans, but at a smaller percentage of the tax required of commercial health insurers, Blue Cross/Blue Shield plans have been tax-exempt. Some legislators and representatives of the insurance industry have argued that the activities of the Blue Cross/Blue Shield plans in recent years have become so similar to those of commercial health insurers that this preferential tax treatment is no longer warranted and provides an unfair, competitive advantage. Blue Cross/Blue Shield contends that the tax-preferred status is justified because of the non-profit, community service-oriented nature of their business. They specifically point to the Open Enrollment Program which is designed to provide health insurance coverage to any applicant regardless of health history, employment status, occupation or geographic location. Blue Cross/Blue Shield contends that one example of the Open Enrollment Program's social value is that coverage is offered to persons engaged in high risk occupations - occupations which are routinely denied health coverage by commercial insurers. Therefore, a segment of Virginia's workforce is capable of finding health care coverage that Blue Cross/Blue Shield believes may not be available through commercial insurers. If the tax-preferred status of Blue Cross/Blue Shield is revoked or substantially reduced, the plans have indicated that they may have to eliminate or curtail the coverage offered through the Open Enrollment Program. The Taxation of Insurance study was unable to determine the possible ramifications for high risk industries if the Open Enrollment Program was no longer available. An identification of those industries typically appearing on commercial health insurers' ineligibility lists is hampered by the widely varying underwriting practices of these companies. In an attempt to obtain additional information on the subject, the Bureau of Insurance was directed to identify which occupations and industries are, in fact, routinely denied health care coverage by commercial insurers so that the social value of the Blue Cross/Blue Shield Open Enrollment Program could be reviewed and the plans be equitably taxed. Study Methodology To achieve this task, the Bureau attempted to obtain the information from commercial insurers directly. Using a list of 42 occupations that the Blue Cross/Blue Shield of Virginia had identified during the Taxation of Insurance study as being routinely denied coverage by commercial health insurers, a questionnaire was developed and mailed to all companies licensed to write accident and sickness insurance in Virginia. Of the 832 surveys mailed, 89% were returned out of which 96 companies indicated that they write group health coverage in Virginia. Each of those 96 companies then responded to the following questions for the 42 categories of occupations: 1. Does your company routinely (i.e., as a standard procedure) insure this category for a group of: a) 2 to 10 employees? b) 11 to 49 employees? c) 50 or more employees? 2. Does your company routinely (i.e., as a standard procedure) deny coverage to this category for a group of: a) 2 to 10 employees? b) 11 to 49 employees? c) 50 or more employees? 3. Does your company provide coverage to this category, underwriting on a case by case basis for a group of: a) 2 to 10 employees? b) II to 49 employees? c) 50 or more employees? By breaking down the group sizes, results could be examined for differences between small, medium and large groups, addressing a concern about coverage availability specifically for small groups expressed by the Blue Cross/Blue Shield plans in response to the Taxation of Insurance study. Additional information was requested in the survey on type and cost of coverage provided to industries routinely insured and reasons for coverage denial for industries routinely denied. Findings and Conclusions Based on the research findings by the Bureau of Insurance, the State Corporation Commission cannot support the contention that certain high risk industries are deemed ineligible for coverage by commercial health carriers. While the results of the survey indicated that many commercial health carriers do, in fact, routinely deny coverage for high risk industries, at least some coverage is available from the commercial industry for all 42 occupations. The State Corporation Commission concludes, in agreement with the tax study, that the number of groups which would not be able to obtain insurance from commercial carriers is substantially fewer than the number suggested by the Blue Cross/Blue Shield plans. At least nine companies routinely insure small groups (2 to 10 employees) for any of the industries, and at least eight routinely insure medium (11 to 49 employees) and large (50+ employees) groups. Industries most frequently denied coverage but that still can obtain insurance from at least some commercial health carriers include "explosive or fireworks .manufacturers", "mines", "bars", "circuses and amusement parks", "taxi companies", and "oil operations". In most cases, the coverage offered to all 42 high risk industries is comprehensive, and no company limits the benefits offered to routinely insured small (2 to 10 employees) groups. And while several of the industries routinely insured do face higher, nonstandard rates from some companies, most of the higher rates are for large groups with 50 or more employees. The State Corporation Commission further concludes that there is inadequate information to determine whether coverage for those groups that are denied insurance by some commercial health carriers is actually being provided by the Blue Cross/Blue Shield plans. Although coverage for high risk industries appears to be available from at least some commercial health carriers, efforts to determine the true ramifications of losing the Open Enrollment Program remain elusive. Several questions that go beyond the scope of this present study are still unanswered. For instance, how many people in the high risk groups that are denied coverage by some commercial health carriers are actually being picked up by the Blue Cross/Blue Shield Open Enrollment Program? How many of the industries that are denied commercial coverage are self-insured or would not seek commercial group health coverage as a benefit for its employees anyway? What are the Virginia employment statistics for the groups that are identified as being denied coverage by some commercial insurers? How many individuals are actually employed by these industries? How many such industries actually operate in Virginia? For instance, casinos are on the excluded list but they are illegal in this state. Some of these industries such as breweries and hospitals are typically large groups, making coverage availability for small groups within these industries unnecessary. How many of these industries actually have employee groups in the different sizes? Whether commercial insurers routinely deny any of these industries does not address the issue of the degree to which health care coverage needs are or are not being met for high risk industries in Virginia. Study of the actual health insurance coverage needs of high risk industries in Virginia might be needed to determine the true effect of routine denial for health coverage by some commercial health carriers and whether the Open Enrollment Program fills whatever void exists. This study was designed to respond to one premise offered by the Blue Cross/Blue Shield plans operating in Virginia as a description of their social value and justification of their tax-exempt status in response to the taxation of insurance companies study completed last year. Specifically, this study identified the high risk industries and occupations that are most frequently denied coverage by commercial health insurers. This study was not intended to provide conclusive evidence to make a determination about the ramifications of losing the Open Enrollment Program. Therefore, while the results of this study may offer members of the Virginia General Assembly some information about the treatment of high risk groups by commercial health insurers, additional information may be necessary in order to determine fair tax treatment for insurers who accept higher risks. |
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