SD8 - An Operational Plan for Establishing a Small Employer Group Reinsurance Association
Executive Summary: Senate Joint Resolution No. 121, adopted by the 1992 General Assembly, requested the State Corporation Commission's Bureau of Insurance (Bureau) to develop an operational plan for establishing a small employer group reinsurance association for the Commonwealth. The request was made as a result of the review of a previous study done by the Bureau that recommended market reforms to improve access to health care coverage for small employer groups. A requirement that insurers accept every small employer group applying for coverage (guaranteed issue) was not instituted when the other market reforms of guaranteed renewability, entire group coverage, and continuity of coverage were instituted. The General Assembly decided to delay implementation for a guaranteed issue requirement and rating reforms until further study of a reinsurance mechanism was conducted. In accordance with Senate Joint Resolution No. 121, the State Corporation Commission's Bureau of Insurance recommends that: (1) A retrospective reinsurance mechanism be implemented; (2) Small employer group carriers be required to accept all groups applying for coverage; and (3) Community rating be required for small employer groups. The Bureau recommends that the above actions should apply to groups with at least two but less than 26 employees. The Bureau believes that groups with less than 26 employees are more likely to be uninsured because of lack of access to health insurance. The Bureau has reviewed the market reform efforts of other states, as well as the National Association of Insurance Commissioners (NAIC) and other interested parties. The majority of the reforms reviewed have been instituted very recently and there are no conclusive results to point to as a guarantee that any particular approach will be the solution. In recognition of what the Bureau believes are legitimate concerns of interested parties, and the Bureau's analysis of the shortcomings in the various options reviewed and/or implemented elsewhere, the Bureau proposal combines features of several proposals, including the NAIC model laws, and legislation and regulations enacted in Vermont. Some of the provisions will be unique to Virginia if they are adopted. The Bureau recommends a retrospective reinsurance pool. We believe that a retrospective stop-loss insurance approach will be simpler to administer and monitor, as well as more effective than a prospective approach. The Bureau also recommends that the community rating requirement be phased-in over a period of three years. A phase-in period would mitigate some of the impact community rating will have on small employer groups currently paying premiums that are considerably lower than the average. The Bureau believes that the additional requirements of guaranteed issue and community rating will improve access to health insurance coverage for the small employer group market. The establishment of a reinsurance mechanism in conjunction with these market reforms will provide stability and protection for carriers participating in that market. We recognize that the changes proposed in this report will not affect health care coverage for those covered by individual contracts or self-insured benefit programs. And, all individuals that are currently without health care benefits may not be assisted by the recommendations in this report. We do believe, however, that the recommendations, if implemented, will serve as a beginning for incremental improvement in access to health care coverage for the citizens of Virginia. |
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