SD25 - Study of High Risk Pools Pursuant to SJR 337 of 1997, and Other Related Health Insurance Issues

Executive Summary:

During the past several years, the Joint Commission on Health Care has initiated a number of health insurance market reforms to improve the availability and affordability of coverage for small groups and individuals. In addition, the Joint Commission has conducted a number of health insurance studies in recent years in response to study resolutions adopted by the General Assembly.

During 1997, the Joint Commission conducted a major study of how the Commonwealth can improve access to health insurance coverage and health care services for the indigent and uninsured pursuant to Senate Joint Resolution (SJR) 298. As part of this study, several policy options are being considered to further reform the health insurance market to make coverage more available and affordable for uninsured persons. Another health insurance-related study being conducted by the Joint Commission in 1997 examines whether health maintenance organizations (HMOs) should be required to include a "point-of-service'' option in their HMO plan offerings. This study is being conducted pursuant to Senate Joint Resolution (SJR) 297 and House Joint Resolution (HJR) 631.

Four Health Insurance-Related Issues Are Addressed In This Issue Brief

This issue brief addresses four additional health insurance-related issues. Two of the four issues were studied last year by the Joint Commission. This report provides follow-up information on the analysis conducted last year. The other two issues are specific study directives of the 1997 Session of the General Assembly.

Follow-up analysis is presented on the following two topics: (i) whether the Commonwealth should adopt legislation which broadens the Bureau of Insurance's regulatory authority to certain health insurance policies currently not regulated by the Commonwealth; and (ii) an overview of technical corrections that are needed in the legislation passed last year (House Bill 2887/Senate Bill 1112) to implement the provisions of the Health Insurance Portability and Accountability Act (HIPAA) of 1996. The two General Assembly study directives included in this report are: (i) a study of community rating and pre-existing condition exclusions; and (ii) a study of the feasibility of establishing a high risk pool in Virginia for uninsurable persons.

Bureau Of Insurance Authority To Regulate Health Insurance Policies That Are Issued Out-of-State But Cover Virginia Residents: Last year, pursuant to House Bill (HB) 1026, the Joint Commission studied whether additional insurance reforms should be enacted in the individual market. One of the specific issues addressed in the HB 1026 study was whether the Commonwealth has the authority to apply individual health insurance reforms to multiple employer welfare arrangements (MEWAs) and out-of-state group trusts and associations. One of the conclusions of the study was that if additional individual market reforms were to be adopted, consideration should be given to extending the reforms to out-of-state group trusts and associations by expanding the Bureau of Insurance's regulatory authority to these products. These insurance policies, although issued outside of Virginia, cover Virginia residents and are not subject to Virginia's insurance laws and regulations. This report presents additional information on whether the Bureau of Insurance should have some regulatory oversight of certain insurance policies that are issued outside of Virginia but insure Virginia residents.

Technical Amendments to Virginia's Legislation Which Implements the Federal Health Insurance Portability and Accountability Act (HIPAA) of 1996: Last year, the Joint Commission, with the assistance of the Bureau of Insurance, drafted legislation (HB 2887/SB 1112) to implement the federal health insurance reforms included in HIPAA. This legislation was passed by the 1997 Session of the General Assembly.

To meet the requirements of HIPAA, Virginia's legislation had to be drafted in a very short period of time to avoid federal preemption of the Commonwealth's pertinent insurance laws. In fact, HB 2887/SB 1112 had to be drafted before federal regulations were issued. Due to the limited amount of time available to draft Virginia's legislation and the lack of federal regulations/ guidance, a number of technical amendments are needed in Virginia's legislation to ensure compliance with HIPAA. This report briefly summarizes the needed technical changes, and addresses one policy concern regarding a limited number of individuals eligible for certain HIPAA protections who are not covered under Virginia's current statutes.

Study of Community Rating and Pre-Existing Conditions: Senate Bill (SB) 1181, which was introduced during the 1997 Session of the General Assembly, would have required pure community rating on all health insurance policies in the Commonwealth, and would have prohibited health insurance carriers from including pre-existing conditions exclusions or limitations in any policy. SB 1181 was not passed by the General Assembly. However, the Senate Commerce and Labor Committee requested that the Joint Commission on Health Care study the desirability and effects of: (i) prohibiting the use of pre-existing condition exclusions in all health care coverage plans subject to regulation by the Commonwealth; and (ii) requiring community rating in all health are coverage plans subject to regulation by the Commonwealth.

Study of High Risk Pools: Senate Joint Resolution 337 of the 1997 Session of the General Assembly directs the Joint Commission to study high risk pools and the feasibility of establishing such a pool in the Commonwealth. The Bureau of Insurance was directed to provide technical assistance to the Joint Commission in this study. A copy of SJR 337 is attached at Appendix A.