A Massachusetts law intended to increase access to health insurance apparently has made it illegal for HMOs and other insurers to subsidize the premiums of low-income people.
An interpretation of the law by the state's insurance commissioner threatens the expansion of an innovative program, pioneered in Massachusetts and copied nationwide, that picks up part of the premium for workers who are between jobs or whose employers do not offer health insurance.
The insurance division's opinion could stymie the efforts of the state attorney general's office to promote the premium-subsidy plan as a fine example of how an HMO can provide community benefits to vulnerable and underserved populations (See related story, this page).
It also interferes with a $1 million premium-subsidy program launched by the state's largest HMO, Harvard Pilgrim Health Care, at the behest of Attorney General Scott Harshbarger. The program was a condition of approval for the 1994 merger of Harvard Community Health Plan and Pilgrim Health Care, the predecessors of Harvard Pilgrim Health Care.
The flap over the law, which was enacted last Oct. 1, illustrates the difficulty of using legislation to reform the complex underwriting practices of insurance companies.
The law establishes a standard package of healthcare benefits that must be made available to individuals seeking nongroup health insurance. It also forbids adjustments to premiums for any factors except age and geographic location.
The adjustment restriction was intended to block avenues for denying coverage. But it could very well prevent insurers from giving price breaks based on varying levels of income. The law "doesn't seem to have any other provisions for any other rate adjustments," said Kevin Beagan, the insurance division's director of health policy.
Decrying what it called an "overly technocratic" reading, the attorney general's office has beseeched Insurance Commissioner Linda Ruthardt to leave well enough alone. "It was not intended to kill this kind of a program," said Barbara Anthony, assistant attorney general, giving her interpretation of the law. "It does not preclude a discount off the premium."
Insurance officials contended they had no choice but to enforce the law's unintended consequences, leaving any revisions to the Legislature. "We can't selectively enforce part of the law," Beagan said. "We have to enforce the laws as they're written."
The issue arose when Kaiser asked the insurance division whether it could continue to offer the subsidy plan under the new law, Beagan said. The plan dates to the 1980s when a small HMO called Valley Health Plan offered it in two western Massachusetts counties.
Kaiser bought the HMO in 1987 and thought so much of the "dues subsidy" concept that in 1990 it began expanding it to other Kaiser plans nationally, varying the terms slightly according to local circumstances, said Kaiser spokesman David Rooney.
In 1997 a total of 24,000 beneficiaries received subsidies of 50% to 80% on their insurance premiums nationally, for a total Kaiser commitment of $35 million. Rooney said the Oakland, Calif.-based company plans to increase that commitment to $50 million in 1998.
In Massachusetts, Kaiser absorbs $400,000 in subsidies to 308 people through its local health plan, Farmington, Conn.-based Kaiser/CHP. Those beneficiaries have family incomes of less than 200% of the federal poverty level but are not eligible for Medicaid or other health assistance. Beneficiaries must be either actively seeking work or in a job that does not include health insurance, Rooney said.
Beagan said those beneficiaries are not affected because their subsidies predate the new law.
But Anthony was more concerned about the hurdles to expansion. She cited Kaiser's pledge to raise its commitment to a maximum of 0.75% of total premiums, from the previous 0.5%. And the enforcement stance by the insurance division "could have a chilling effect on other plans that were thinking about it," she said.
Ruthardt offered a way around the dictates of the law by suggesting that insurers set up a foundation through which vouchers for insurance coverage could be funneled.
But Anthony said that would needlessly force low-income residents to "jump through an extra hoop" as well as add a layer of cost and bureaucracy to an otherwise simple community-minded initiative by health plans.
Harvard Pilgrim, midway through a four-year pilot program, is "adopting a wait-and-see attitude" during the clash of state agencies, said spokeswoman Patti Embry-Tautenhan.
The pilot has 184 active participants receiving subsidies of $100 per month for individuals or $200 for families. Since 1996, 338 beneficiaries have been in and out of the program, which is aimed at workers losing employer-sponsored insurance because of layoffs, Embry-Tautenhan said.
For its part, Kaiser will "try and find ways to keep it going" in Massachusetts, Rooney said. "We really see the value of the program."
Even if the income-adjustment issue could be overlooked, the law still would close the door on dues subsidies because the rates are determined in part by medical underwriting, another forbidden practice, said Michael Klein, spokesman for the insurance division.