N.H. Weighs Impact of New Group Rating

August 24, 2004

New Hampshire’s smallest businesses are being hit the hardest by a new law that allows health insurers to set rates based on such risk factors as age and health, state officials say.

Officials said the nearly 25,000 businesses that employ fewer than 10 people are experiencing extreme volatility in their rates.

The law has led to 30 percent rate reductions for some and 80 percent rate hikes for others, officials said.

At the same time, insurance agents and state officials say the law — known as Senate Bill 110 — has resulted in renewed competition among insurers. New carriers have entered the state and begun rolling out lower-priced health care plans in response to the competition.

The law allows insurers to consider a company’s location, type of business and health of its workers in setting premium rates for businesses with 50 or fewer employees. The goal is to attract more insurers to the state, thereby increasing competition and giving businesses more choices and better prices.

Officials said the wide rate swings are affecting the smallest companies most because larger ones have a mix of young, old, healthy and sick workers to spread the risk.

According to the state, the law covers 90 percent of the 34,844 businesses in New Hampshire. The 214,000 people working for the affected businesses represent 35 percent of the state’s work force.

The Business and Industry Association of New Hampshire said the law’s full impact won’t be known until businesses renew policies in October.

Thus far, there’s a wide range of estimates of the law’s impact.

State Sen. Bob Flanders, R-Antrim, who chairs the Senate Insurance Committee and is a sponsor of the law, said it appears 70 percent of small businesses have experienced rate cuts, 15 percent had no change and 15 percent experienced rate increases.

Democratic gubernatorial candidate John Lynch — who believes the law should be repealed — said 10 percent of all small business owners have experienced rate hikes of 70 percent or more.

Raymond White of Cornerstone Benefit and Retirement Group in Bedford said his renewals have resulted in one-third getting reductions, one-third staying the same and one-third getting increases.

Insurance Commissioner Roger Sevigny says lawmakers could ease the impact on the smallest businesses — the ones employing fewer than 10 people — by capping their maximum rate hike.

“For example, in that one to 10 business category, rates might not be more than three times the lowest rate for the group. Right now, it can go up substantially more than three times,” he said.

Flanders said he’d like to change the law to help the smallest businesses.

“That’s not what we intended and that’s what we’ll be addressing,” he said.

What frustrates business owners is that rates can vary for the same type of business.

Tim Sink, president of the Concord Chamber of Commerce, was pleased and surprised to see a 5 percent rate reduction. Meanwhile, the Waterville Region Chamber of Commerce rates jumped 18 percent.

Cynthia Cobb, who runs Colby Hill Inn in Henniker with her husband, was rocked by a 54 percent increase for their family and three employees.

“Nothing had changed. We didn’t add or deduct anyone, we didn’t have any major illnesses, no chronic diseases. Nothing,” she said.

She calls the process “voodoo insurance.”

On the other hand, state Sen. Russell Prescott, a Kingston Republican and sponsor of the law, is getting quotes from different companies for the first time in 10 years at his family business, R.E. Prescott Water System Supply and Engineering in Exeter.

“Those who get large increases usually find out that less than 25 percent of it is attributable to SB110,” he said in defense of the law.

In the end, how health care costs are split up will come down to one’s philosophy, believes Sevigny.

“Do you believe it should be the same price for everyone or somewhere in-between?” he said.

Copyright 2004 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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