R.I. State Senate Bills Seek to Spur Competition in Health Insurance Market

February 22, 2005

Saying that a competitive insurance market is critical to making health insurance more affordable for Rhode Island consumers and businesses, Sen. Marc A. Cote has introduced a package of legislation aimed at attracting more insurers to do business in the state.

The legislation has been co-sponsored by an additional 24 members of the Senate.

Cote stated that the ultimate objective of the five bills is to cut red tape for insurance providers, while taking care to protect the health care coverage of Rhode Islanders.

“Without a competitive market, we have a situation where, basically, a single insurance company can get away with charging high premiums, allowing administrative costs to balloon and giving doctors reimbursements so low that many feel they must move out of state to remain in business,” said Cote, a Democrat who represents District 21 in Woonsocket and North Smithfield.

“Last year, the Assembly took aim at reforming Blue Cross & Blue Shield of Rhode Island. Those changes were necessary, but if we want lower insurance rates and more diverse insurance products, the next step is to move beyond reforming one insurer to make our regulations more inviting to all insurers. We need to have a greater number of companies competing for our business.”

The first of the bills (2005 – S0428) is meant to make it easier for insurers to do business in Rhode Island by eliminating a requirement that the Department of Business Regulation (DBR) review any premium rate changes before an insurer can institute it. The legislation would set up a “file and use” system for rates, under which insurers would still have to inform the department of new rates, but the rates would not be subject to DBR review provided that the changes meet established guidelines.

That bill would also eliminate public hearings held by DBR on certain types of rate changes filed with the department. The goal, according to Cote, is to eliminate hearings that generally do not result in lower rates and add to administrative costs that are passed along to ratepayers.

The second bill (2005 – S0424) eliminates the Department of Health’s oversight of indemnity insurance companies that have no involvement in the doctor/patient relationship. According to Cote, the regulatory burden placed on these companies that contract with preferred provider organizations has discouraged these insurers from doing business in the state.

A third bill (2005 – S0421) shortens the “sitting out” time that insurers face if they choose to discontinue issuing policies in Rhode Island. Current law, which exists in 48 states, bans insurers from returning for five years if they leave Rhode Island. The bill would reduce that time to three years.

Another bill (2005 – S0419) would create a high-risk pool to provide moderate-priced insurance to individuals who could not otherwise obtain private health coverage. This legislation is based on an American Legislative Council model act that has been customized and adopted by other states. Financing for the pool would come from an assessment on all health insurance and re-insurance carriers regulated by the state.

The final bill (2005 – S0423) would allow companies to offer high-deductible insurance plans, the sale of which was unintentionally eliminated by a piece of insurance reform legislation passed last year. According to Cote, many businesses look to high-deductible insurance as a cost-saving option, and allowing Rhode Island insurers to offer that option would attract more insurers to the market.

“Similar reforms were instituted in New Hampshire last year with great success. The number of companies and choice of plans has grown significantly, and there has been a big increase in the number of people who now have more affordable health insurance in that state. With the support of my colleagues in the General Assembly, Rhode Island can do the same,” he added.

Representative Elizabeth M. Dennigan (D-Dist. 62 – E. Providence, Pawtucket), an attorney and registered nurse, has filed companion legislation in the House of Representatives.

Cote’s five bills were submitted Feb. 10 and were transmitted to the Senate Health and Human Services Committee.

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