Ill. Governor Uses Executive Authority to Limit What Insurers Can Charge

July 17, 2007

Ill. Gov. Rod Blagojevich used his executive authority last week to make a rule that prevents insurance companies from considering someone’s health when deciding what premium to charge when renewing an individual policy.

His action comes as the Democratic governor’s sweeping health care initiative to extend coverage to the uninsured founders in Springfield, where he and lawmakers are locked in a budget disagreement.

The administration contends it’s trying to keep individuals from being priced out of their health plans once they’ve had an illness or injury. Insurers only would be able to consider demographics and medical cost inflation when setting individual renewal premiums under the rule. It doesn’t apply to insurance policies that cover large groups of people because they are more insulated from price fluctuations because the risk is spread out.

“Insurance companies shouldn’t use someone’s illness as an excuse to raise profits. It’s wrong and we intend to stop it,” Blagojevich said during an event at the University of Illinois at Chicago medical center.

The governor’s rule still must be reviewed by a 12-member bipartisan legislative oversight committee that with a super-majority vote could prohibit it from taking effect, said Susan Hofer, a spokeswoman for the Illinois Department of Financial and Professional Regulation.

But some said the governor’s move could do more harm than good by driving insurers out of the market and thus putting insurance farther out of reach for many people.

“Insurance reforms must go hand in hand with universal access,” said Karen Ignagni, head of the Washington-based trade group America’s Health Insurance Plans.

Insurance experts in the General Assembly reserved judgment on Blagojevich’s action.

House Insurance Committee Chairman Frank Mautino, a Spring Valley Democrat, said only eight other states have similar programs. Some have seen insurance premiums increase and companies stop writing policies, he said.

“It has the tendency to reduce the amount of coverage available within the market and also to raise the price because the pool within that structure tends to be a sicker pool,” Mautino said.

The Senate’s Insurance Committee chairman, Alton Democrat Bill Haine, called the plan “a worthy goal” and said insurance companies might be able to absorb the cost because the proposal covers only existing policyholders wanting to renew.

He said the reporting requirements of the plan would benefit ratepayers.

Mautino said he wasn’t certain the governor had the authority to implement the idea without legislation.

The governor also announced rules that would require insurers to report quarterly what they collect in premiums and how much they spend on claims.

Topics Carriers Legislation Abuse Molestation Illinois

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