Brooklyn Chamber of Commerce President and CEO Carl Hum testified about the organization's support – with conditions – for reinstating prior approval of health insurance premiums before the New York State Assembly Committee on Insurance on June 8, 2009. Following is his testimony:
Good morning Chairman Morrelle and members of the Committee. My name is Carl Hum. I am the president and CEO of the Brooklyn Chamber of Commerce, a membership organization whose mission is to support and advocate for its Member businesses and promote a healthy and robust business environment in Brooklyn. The vast majority of our membership consists of small businesses and we also have a number of larger companies, including four of the seven major health insurance carriers operating in and around New York City.
We are here today in support of reinstating prior approval of health insurance premiums, but we have concerns about some of the specifics of this legislation as currently written. Allow me to provide you some context before I go further.
Since the beginning of this decade, our Members have consistently cited the increasing cost of health insurance premiums as a primary obstacle to growth in our annual membership surveys. The Chamber responded to these concerns in 2004 by creating Brooklyn HealthWorks, a subsidized small business plan made possible by the New York State Legislature under the leadership of Assemblyman Joseph Lentol and Senator Martin Golden, and with the generous support of our long-standing insurance partner, GHI, an EmblemHealth company.
Today, more than 429 businesses in Brooklyn and nearly 2,000 employees and their family members have Brooklyn HealthWorks coverage. We are currently enrolling 20 to 25 businesses each month while many other counties in the state have seen flat or decreasing Healthy NY enrollment. Businesses enroll in Brooklyn HealthWorks because of its low-cost and the overall value proposition compared to other small group products available in Brooklyn.
While current file and use provisions have a mechanism for refunding rate increases that are found excessive, small businesses do not have the luxury to anticipate a possible refund as many are constantly juggling cash flow to pay for rent, fuel, wages, and other costs of doing business. Excessive rate increases not only jeopardize our Members’ ability to compete, but could also force some to drop coverage and prevent others from offering coverage to their employees at all. Small businesses need assurance that rate increases are justified and non-discriminatory. Accordingly, the Chamber supports the reinstatement of prior approval; however, we have three primary areas of concern about the proposed legislation in its current form.
First, small businesses need time to consider their options based on approved rate increases. The current legislation requires insurers to give small businesses a minimum of 30 days notice. This timeframe is inadequate for brokers, chambers of commerce, and others to notify small businesses of approved rate increases and process renewal paperwork before coverage lapses. In order to give all stakeholders enough time to adequately consider their available plan options and process necessary paperwork, a minimum of 60 days notice should be required. Most insurance companies already adhere to this timeframe, so this change should have a minimal impact for most carriers.
Second, we are concerned about the Insurance Department’s staffing capacity to approve new proposed rate increases under a prior approval system. We hear from our insurance carrier Members about excessive delays they experience in getting new products on the market—those that are currently subject to prior approval. In order to ensure carriers can get justified rate increases approved in a timeframe that allows for 60-day rate notification, a mechanism must be in place to deem proposed rates automatically approved if the Department is unable to meet statutory approval timelines.
Third, we share the Chamber Alliance of New York State’s concern about the impact of increasing medical loss ratio requirements from 75% to 85%. This increase could adversely impact the competitiveness and viability of carriers throughout the state—in particular those newer and smaller carriers who do not have the administrative efficiencies to operate within these boundaries.
Finally, in addition to ensuring rate increases are justified at the front end, we must focus our attention on some of the major cost drivers of increasing health insurance premiums. We were dismayed to see a hike in the health insurance premium taxes this year by more than $700 million. These taxes now total more than $4.2 billion in annual taxes that get passed along to businesses and individuals with health insurance coverage.
At the end of the day, we need to address the rising cost of medical care—which is the primary driver of increasing health insurance premiums. Companies like Atlantis Health Plan have some of the lowest cost plans in New York City by making one-stop medical facilities available to subscribers, using electronic medical records, and ensuring medical procedures are necessary and in the best interest of the subscriber. In addition, Aetna, Emblem, and Empire Blue Cross Blue Shield have taken many steps in recent years to encourage wellness, prevention, and appropriate management of chronic conditions as a way to help reign in some of the costs that make up increasing health insurance premiums. These and other steps are necessary to retain a competitive employer-based health insurance market in Brooklyn, New York State, and throughout the entire country.
Once again, while the overall intention of this prior approval bill is laudable, some of the specific details could be improved to ensure it works better for all of the stakeholders in our insurance system.
Thank you again for the opportunity to testify. I would be happy to take any questions you may have.