With so many NH attorneys in private practice working for themselves or in small firms, many in the legal community have no doubt closely watched the progress of small-group health insurance reform in the past few months.

According to NHBA membership records, three out of every four NH Bar members work in offices with fewer than 10 attorneys. Offering insurance as an employee benefit is a challenge for many law firms since small groups (especially in a high-stress profession) historically have had difficulty obtaining a good price for insurance.

But early last month, Gov. John Lynch and others concerned about the high cost of health insurance celebrated the legislature’s passage of SB 125, a bill that imposes limitations on insurers’ ability to discriminate in setting rates and sets up a mechanism for covering individuals in groups that pose the highest risk for large claim costs. (At press time, the bill was still awaiting the governor’s signature.)

SB 125, which Gov. Lynch intends to sign, rolls back many changes imposed by SB 110, a health insurance bill passed two years ago that eliminated community rating and allowed insurers greater latitude in setting rates based on health status, geography, and other factors. Although SB 110 benefited some groups with good claims experience and other favorable factors, many small groups experienced shocking increases in their health insurance premiums. Their protests spawned support for the provisions of SB 125.

In a news release following the legislature’s approval of SB 125, Gov. Lynch applauded the new legislation. "No longer will insurance companies be able to discriminate against sick workers, or dramatically increase rates on small businesses just because they are located in the Seacoast or North Country. This legislation will eliminate the onerousprovisions of SB 110 and will help stabilize health insurance rates for our small businesses," Gov. Lynch said.

Whether that will truly happen remains an open question. This latest attempt at reform, insurance experts say, will not change many of the underlying conditions that can make health insurance difficult for small employer groups to purchase.

Major provisions of SB 125 affecting small-group health insurance (groups of 1 to 50 covered lives) include:

• Narrowing the spread between the lowest and highest premiums a carrier may charge to small-employer groups. Under current law, the spread can be as large as 12 to 1 and under SB 125, the highest premium can only be 3.5 times the lowest premium. (Under federal law, an insurer cannot refuse to insure a small-employer group of two employees or more, and state law extends guarantee-issue protection to groups of one with certain limitations on when such groups can enroll.)

• Eliminating health status of individuals and geographic location of the employer as factors in determining rates.

• Creating a reinsurance facility to allow insurers to protect themselves against large claims from workers with the highest risks of health problems. The program involves transactions between an insurance company and the reinsurance mechanism—the insured person and the employer would never know that the individual was in the reinsurance pool. However, the cost of entering an employee into the pool is high.

• Assessing every licensed health insurer in the state to support the cost for the reinsurance pool.

• Increasing the annual rate for any group would be capped at 20 percent of the previous year.

Health insurance costs are still likely to increase, insurance experts say, because underlying factors driving up health costs aren’t eliminated by the new regulatory scheme. One thing that will change, some experts warn, is that the "winners" and "losers" may switch places. Employer groups that saw large increases because of their geographic location and health status may see their increases moderate, while employer groups that benefited from lower rate increases or even decreases because of their relative healthiness will see their costs increase. Groups with many older workers and small groups will see relatively higher increases as insurers will still be able to use age of workers and size of group as rating factors.

Leslie Ludtke, an attorney and health policy analyst for the NH Department of Insurance, recently spoke about SB 125 at a meeting of the NHBA Health Law Section. She offered several cautions with regard to the new law’s potential impact. For one thing, Ludtke said, the legislation will not alter the nature of the marketplace, which is dominated by three carriers, Anthem Blue Cross and Blue Shield, Cigna and Harvard Pilgrim Health Plan. That lack of competition makes it difficult for insurance purchasers and for providers to bargain effectively.

Ludtke also said some insurers who had been lured to the state by the greater rating flexibility allowed under SB 110 have indicated that they will not continue to offer insurance in New Hampshire. Some of these carriers are national insurance companies, not previously known in New Hampshire, that had been interested in offering high-deductible health insurance policies that would work in conjunction with Health Savings Accounts (tax-exempt accounts established to pay out-of-pocket for routine health expenses) to which employees and employers might contribute. (The potential use of HSAs as an employee benefit will be explored in a future issue of Bar News.) Thus, SB 125 may slow the growth of HSAs as a benefits strategy in NH.

Ludtke said the Insurance Department is in the process of forming a study group to look at the issue of accessibility to insurance in New Hampshire. Some employers, faced with significant cost increases in health insurance, are electing not to offer health insurance as an employee benefit.

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