Ensuring Accountability

Illinois PIRG Education Fund

As our economy weakens nationwide, Illinoisans are having a harder time accessing and affording health insurance. Illinois needs to change the way it regulates the health insurance industry to make sure residents have access to predictable and affordable coverage. An analysis conducted by the Illinois Public Interest Research Group indicates that increasing cost-containment and accountability measures for health insurance companies does not mean that the premium costs paid by consumers will increase.

Health insurance in the United States is regulated by federal and state laws. The federal government sets standards for employee benefit plans and protects consumers who experience lapses in coverage due to losing or changing jobs.i iiStates have the authority to regulate the business of the private individual health insurance market, as well as some components of employer-provided insurance.1

With regulation of the individual health insurance market left to the states, it is important that states provide consumers with the protections they need to access quality, affordable health care by holding insurance companies accountable. Without proper regulation, consumers often fall victim to unfair insurance industry practices that leave them in debt and without medical care.

There are fewer regulations placed on the health insurance industry in Illinois than in most other states, leaving insurance companies less accountable to the consumers they serve. Regulation in other states can provide a model to increase consumer accountability and protections and strengthen the marketplace.

The goal of any regulation policy change in Illinois should be to increase access, predictability, and affordability for consumers while preventing unethical, discriminatory or unfair price manipulation practices that consumer choice alone cannot prevent.

For this reason, it is important to consider the potential for cost increases in health insurance premiums generated by additional consumer protections. This has been a common argument made by opponents of insurance industry reform to justify avoiding instituting regulations to protect consumers.

A statistical analysis comparing the levels of regulation from state to state with average premiums, however, has found little evidence of a correlation between the number of regulations placed on industry and higher premium prices. According to the analysis conducted by the Illinois Public Interest Research Group (PIRG) Education Fund, opposing increased regulation by arguing that it will lead to higher premium prices is not tenable.

As job losses in Illinois continue to rise and family budgets tighten, it is important that consumers have health insurance coverage that is predictable and accessible when they need it. There are many oversight and accountability measures that can be added to Illinois regulations that make the individual and small group markets accessible and affordable for consumers. Based on the experience of other states, Illinois PIRG Education Fund recommends that the following basic reforms be a part of any reform policy:

• Require insurance companies to spend 85% of premiums on health care, not profit and administrative costs.

• Establish prior approval measures that prevent insurance companies from arbitrarily raising rates.

• Eliminate unfair coverage revocation by preventing the industry from unfairly canceling coverage after a policy has already been issued.

• Reduce barriers to access by creating an objective standard for “preexisting conditions”

This report provides further details of these recommended policies, compares Illinois’ current oversight of the private health insurance market to other states, and provides statistical evidence that new regulations do not correlate with higher premium costs for the consumer.

1 States cannot regulate health benefits that employers “self-fund”- that is, arrangements in which employers pay medical claims for employees rather than paying premiums to an insurance company – but when employers and employees pay premiums for employer-sponsored health insurance, states can regulate the health insurance plans.)
i Health Insurance Portability and Accountability Act of 1996 (HIPAA), Public Law 104-191
ii Employment Retirement Income Security Act (ERISA), 29 USC 18