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‘Cover FL’ sponsor losing money

By Christine Jordan Sexton
1/8/2010 © Health News Florida

One year after Gov. Charlie Crist’s “Cover Florida” took effect, there are signs that the voluntary approach to providing affordable health insurance is in trouble. 

The largest health insurer in the program says it needs a 30-percent rate increase effective March 1. Without the hike, it will cost Blue Cross and Blue Shield of Florida 23 percent more to pay claims than it would collect in premiums, according to the rate filing. 

The Office of Insurance Regulation denied the initial request on Jan. 5, saying the information in the filing didn’t justify such high rates, OIR spokesperson Tom Zutell said in an e-mail to Health News Florida

The decision is not final; Blue Cross and Blue Shield could challenge it or submit a different filing. 

Randy Kammer, Blue Cross and Blue Shield of Florida’s vice president of regulatory affairs and public policy, said the company and OIR are trying to reach a consensus that will benefit “our members as well as the (Cover Florida) program.’’ 

“We are having discussions with the OIR that we hope will be fruitful,” she said. 

Sen. Dan Gelber, a Democrat from Miami Beach, said he voted for the bill but isn't surprised that the program is in trouble. "The only thing that's surprising is how much it's used by people running for office who somehow claim it was the right approach," he said. 

Crist pushed Cover Florida as a way to help lower the state’s uninsured population, which now hovers at 3.6 million, or about 20 percent of the population. Nearly one in four Floridians under age 65 lacks coverage.

The governor is fond of saying it’s a “mandate-free” plan, requiring nothing of anybody -- no subsidy from the government, no requirement that a company offer it, and no requirement that someone buy it.

Participating companies also are freed from the dozens of requirements for coverage that apply to most other plans sold in Florida. In Cover Florida, one type of plan, the least expensive, covers mostly preventive care, such as cancer screening. Companies are also required to offer a more expensive plan that includes inpatient and outpatient hospital care. 

While the voluntary approach was easier for the Republican-controlled Legislature to pass, it may be the undoing of the program. Cover Florida won’t let participating companies turn applicants away. 

That rule is also part of federal health reform legislation pending in Washington, but the bills also require that all individuals carry insurance -- the so-called "individual mandate,"  which has proven to be controversial. Florida Attorney Gen. Bill McCollum says he will contest its constitutionality. 

Under the Senate bill, those who refuse to buy coverage would be fined $750 for individuals and $2,250 for families of four or more. The House bill would impose a financial penalty of 2.5% of adjusted gross income, capped at the cost of a health plan. 

The proposed fines are not high enough to assure compliance, the insurance industry says. If young, healthy people aren’t required to purchase health insurance, they say, they may not. 

That, said Kammer, is exactly what is happening with the Cover Florida program. Only those who need coverage buy it, a situation called “adverse selection.”
Kammer said the company underestimated patients’ demand for medical services, which she called “extraordinary.”

The company maintains that even with a 30-percent rate increase, it would still have a “medical-loss ratio” of 94.6 percent, which means that nearly 95 cents of every dollar it collects would be spent on health care. Without the rate hike, the company says, its loss ratio will be 123 percent. 

The Office of Insurance Regulation rejected the rate request this week. In a written statement to Health News Florida, Zutell said the actuary reviewing the rate filing “determined that the rates being requested were too high.” Zutell said he does not know what the OIR would consider acceptable. 

Kammer said the company underestimated how many customers it would get from the program: It wound up with 65 percent of the 5,246 Cover Florida policies in effect through November. 

United Healthcare, the only other company to offer the Cover Florida products statewide, got a late start because of a delay in its rate approvals. So for the first couple of months of the program, Kammer said, the Blues offered the only statewide plans. 

United had sold 749 policies through November, said spokesman Roger Rollman. It is not considering asking for a rate increases at this time, he said. 

Sen. Gelber said that if companies are required to write policies for all comers, there has to be either a requirement or an incentive that encourages people to buy them, such as a tax credit. But when Cover Florida was being considered, he said, those options were "never on the table."

--Christine Jordan Sexton is co-founder of