The Sort of Too-Easy Legislation That Has to Stop

Two General Assembly press releases from yesterday provide examples of the deceptively simple actions to which our state government is prone that are strangling to business and economic environment. The first comes from Senate President Teresa Paiva Weed (D - Jamestown, Newport):

Rhode Island law prohibits health insurance companies from adjusting the premiums charged to small employer groups more often than once a year, but it doesn’t specify what those adjustments can or cannot be.

The Senate yesterday approved legislation, (2009-S0539Aaa), that sets a cap on the amount that premiums can be raised from year to year based on changes in each employer group's age and gender of persons to be covered. That cap on adjustments in the "age and gender rate factor" would be set at 120% of the prior year's amount for that same rate factor. This would provide a maximum increase allowable (due to age or gender) of 20% or less, compared with 40% increases recently reported by some small businesses. ...

"The bill we passed in the Senate is a small piece of the vast and challenging health insurance and health care picture," said President Paiva Weed. "Yet each action we take is important if it helps more citizens, more workers and their families, have access to affordable care. Prohibitive costs are one of the major problems. This bill should help rein in and control those costs for small employer groups."

The press release evinces no attempt to understand why those rates go up, and why they might go up more one year than the previous. In the long run, this sort of mandate is likely to increase the costs of health insurance for everybody in the state, ensuring that fewer workers and families have access to affordable care, because rates don't go up "just because."

The second piece of legislation comes via the House, from Rep. Brian Patrick Kennedy (D - Hopkinton, Westerly):

Under current state law, an auto insurance company can refuse to renew a customer policy if the company has to pay out more than $1,000 for a claim in any one policy year.

The legislation approved today by the House, (2009-H5193A), will raise that limit to $1,500.

It also increases to $1,500 — from the $1,000 figure in current law — the property damage claim limit below which an auto insurer is prohibited from assessing any premium surcharge against a policy holder.

Just because insurance companies can take a particular action unless forbidden by law doesn't mean that they will. If a customer, or group of customers, is profitable over the long term, the company will work to keep him, her, or them. Conversely, if the regulatory regime is too restrictive in a particular state, companies will leave or avoid it.

The way to increase consumer leverage — or leverage of individuals in any capacity — is to increase their opportunities to refuse to renew contracts and policies, which means more providers and more options.