Health Care Market Disrupted in Kansas

Published August 1, 2002

State insurance officials have established a task force to find out why insurance companies are leaving Kansas and what can be done about it.

During 2001, several national insurance providers stopped offering individual medical coverage in Kansas, a development that is hurting more than 11,000 state residents. The lack of competition in the state’s insurance market is having an inflationary effect, hurting even those consumers whose providers haven’t left the state.

Kansas Insurance Department (KID) officials and insurance company spokespersons note similar problems plague other states. Over-bearing regulations imposed on the individual health insurance market are inflating insurance costs and making the individual medical insurance market unprofitable.

“I have no doubt it’s a business decision,” says Matt All, KID assistant commissioner. “Companies are finding it really difficult to make a buck right now in the individual medical market because of rising medical costs.” Industry experts, however, say insurers are leaving because of a difficult and expensive regulatory environment.

“Sometimes you hear insurance agents say that Kansas is more difficult to deal with than other states,” says Larry Magill, executive vice president of the Topeka-based Kansas Association of Insurance Agents, a group of about 2,500 independent insurance agents. “I’ve heard stories that companies were leaving because they couldn’t get rate increases, or couldn’t get them fast enough.”

Kansas Not Alone

Individual medical insurance plans provide health insurance coverage for people who are not part of a group plan offered through an employer. KID’s All says about 11 percent of the Kansas population—twice the national average—is covered by this type of insurance.

Since April 2001, at least seven national insurance providers have notified the state insurance department they will not renew existing individual medical insurance plans. Others have suspended sales or marketing efforts, although they will continue to administer existing policies.

John Bouslog, in-house counsel for National Travelers Life Co., says his firm did not renew about 1,850 major medical policies issued to Kansas individuals. “It did not prove to be a profitable business,” he explained.

Mutual of Omaha Insurance Co. also did not renew its individual hospital, medical, and surgical expense plans last year, a move that affected about 800 Kansas policyholders. “We pulled out of the individual major medical business in Kansas because we were unable to maintain a viable product in the state,” says spokesman Joe Clauson.

“We had a very small policyholder base in the state,” says Paul Burkett, vice president of corporate relations at American Republic Insurance Co., which suspended Kansas sales of individual medical policies late last year. “It was a business decision.”

All notes Kansas is not the only state to be losing individual medical coverage. He says the seven companies leaving Kansas also left other states about the same time. “To my knowledge, not a single company has left Kansas that hasn’t also left other states,” All says.

Rate Complaints

All says health care costs are rising at double-digit rates. As a result, KID has tried to strike a balance between allowing insurers to raise rates to cover costs and protecting Kansas consumers from high rates.

Magill, however, says recent federal and state insurance reforms, mandates, and regulatory compliance burdens have added to the problem for insurers. Some states have adopted legislation prohibiting carriers from denying coverage or charging high rates to individuals because of previous health care expenses or pre-existing conditions.

Burkett says the Kansas regulatory environment does not help the situation. “As any company, we would like to have a favorable regulatory climate allowing us to get the rate increases we need,” he says. “Evidently, we had a difficult time getting the rate structure we felt we needed to get.” All says most complaints are based on rate increase requests.

The state insurance department sees the issue differently. According to All, “I don’t think this is a regulatory issue. Some companies didn’t get a rate increase as quickly or as easily as they wanted, but we feel it’s also important to keep rates fair for Kansans.”

Task Force Named

Magill says Kansas is now trying to streamline some processes and do a better job of dealing with insurance providers and agents. All has recently suggested the department issue clearer guidelines for carriers filing for rate increases and more complete explanations of why requests are denied. There was no mention of any efforts to review the state regulatory environment.

The task force organized late last year, which includes several insurance agents from around the state, has not yet made specific plans. Most likely the group will start by approaching the insurance companies who left the Kansas health insurance market and ask what it would take to bring them back to the state.