FRANKFORT, Ky. (Sept. 24, 2014) – Kentucky lawmakers received a report this week concerning the state of the insurance industry as it adjusts to the Affordable Care Act and increased fraud while trying to control costs.
“The insurance industry in Kentucky is healthy,” Department of Insurance Commissioner Sharon Clark told members of the Interim Joint Committee on Banking and Insurance on Tuesday. “We have a stable market here today. Companies and agents want to do business here.”
In 2008, when Clark first took over the department, 1,615 companies and 120,566 people were licensed to sell insurance in Kentucky. Today, she said the state has 2,026 companies and 174,000 people.
Clark said Kentucky ranks 27th in the nation in the amount of insurance premiums collected. In 2008, $16.5 billion in premiums was collected. Last year, it was $21.5 billion.
The state collected $138 million and local governments collected $250 million in taxes on insurance premiums last year, Clark said. Kentucky is one of only six states to allow such a tax.
“That is a very good source of revenue for local government,” said Clark. “They depend upon that.”
Clark said two additional insurance companies, WellCare Health Plans of Kentucky and Humana’s CareSource, have decided to sell private health insurance plans in the state.
“As you know, it has been a struggle for many years to increase competition across the state,” she said.
Clark said insurers are adjusting to the Affordable Care Act in Kentucky although there have been issues with prescription reimbursements and appeals of denied coverage.
“Our basic hurdle is we are dealing with some people who have never had health insurance before,” she said. “We have to do a lot of education. People didn’t know what the difference was between a co-pay, premium and deductable. It’s really been a challenge.”
Sen. Julie Denton, R-Louisville, asked what the insurance department was doing concerning inconsistencies in the required coverage of smoking cessation programs. She said some insurers were covering counseling and not the pharmacological options.
D.J. Wasson, of the department of insurance, said that was a national issue concerning the definition of the “preventive care benefit” clause of the Affordable Care Act. She added states are seeking guidance from the federal government on that issue.
Clark said the successes involving insurance in Kentucky are not confined to the Affordable Care Act. She said for the ninth consecutive years cost of workers’ compensation insurance has deceased.
“That has a tremendous boost for our employers,” said Clark. “I think the labor cabinet has done a very good job. They have had a very aggressive campaign on trying to work with Kentucky employers on safety in the workplace.”
She added that Kentucky also has the ninth lowest rate in the nation for workers’ compensation insurance. The average loss in Kentucky is $1.11 per $100 of pay rate. The national average is $1.34.
She said the average for the region – including Indiana, Illinois, Tennessee and Virginia – is $1.46.
Rep. Jeff Greer, D-Brandenburg, co-chair of the committee and a small-town insurance agent, said he was proud Kentucky continues to control the cost of workers’ compensation insurance.
“I think that is impressive, because maybe other than West Virginia, we have such a huge mining exposure which is really dangerous work when you think about workers’ compensation. We are going in the right direction there. I think our companies in the commonwealth are doing a much better job in loss prevention.”
Clark said a persistent challenge to the industry is the number of people committing insurance fraud.
“I hoped that as the economy recovered that it would plateau, but that doesn’t seem to be the case,” she said.
Last year alone, Clark said the insurance department received 1,686 fraud referrals that resulted in 86 criminal convictions. She said the majority of insurance fraud cases are occurring in Jefferson County.
“We have had issues with a lot of staged automobile accidents,” said Clark.
She attributed the staged wrecks to residents addicted to painkillers seeking prescriptions for opiates from pain clinics.
Clark said the Kentucky General Assembly’s passage of House Bill 1 in 2012 seemed to be one of the only factors that have slowed the growth of staged car wrecks. The legislation focused on the regulation of pain clinics and prescription drug abuse in Kentucky.