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New Pennsylvania Law Helps Small Businesses Control Insurance Costs

Governor Tom Corbett has signed a law that expands the Pennsylvania Insurance Department's authority to review and disapprove rate increases in the small group market. Previously, that was out of their hands. Large commercial insurance companies that deal with big businesses are still outside the scope of their authority.

"Large employers really don't mind that, because they benefit from direct negotiations with companies. Small employers are sometimes hit rather hard because their health risks cannot be spread among a larger group, so in that case any individual health issue can create a spike for the entire group," said Rosanne Placey, a spokeswoman for the Pennsylvania Insurance Department.

Act 133 expands the department's authority to review proposed rate increases of 10 percent or higher that are filed for small group health plans for work places with up to 50 employees. Under the new law, an insurance carrier that wants to raise rates must first submit an application to the department.

"They submit income and expense data, including claims handling expenses, corporate overhead, and their overall payouts. Before we would approve any rate increases, our actuaries review these proposals to be sure they wouldn't be excessive, inadequate, or unfairly discriminatory," said Placey.

She said that the department will maintain their full authority to review rates for individual products, and added that company filings are disapproved about half of the time. The new law takes effect in March.