The Commissioners: Sandy Praeger

The state of Kansas is examining several key areas of concern in 2007 including the uninsured motorist population, health care for small businesses, rating, federal health insurance iniatives and more. Insurance Commissioner Sandy Praeger met with the Insurance Journal at the December 2006 Winter Meeting for a discussion of the top insurance priorities facing her state. First elected in 2002 for her first term, Commissioner Praeger was recently re-elected in November 2006 to a second term. As commissioner she oversees nearly 1,700 insurance companies and 65,000 agents.

What are your plans to correct the high number of uninsured drivers in Kansas?
Praeger: You know, in spite of the fact that we mandate that everyone that drives a car has insurance; we know that probably at least, at any given time, 10 percent don’t. It is very important for motorists to have insurance, because if they’re hit by someone who is not insured, then the cost is shifted to those who have insurance. Our legislature this year created a task force that will bring insurance industry and legislators together to look at what can be done.

One of the things that we’re looking at is an identification number that can be filed with the Department of Revenue which will indicate whether or not that person has insurance. It will be something that law enforcement can readily access and make sure that when they stop a driver and they say they have insurance but don’t have proof of it with them, they can quickly check that. So that’s one step.

We’ve increased penalties for uninsured motorists. We’ve required that they bring proof of insurance when they get their new car tags, all of that helps, but it doesn’t solve the problem.

Kansas is also considering changing the regulation of personal lines insurance. Can you tell us about that?

Praeger: Two years ago, we did change commercial lines to be just a “file and use,” rating system. This year we are going to begin the process of discussing and educating the legislature about the advantages of “file and use,” for personal lines as well making sure that if the change is made consumers are protected.

We do think a good competitive marketplace, including the file and use system, can go a long way to keeping rates down. Good, healthy competition can do that. Kansas ranks fifth-lowest in terms of what people pay for auto insurance premiums (nationwide). So when you have a good competitive market, you can keep premiums down.

Could you discuss the availability of health insurance, particularly for small businesses?
Praeger: We define small business as groups with two to 50 employees. We know that the real problems with health insurance lie with the two to 25 employee groups. We see much more of a buy-in on insurance when you get over 25 employees. The problem in the small group market is that groups are rated by the people they work with, and if you have several people in your workforce that have a chronic conditions, then everyone pays more on their insurance.

We’ve actually done a couple of things: we had a federal grant in 2000 to do a very comprehensive study on the uninsured, and divided the state into ten regions. Even though we’re a small state, there is still a lot of geographic diversity in Kansas that correlates with the uninsured rates. In the Kansas City metropolitan area, 5.4 percent was the uninsured rate, in southwest Kansas where we have the meat-packing industry, it was 16.8 percent. There is a real disparity in terms of the number of uninsured and the percentages of uninsured.

We have a second grant that we are just winding up, that looked at a different way of spreading the risk in the small group market. Essentially if you’re in a small group and you have a couple of individuals that have high-risk conditions, the rest of the group doesn’t pay more because of that. We’ll seed those people out, pull them out, for rating purposes only — though they will have the same coverage. We think there are better ways to fund those costs.

It is a problem. If we are going to continue to have a private market system for health insurance, we have to find ways to assist folks who have health conditions.

Do you see a future for any kind of federal system for health insurance?
Praeger: Well, there are a number of options that have been proposed. The federal government does assist us with our high-risk pools, and that’s been one of the ways that the states have addressed the issue of individuals who can’t get insurance. The federal government makes grants to the states to assist us with the costs in those high-risk pools. Kansas has taken full advantage of that and that’s one thing that the federal government is already doing.

There have been proposals to assist companies with their high-cost individuals, much as I was just talking about. However, one of the proposals in Congress has been that those excess costs would be provided by the federal government. Those are a couple of solutions that build on a private sector approach.

Sen. Michael Enzi, who used to chair the Labor Committee, and I guess he probably won’t be in leadership now that the Senate has changed, had a proposal. His proposal would have created some opportunities for small groups to band together into associations.

The National Association of Insurance Commissioners has always opposed association health plans because as originally drafted and conceived, they would have superseded, or preempted, state regulation. Of course, we think state regulation is the best in terms of consumer protection.

Sen. Enzi came out of the legislature in Wyoming so he understands the importance of state regulation. His proposal would have created the associations, but the members and the products would have still been regulated at the state level. Whether that proposal goes anywhere now with change in leadership I don’t know, but it is another proposal that is out there.