Currently the Utah legislature is proposing House Bill 294.  HB 294 is mainly a health insurance reform bill and it has already been passed in the House and is now moving to be debated and voted on in the Senate.  Much of the bill is fine however, there is a part of the bill that is concerning to me.  The bill will require a State-wide risk adjuster for all health insurance companies starting in 2013.  A risk adjuster is a mechanism  that essentially allows competitor insurance companies to share risk (loses and profits).  This bill would require that all health insurance companies in Utah to share risks and loses.  So what’s the big deal?

Well let me put it this way, let’s say you have two competing banks, B of A and Wells Fargo and lets assume they are part of a risk adjuster.  So the first year B of A has a great profiable year and makes $5 million dollars but Wells Fargo has a downer year and only makes $1 million (because B of A  took many of their customers).  To make it “fair and an even playing field” B of A will now have to take a portion of its profits and cut a check to Wells Fargo to make them even.  So even though B of A was a better-run business and made a profit it will now have to share profits with its competitors.  On the other hand, Wells Fargo got a hand out they did not deserve or earn to the detrament of B of A and its owners/members.  That does not make any sense to me. 

If competitors share losses and gains, what will will the incentive for companies to be efficient, cost concious, and prudent as they compete only to know that a competitor who is more successful will prop them up?  To be as plain as can be, this is a way for Utah to socialize health insurance through private insurance.  The risk adjuster in no way will reduce our health insurance premiums nor will it reduce health care inflation.  I personally believe this idea will harm the insurance market and reduce competition because it will dis-incentivize insurance companies from coming to Utah.  Less competition means  less choice, less choice means higher costs eventually. 

This legislation is headed to the Utah Senate for debate this week.  If you have concerns about this item in the bill, please let you State Senator know.  You can visit http://le.utah.gov/Documents/find.htm to find your State Senator and let them know your concern.