Court Grants WEA Trust's Stay

Trust can maintain pool-rating system while court decides case

The WEA Trust recently picked up an important victory in its efforts to maintain affordable health insurance coverage for smaller and medium-sized school districts.

A circuit court judge granted the Trust's request for a stay of an Office of the Commissioner of Insurance (OCI) cease and desist order. This ruling allows the Trust to continue its method for determining health insurance premiums for pool-rated school districts.

"While we are pleased with the decision, we realize that this is only one step toward what we hope will be a favorable conclusion," said Fred Evert, Trust vice president of field operations.

Early last year, the OCI ordered the Trust to stop requiring school districts that participate in its pool to waive their right to receive individual medical claims history – a requirement that the Trust considers vital to the success of its current pool-rating system.

The Trust appealed OCI's ruling and asked the court to allow it to continue its pool-rating practice, pending the court's final decision on its appeal.

How the pool works
When insurers determine health premiums for a group, they look at medical claims incurred by the employees in previous years, known as "claims experience."

For large employers, a few costly claims do not cause a premium spike because they have a large enough pool of premiums to diffuse the impact. But smaller employers can watch premiums soar when they see even one large claim.

To temper these premium spikes, the Trust "pools" smaller districts into one group and treats them as a single, large group. This method mitigates the effect a large claim can have on a district.

"For smaller districts, determining premiums on a pool basis usually means their rates don't fluctuate wildly from year to year," Evert said.

Preserving the pool
While most insurers do not use a pool-rating system, it is the best option for smaller and medium-sized school districts. About 50% of the Trust's 62,000 health plan participants work for smaller districts.

To maintain the pool, the Trust adheres to a strict policy concerning the release of claims information: Pool-rated districts receive claims history reflective of the entire pool, rather than history for their individual district.

If a pool-rated district specifically requests its individual claims history, the Trust will provide it as required by state law, but will then base the district's premium on its own claims experience, making that district ineligible for pooled rates at the following renewal.

If districts within the pool were privy to their individual claims experience each year, those with high claims for the past year would stay with the pool. Conversely, those with moderate medical bills would likely find a lower rate and leave the pool, ultimately destroying the pool and decimating coverage for smaller districts, Evert said.

"If a significant number of districts with good claims experience leave the pool each year, the pool will eventually disintegrate," Evert said. "If the pool is gone, and all smaller districts were rated on the basis of their own experience, many would find it difficult to provide excellent and affordable health coverage for their employees."

Posted November 8, 2002