This article appeared originally in the Providence Journal in the business section on April 17, 2002

Insurance firm joins exodus from state

Journal Staff Writer

The number of health insurance companies that provide coverage in Rhode Island continues to shrink as another insurer has announced it will pull out of the state.

John Alden Life Insurance Co., a subsidiary of the Milwaukee, Wis. - based Fortis health, said it will withdraw its individual and small group medical insurance plans from the Rhode Island market in October.

The company stopped writing new insurance plans as of April 1, and will end its medical coverage on Oct. 1 or Oct 15, depending on the policy.

The company declined to say how many customers in the state would be affected. In its most recent regulatory filings John Alden had under 1000 enrollees in the state.

John Alden is the latest of several insurance companies that have left the state, including Harvard Pilgrim healthcare of New England which closed at the end of 1999.

Fortis Helath spokesman Robert Guilbert said the main reason that John Alden is withdrawing its coverage has to do with the regulatory environment in Rhode Island.

"It's primarily due to the fact that the managed-care regulations are applied to us and we re not a managed care [operation]," he said.

"It's a culmination of events that started a year ago with extensive regulatory mandates and regulations being overlayed," he said."It became impossible for us to stay."

He declined to elaborate on what specific regulations were affecting the company's business operations.

John Alden has been offering what is commonly known as a preferred provider network, meaning that it provides incentives for those it insures to see particular doctors. the co-payments are typically lower for visits to doctors who are part of the network.

Emily Harding, an independent insurance agent based in Newport, said that Rhode Island's health-insurance laws and regulations are pushing insurance companies out of the state. she said that a requirement that health insurance companies carry some responsibility for the care provided by the doctors they steer patients too doesn't make sense.

Rhode Island is trying to force life insurance companies with no doctors of their own to act like an HMO and all of a sudden be responsible for doctors' malpractice...." Harden said. "this is terribly unfortunate for Rhode Islanders who now have few if any reasonable choices left for health insurance."

Donald C. Williams, the state health Department's associate director for health-services regulation agrees that there are few choices now for health insurance, and that John Alden's decision to leave is bad for the state.

"I don't think that they are disclosing the real reason they may be leaving," he said.

There have been no significant regulations put in place in the past year, Williams said, so he's unclear
what John Alden refers to when it speaks of events that have affected its business in the past year.

"We do have strong consumer protection laws," Williams said, namely the Zainyeh Act, passed in 1994

The key provision of the law applies to companies that steer people to a select or preferred provider network. Such companies have an obligation to assure access. quality and continuity of care, Williams said.

That means that the network has to be large enough to handle the basic services of the insured; the insurance company has to make sure the providers are giving an "acceptable level of quality care," which is done by studying the outcomes of patient care, checking a physicians, credentials, reviewing licensing and seeing how many malpractice suits have been filed; and it means making sure patients get hooked up with a new provider if the old one leaves the state.

"We don't think [the regulations] are unreasonable, "Williams said. We think they protect consumers"

One of the main problems in getting more choices for health insurance is the domination of the Rhode Island Market by one company -- Blue Cross and Blue Shield of Rhode island, Williams said.

That company controls 7- percent to 80 percent of the private health insurance market, he said.

"They have such power in the state, they have a competitive advantage," he said.

Blue Cross can demand discounts at hospitals and it controls payments to physicians. "they really have a stranglehold on the state in terms of power."

That makes it difficult for another insurer to come into the state to compete," Williams said

He added only that it makes matters worse when the state government negotiating for health insurance for state employees and retirees, chose Blue Cross exclusively, "That was not conducive to competition,"
Williams said "We are becoming a single plan state".

How can you fix that?

"Maybe the answer is you make them a utility," he said. utilities such as telephone, gas and electricity companies are highly regulated by state government and have rates approved by regulators.