main menu page title feature menus content footer
My Florida C F O

CFO's Initiatives

Stay Connected

Follow the
Department of
Financial Services

Sign up for the CFO's

Press Release

News   RSS RSS   Press Office   Archive

Gallagher Partners with Atwater, Negron to Put an End to Predatory Rating Practices


CONTACT: Tami Torres
(850) 413-2842

TALLAHASSEE – Shaneen Wahl from Port Charlotte signed up with an out-of-state insurance company in 1995 and paid $156 a month for coverage. After developing breast cancer, Wahl's premiums skyrocketed to $1,900 a month. Charles Castilla from Miami experienced the same spiraling rate hikes after his son had minor sinus surgery and his premiums rose 300 percent in two years. Florida's Chief Financial Officer announced at a press conference today that he wants to put an end to the predatory rating practices experienced by these consumers, and hundreds like them.

"Targeting individuals for substantial premium increases when they become ill and need coverage the most is unconscionable," Gallagher said. "All Floridians who purchase individual health insurance coverage should be given the same consumer protections. Floridians should feel protected by their health plan, not trapped by it."

Joining Gallagher at the press conference were Senator Jeff Atwater and Representative Joe Negron, who are both sponsoring legislation to close a loophole in Florida law. That loophole allows insurance companies to market health insurance products to Floridians through out-of-state associations, effectively bypassing Florida's consumer protections. The legislation would require all insurance companies writing individual health insurance plans to follow Florida law. Kevin McCarty, Director of the Office of Insurance Regulation was also at the press conference in support of the legislation.

"There are thousands of Floridians who are trapped in health insurance plans, struggling to pay premiums and fearful of becoming uninsured," said Atwater, whose legislation (Senate Bill 2264) was heard, but temporarily passed in Senate Banking and Insurance Committee today. "We need to put an end to predatory rating practices and establish a single standard for health insurance coverage marketed to individuals and families."

"Allowing some companies to write health insurance policies that aren't subject to Florida's consumer protection laws is a travesty," said Negron, who is carrying the companion bill (House Bill 999). "All insurance companies selling individual health insurance plans in Florida should play by the same rules."

Atwater and Negron also expressed concern that many consumers were being misled into believing that they were purchasing "group" health insurance and would be pooled with other members of the association that they are required to join. "It appears that many of these associations are just subsidiaries of the insurance companies," they said.

Using the loophole, out-of-state insurers circumvent consumer protections provided under Florida law, including timely payment of claims, credit for prior coverage and choice of replacement coverage. Predatory rating practices are also prohibited under Florida law but are employed by many out-of-state groups, including:

* Durational rating – The periodic raising of a policyholder's rates merely because they've held coverage for a specific length of time.
* Periodic closing of blocks of business – A common tactic used to segment the healthy from the sick by shutting down entry into one block of business while simultaneously opening a new block of business. Healthy policyholders from the old block migrate to the new block and leave the sick policyholders behind.
* Tier rating – Companies move policyholders who become ill from the class in which they were issued coverage to one that is of a lesser standard and subject to higher renewal rates.

"Florida's rating standards are based on risk-sharing principles that protect both the buyers and
sellers of health insurance from price shock, Gallagher said. "Florida requires insurance companies to properly price their products so policyholders don't experience rapid increases in their premiums when they need coverage the most."

Also on hand to testify at today's Senate committee meeting and at the press conference were Andrea Wolfe from Lakeland, two insurance agents – John Sinibaldi from St. Petersburg and Bruce Hadburg from Palm Harbor.

"The unregulated market experiences rapid turnover among policyholders, as healthy people are added through competitive pricing and older, often sick, policyholders are forced to drop coverage due to spiraling rate hikes," Sinibaldi said. "This practice needs to be stopped."

The unregulated market represents approximately 40 percent of the total health insurance market for individuals, or more than 175,000 Floridians. Fourteen of the 22 companies that sell individual health insurance in Florida do so through out-of-state groups.

The Department of Financial Services, formerly the Department of Insurance, has received hundreds of calls from Florida consumers. In fact, complaints about out-of-state group insurers has skyrocketed with a 483-percent increase between 1998-2002.

Broward Example

Palm Beach Example

Polk Example

Port Charlotte Example

Duval Example

Sarasota Example