Other Mechanisms

Plan Standardization

A few states have established standardized plans in the small group market that must all offer consumers the same set of benefits. This allows states and consumers to more easily compare the prices of insurance policies. Maryland and New Jersey are among the states that use this mechanism.

Example: Under law, insurance carriers in Maryland can sell the Comprehensive Standard Health Benefit Plan only to groups of 2-50. Benefits provided by the plan must be at least equal to those offered by a federally qualified HMO, and the average premium cost across all insurers may not exceed 10 percent of Maryland’s average annual wage. (Insurers can sell riders to the standard policy for an additional fee.) If the average rates for the standard policy exceed the 10 percent threshold, the Maryland Health Care Commission must increase cost-sharing or reduce benefits. Insurers use adjusted community rating to set premiums, and policies are issued with no medical underwriting. While this has held down costs, the commission did have to reduce benefits this year to bring premiums within the 10 percent cap.¹

Setting a Maximum Surplus

While it is common for insurers to set minimum amounts that plans must hold in reserve in order to make sure that the plan is solvent and can pay its claims, a few states have set maximum amounts that nonprofit insurers can accumulate in surplus. In these states, if nonprofit health insurers accumulate more than the maximum surplus, they must return any additional amounts either to policyholders (in the form of lower premiums) or to the community (by funding other health initiatives).

States with maximum surplus limits for nonprofit insurance carriers generally, or for Blue Cross Blue Shield in particular, are as follows: Hawaii, Michigan, New Hampshire, and Pennsylvania.²