June 22, 2009

The Honorable Susan Bysiewicz           

Secretary of the State of Connecticut

30 Trinity St.

Hartford, CT  06106

Dear Madam Secretary:

I hereby return without my signature House Bill 6531, Public Act 09-135, An Act Clarifying Post Claims Underwriting.  For the following reasons I believe that this act is a solution in search of a problem and will unnecessarily disrupt the individual health insurance market at a time when Connecticut residents need more options, not fewer.

First, the current law, Public Act 07-113, passed by the legislature and signed into law only two years ago, works. It protects consumers and maintains a viable individual health insurance marketplace

Allow me to illustrate. The stated purpose of Public Act 09-135 is to ensure that consumers are protected from rescission, cancellation or limitation of an individual health insurance policy. Since the enactment of Public Act 07-113, however, the number of complaints regarding pre-existing condition limitations, claim denials and rescissions has significantly decreased.  In the year following the enactment of P.A. 07-113, 32,950 individual health insurance policies were written in Connecticut. Of these, only 52 – less than one-tenth of one percent -- were rescinded in accordance with the law. During that same period of time, the Insurance Department received 7 consumer complaints claiming that an insurer engaged in improper post-claim underwriting.  In each case, it was found that the consumer failed to accurately depict his or her medical condition when asked by the company. Clearly, the landscape of the individual market has changed – and for the better.

 Second, the act before me will increase the likelihood of insurance fraud, which raises costs for all of us. Specifically, certain provisions of P.A. 09-135 prohibit companies from rescinding, cancelling or limiting coverage on the basis of anything written on the application.

            If consumers know that they will not be held to account for the information supplied to the company in support of their insurance application, what incentive do they have to be truthful – particularly when they have a costly chronic illness or a pre-existing condition? While it is true that insurers are in the business of risk-taking, there is an underlying assumption that they understand the extent of the risk they are insuring. By prohibiting companies from rescinding, cancelling or limiting coverage based on the information contained in the application, the legislature has signaled that there is no meaningful penalty for failing to be truthful. If people know that they do not have to be truthful on their insurance applications and still have their conditions covered, the incidence of insurance fraud will increase. At a time when there is state-wide and national discussion on reducing the costs in the healthcare and health insurance systems, this approach seems short-sighted.

            Third, the act before me weakens competition in the individual market making it more difficult for consumers to find affordable health insurance. I think we would all agree that consumers benefit when there are multiple carriers offering multiple options at different prices. In times such as these, when Connecticut residents are looking for varying degrees of affordable coverage to fit their specific needs, I cannot support a bill that will reduce the number of carriers operating in our market.

 While I am certain this is an unintended consequence, it is, nonetheless, a consequence which I, as Governor, cannot overlook.  If we, as a state, tell insurance companies who underwrite individual policies that they cannot rely on their insureds to be truthful in describing medical conditions on the application, they will simply make the business decision not to write policies here. And, who can blame them?  Public Act 09-135 essentially requires them to take on all of the risk without the benefit of knowing whether the insured is being truthful. This makes it virtually impossible for the company to underwrite or price the risk appropriately. The result will be fewer insurers operating here and fewer choices for Connecticut consumers.

For these reasons, I am returning P.A. 09-135 without my signature.

Sincerely,

M. Jodi Rell

Governor