04/28/01

Local rep sees need to stop 'death spiral'

Paul supports Gallagher's efforts

TALLAHASSEE -- The Florida Legislature should put a stop to the insurance scam known as the "death spiral," state Rep. Jerry Paul, R-Port Charlotte, said Thursday.

But it should do it without hurting the individual insurance market served by out-of-state insurance associations, he added.

Paul took that position after reading up on the issue, and reading a Charlotte Sun article Thursday about Shaneen Wahl, 51, of Port Charlotte.

Wahl bought insurance through a Wisconsin-based association that used a loophole in Florida law. The loophole allows insurance associations registered out of state to sell policies that don't comply with Florida's rate protections.

After a few years, the insurance association closed Wahl's insurance pool and then worked to weed out the healthy, low-risk customers. They leave for cheaper policies elsewhere.

That leaves the chronically ill, high-risk customers in the pool. They have no alternative. They can't find insurance elsewhere because they have preexisting conditions.

That allows the association to jack up its premiums to astronomical levels. The scheme was dubbed "the death spiral" in a 1999 Newsweek article.

Wahl never heard of the death spiral when she first bought her policy for $156 per month in 1993.

The spiral began after she battled breast cancer in 1996. Her premiums went from $588 to $1,180 in 1998 to $1,881 in 1999.

Only insurance associations registered out of state can get away with such rate hikes. That's because those registered in Florida must charge all their beneficiaries with similar policies the same rates.

This year, Wahl has teamed up with Tom Gallagher, state insurance commissioner, to promote legislation that would close that loophole.

The legislation was deleted by a House committee and replaced with a study group, however, after a campaign by lobbyists convinced some lawmakers the legislation would drive an affordable alternative insurance from the Florida market.

"It's not affordable if it isn't there when you need it," said Gallagher.

"My hope would be that, through the legislative process, we could find a way to save the Shaneen Wahls from the death spiral, but do it in a way we also preserve the viability of this insurance market," Paul said.

Paul said he has received numerous e-mails from constituents. They run about 50-50 in support and opposition to Gallagher's proposed legislation.

Paul cited one letter from Rick Willis of Port Charlotte, who wrote that the regulation would result in "numerous first-rate national insurers leaving the Florida market" and "force thousands of insured persons to lose their current health insurance coverage."

However, under Florida law, any insurance company that cancels a policy must issue a certificate to the beneficiary that requires another company to accept him or her, pointed out Torre Grissom, a legislative specialist in Gallagher's office.

Grissom said the letter matched a form letter that can be found at the Florida Insurance Forum Action Site on the Internet. Out-of-state insurers have been directing their customers to access the site and send letters to lawmakers opposing the bill, he said.

"I'm sensitive to the concerns (Willis) is raising," Paul said. "But I also have to be concerned for people like Shaneen Wahl, who get trapped."

He said he supports Gallagher's proposals.

However, Gallagher expressed less concern for the proliferation of out-of-state registered insurers.

"If the carriers don't want to follow Florida's rating protections, then they never wanted to write true insurance anyway," he said.

You can email Greg Martin at gmartin@sun-herald.com

By GREG MARTIN

Staff Writer