Donelon: Citizens Insurance reduction should benefit all property owners
Louisiana Citizens Property Insurance decreased to less than 3 percent of the state’s property insurance premium volume in November, and is anticipated to reach an even lower percent of premiums in 2014, Louisiana Department of Insurance Commissioner Jim Donelon said Monday.
The number of Louisiana Citizens Insurance policies has been reduced by 13,000 policies to about 93,000 policies due to private insurers acquiring those policies, Donelon said. The other 97 percent of property owners who have property insurance in the private sector are also helped when it comes to having their property values assessed for the next Hurricane Katrina type storm, Donelon said.
Additionally, 20 percent of the 3,000 policies in St. Mary Parish were taken out of Citizens Insurance in 2013, he said.
Donelon was the guest speaker at Monday’s St. Mary Industrial Group meeting at the Petroleum Club of Morgan City.
Louisiana Citizens Property Insurance is a quasi-state organization that provides property insurance of last resort.
Commercial policies for Citizens Insurance are based solely on actuarial costs. However, for homeowners, the department compares a survey of insurance companies with a minimum amount of activity in each parish to the actuarial costs and takes the highest number of those two numbers in each parish, Donelon said.
State Rep. Sam Jones, D-Franklin, who was at the meeting, said he disagrees with taking the higher of the two numbers to determine Citizens Insurance rates for homeowner policies. “When he (Donelon) said in his comments that of the two models, he always takes the one that’s the highest ... Let’s take the lowest and give the people a break,” Jones said.
Donelon said state law requires the department to take the highest number in each parish, and has been successful in reducing the volume of Citizens Insurance in Louisiana by two-thirds over the time it has been in place.
That number indicates recovery of Louisiana’s property insurance market, he said. However, the “big players” in the industry have retreated from coastal coverage across the U.S. “Despite that retreat, we have replaced them with smaller, regional carriers that have competed with each other in benefiting (the state),” Donelon said.
When addressing the Affordable Care Act on Monday, Donelon said politicians do not do insurance well because they cannot bring themselves to charge constituents what it actually costs to provide the coverage they are offering.
Louisiana is one of six states that do not regulate the rates of health insurers, Donelon said.
Donelon acknowledged that the health care system does need reform, and he met with President Barack Obama in 2013 when Donelon was president of the National Association of Insurance Commissioners.
The health insurance guarantee component of the Affordable Care Act is the “cost driver,” Donelon said. “Once you promise individuals that they can get coverage regardless of their health condition, you have to find a way to pay for it. This requires the largest pool of individuals possible, and Obamacare accomplishes that via a penalty or tax for those opting out of the pool,” he said.
In 2014, the penalty for individuals not buying health insurance is $95 or 1 percent of the person’s income. In 2016, the fee increases to $695 or 2.5 percent of a person’s income.
The “young invincibles,” or young, healthy adults, help offset the cost for insuring older, sicker individuals, and if they do not participate, health care premiums increase for everyone, Donelon said.
Though health insurance policies purchased through the marketplace by Dec. 24 were to begin coverage by Jan. 1, individuals can still sign up for health insurance until open enrollment closes March 31. However, those waiting until March 31 to sign up would not begin coverage until May 1, he said.
The Affordable Care Act also lifts any lifetime limits on essential health benefits, which is another major factor driving the cost of Obamacare policies, Donelon said.
The main people who will be adversely affected by Obamacare are in good health, Donelon said. People whose income is between 100 percent and 400 percent of the federal poverty level benefit the most from the program, he said. Those individuals and families qualify for tax credits or subsidies to make their health insurance more affordable, Donelon said.
Those people with preexisting conditions also benefit from the Affordable Care Act, which allows them to obtain insurance at the cost of a healthy person, he said. The cost differential for health insurance premiums between the most expensive and least expensive premiums now cannot be more than 3-to-1 as opposed the actual 6-to-1 cost differential between insuring those individuals, Donelon said.