I was vice chairman of the Kentucky Kare Health Insurance Authority until its demise in 1999. The authority was created in an attempt to salvage the Kentucky Kare Health Insurance Indemnity Plan. Because of that experience, I know something about why health care for teachers in Kentucky has gone so tragically wrong, and I can understand their anger at the costs to them. However, we need to understand how this problem was created so we can solve it.
This mess isn't Gov. Ernie Fletcher's fault. He is trying to find a solution to a problem that was created years ago. The blame belongs to enactment of House Bill 250 of 1994, which created the fiasco of "health care reform." It was a disaster. HB 250's restrictions and rules drove almost all health care indemnity insurers out of the state and contributed to the demise of Kentucky Kare.
Until HB 250, health care for teachers, government employees and individuals in the gap between retirement and Medicare was provided by the Kentucky Kare Health Insurance Indemnity Plan. Although Kentucky Kare was facing competition by private insurers, it was solvent before HB 250, having $118 million in trust assets in 1995. Gov. Paul Patton unilaterally cut premiums in 1996 and the hemorrhaging began. HB 250's changes further restricted Kentucky Kare's ability to compete, increasing losses to as much as $3 million to $4 million a month. Kentucky Kare was finally shut down because it was losing too much money.
Under HB 250, Kentucky Kare could not set its own premium rates. The Health Care Purchasing Alliance set the rates based on a scheme called "modified community ratings." Kentucky Kare could not even collect premiums directly from its policyholders. People paid the HCPA, which passed money on to Kentucky Kare. Most of the time, we literally didn't know which people paid their premiums and which did not. Ed Hatchett, former auditor of public accounts, reviewed the HCPA's books and declared the HPCA "a disaster of accountability and oversight."
After the demise of Kentucky Kare and HCPA, changes made by succeeding legislatures, in some cases, seemed to have made matters worse. But those changes were not made by Fletcher. They were made during the Patton administration. Blaming Fletcher ignores reality.
Edward L. Smith Jr. of Park Hills is former vice chair of the Kentucky Kare Health Insurance Authority and a former chairman of the Kenton County Republican Party.
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