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Court Ruling Reinforces Need for Legislation to Put an End to Predatory Rating Practices


CONTACT: Tami Torres (850) 413-2842

TALLAHASSEE – A court ruling issued this week bolstered arguments made by the state's Chief Financial Officer Tom Gallagher that a loophole in Florida law is allowing some insurance companies to engage in predatory and unfair underwriting practices, such as tier rating. Gallagher is pushing for legislation this year that would close that loophole.

The First District Court of Appeals issued the ruling on Wednesday, declaring that "while the DOI (Department of Insurance) made compelling policy arguments regarding why tier rating should be prohibited as to out-of-state group health insurers, as it is for in-state insurers, it is not our job to determine this policy question. We may only review the legality of the finding of violation in this particular case."

"This ruling just reinforces the need for state lawmakers to pass good public policy and stop insurance companies from offering Floridians a false sense of security and preying on them when they become ill and need coverage the most," Gallagher said. "Floridians should feel protected by their health plan, not trapped by it."

In July 2002, Gallagher suspended the license of United Wisconsin Life Insurance Company for deceptive and unfair underwriting practices, including tier rating. Insurers that use tier rating move policyholders who become ill from the class in which they were issued coverage to one that is of a lesser standard and subject to much higher renewal rates.

United Wisconsin, which writes coverage for an estimated 30,000 Floridians, appealed the department's final order to the 1st DCA.

Legislation now pending before state lawmakers, sponsored by Senator Jeff Atwater and Representative Joe Negron, would close a loophole in Florida law that allows insurance companies to market health insurance products to Floridians through out-of-state associations, effectively bypassing Florida's consumer protections.

The Department of Financial Services, formerly the Department of Insurance, has received hundreds of calls from Florida consumers about out-of-state group insurers. In fact, complaints have skyrocketed 483 percent between 1998-2002.