BETTY ANN BOWSER: Every morning Cindy Tipton rushes around her kitchen putting breakfast on the table, packing a lunch for her daughter, and getting herself ready for work. Tipton's 10-year-old daughter, Kylie, was born with spina bifida. That hasn't slowed her down much as she tears out of the house to get on the school bus, but her medical condition did cause the family's health insurance to skyrocket from $200 to month to $900. Cindy Tipton was also having insurance problems at Sam's Cafe, the restaurant she owns with her husband, Kevin, near Georgetown, Kentucky. She was unable to find an insurance company that would cover all of her full-time employees.
CINDY TIPTON, Restaurant Owner: It was almost impossible. What I would do is I would call insurance companies and then when they would ask a few pertinent questions like: Do you have any employees with preexisting conditions, well, yes, I always had a few. I never--when I hired people, I didn't ask them if they had preexisting conditions, so when I would find an insurance company to come out and talk to us, then the process of cherry-picking would start, and out of my, let's say, twenty employees at one time, twenty-seven employees, whatever, I could get maybe seven covered.
BETTY ANN BOWSER: Jo Ann McKinney is a waitress at Sam's. Four years ago when doctors discovered she had high blood pressure, the insurance company dropped her from the company plan.
JO ANN McKINNEY, Waitress: I had nothing but trouble from there on keeping insurance, getting insurance, never had--wasn't on medication--never had no trouble, no spells with it, but they dropped me, and I had to go out on my own, with Cindy and Kevin's help, to get another insurance company to cover me. I couldn't go with our company here.
BETTY ANN BOWSER: Her insurance premiums tripled to $330 a month. It was cases like McKinney's that prompted people in Kentucky to start talking about reforming the system. In 1994, medical insurance reform was not only an issue in Kentucky; it was on the national agenda as well. President and Mrs. Clinton were pressing the Congress for legislation that would make medical insurance more readily available to consumers and less expensive as well. And here in Frankfurt, a group of legislators wanted to write their own laws, laws they hoped would make this state a model for the nation.
THOMAS BURCH, State Representative: A lot of people were being denied insurance and because of preexisting conditions, and seemed like they were just minor things, that people would begin to complain that they could not buy insurance; they couldn't get it at any price.
BETTY ANN BOWSER: Rep. Thomas Burch was one of the sponsors of the bill, which ultimately passed. The law contains four main provisions. It guaranteed that no one could be denied insurance. It required insurance companies to only offer individuals one of five standardized plans. It put strict limits on rate increases. And the most controversial reform, it mandated that individual and small group policy rates had to be set using a modified group rating system. That's an insurance terms which means a person's state of health cannot be used in setting rates or to deny coverage, no matter how sick or how well they are.
THOMAS BURCH: Insurance companies don't like that. They want to be able to cherry pick, pick the healthy people, and let the sick ones fend on their own; let the state pick up the bill for it.
BETTY ANN BOWSER: In fact, the insurance companies dislike the reform so much that 45 companies left the state. Blue Cross-Blue Shield and a state-run program are now the only two companies that will sell individual policies. Those policies, which are issued to people who do not get insurance through their jobs, make up about 5 percent of the insurance market in Kentucky. Leslie Bryant is the Kentucky field director for the Health Insurance Association of America. She bristles at the term "cherry-picking," but she says that in order for an insurance system to work, whether it's automobile, life, or health insurance, risks must be factored into the equation.
LESLIE BRYANT, Health Insurance Association of America: I think there were a lot of very well-intentioned people in Frankfurt who really didn't understand this industry; they really didn't understand that it is all about numbers. It's a mathematical situation. And you can't just throw a social solution at a mathematical problem.
BETTY ANN BOWSER: Ronny Prior works for the Kentucky Farm Bureau, which helps its members get insurance policies. He says the 1994 reforms have been nothing but a disaster.
RONNY PRIOR, Kentucky Farm Bureau: I'm paying more for my insurance. I have higher deductibles in order to make it affordable. I have no choice in providers or plans because I've got to choose one of the standardized plans, and it's been government action that is forced on the private sector of insurance.
BETTY ANN BOWSER: How did this happen?
RONNY PRIOR: I think this happened by government trying to, again, help a handful of people at the expense of everyone, and the only way you can give to the have-nots is take from the haves.
BETTY ANN BOWSER: Prior points to people like Sue Kiser. She and her husband own a small company that manufactures printing cylinders. Kiser says she is now paying twice what she paid for her employee insurance before health care reform.
SUE KISER, Small Business Owner: When you have no free enterprise, which is exactly what they've created, we do not have a choice to choose whom we want, then all these companies have pulled out. When you don't have competition, you've got a clear line to charge whatever you want, and that's what's going to happen. These companies that are willing to stay are the ones that are going to profit and the process is going to keep going right on up until you're going to have the people in the state of Kentucky, they won't be able to afford the insurance, period.
BETTY ANN BOWSER: Kiser says health insurance has gotten so expensive that she is considering packing up the company and moving 30 miles away across the state line into Indiana. She says her employees will gladly make the move. They haven't been happy with the insurance changes either. Randy Powell is a machinist at the company.
RANDY POWELL, Machinist: You know, it doesn't seem like you get near as much as what you used to, and you have a harder time getting the things approved, you know. It's to the point where, you know, you're afraid to go to the doctor about things because you don't know if your insurance company is going to cover it.
BETTY ANN BOWSER: But Cindy Tipton says she's very pleased with the changes reform has brought to the small group policy she offers her employees.
CINDY TIPTON: It has been wonderful. Because of health care reform we are rated under what they call a modified community rating, meaning they cannot ask you any questions about your health. That caused my insurance premium to go from $900 a month to $385 a month. My employees could not be turned down. That meant everyone who worked here for at least 60 days and worked 30 hours a week could have health insurance if they wanted it.
BETTY ANN BOWSER: The job of figuring out how to fix the reforms, while keeping people like Tipton happy, rests with this man, insurance commissioner George Nichols.
GEORGE NICHOLS, Kentucky Insurance Commissioner: When you look at what we did in 1994, if insurance companies were taking advantage of consumers, we needed to fix that. And that's what Kentucky attempted to do. But in the process of doing that, we may have taken the pendulum and swung it too far on the side of the consumers that you've missed the balance.
BETTY ANN BOWSER: Nichols has appointed two groups, one with industry representatives and the other with consumers, to recommend a plan for the state legislature to consider.
GEORGE NICHOLS: I've got 45 companies that exited the individual market. I've got to figure out a way to get those companies back. Those companies have leverage over us now because they've given up their business; they define Kentucky as a hostile regulatory environment; and they're saying, okay, I can do a lot better in some other state, so why do I want to come back to that. So I've got to give them reasons. That's a very, very difficult balance to create, is giving a company the ability to make a reasonable rate of return and give consumers the protections they believe that they need.
BETTY ANN BOWSER: Consumer advocate Jane Chiles is nervous about tinkering with the reforms. She thinks people haven't given the reforms enough time to work, and she says that because Kentucky is at the forefront of insurance reform, the industry has decided to abandon Kentucky in order to send a warning to other states.
JANE CHILES, Kentuckians for Health Reform: We're a small state, and so market share of any one company is small. So at a certain point--and I think this is really what we have experienced here--at a certain point--there are companies, national companies, who are willing to make a stand, give up market share here to try to protect themselves in other states that have not gone into this--this kind of reform.
BETTY ANN BOWSER: A special session of the legislature is expected to take up reforming the reforms sometime after Labor Day. Most lawmakers predict the modified community ratings system will likely be abolished so that health status can once again be considered in deciding rates. But they insist whatever happens, no one will be denied insurance.