The taming of insurers…

How will health reform prevent the insurance companies from unjustified rate increases and consumer abuses?

That was one of the main rationale for the public health insurance option, which is still in the House bill and not in the Senate version of health reform. It’s not the only mechanism with this goal. Noam Levey at the Los Angeles Times has a good story today focusing on the regulation of insurers in the bills.

It’s a topic that has gotten little attention in the media, and so people assume there’s little of it in the bill. But the list of new consumer protections is long, both of ones that people have heard of, and ones that people haven’t. A partial list of new or improved insurance regulations (compared with the status quo in California) includes:

* Rescissions prohibited on day one. (Thousands rescinded in CA; Settlements with insurers have been negotiated but regulations and legislation stalled.)
* No denials or discriminatory pricing based on pre-existing conditions. (Hundreds of thousands denied in CA now.)
* No denials or discriminiatory pricing based on gender. (Just banned in CA to go into effect next year.)
* A limit of any pricing difference based on age of 3:1 from the oldest to the youngest on a 3:1 basis. (No limit in CA now; practially the pricing difference on age is 9:1)
* The establishment of a basic benefit package for all health coverage (Some mandated benefits in CA now, but not even all the basics in Department of Insurance plans: there’s not even a requirement in CA that coverage include both doctor and hospitals)
* A minimum actuarial value for all plans, and labeling of products based on their comprehensiveness. (No minimum in CA, and lots of “junk” plans that pay out very little are sold in CA)
* Standardized definitions between plans of product services (CA health plans are not consistent even within a company over what counts for a “deductible,” for example.)
* No arbitrary annual caps on coverage (No limits in CA on Dept. of Insurance plans.)
* A maximum cap on out-of-pocket costs of $5000 or $6000–and less for lower-income families–so even a plan with higher cost-sharing will at least prevent bankruptcy (No limits in CA on Dept of Insurance plans.)
* No cost-sharing for preventative services. (No regulations in CA.)
* Minimum medical loss ratio so that money goes patient care rather than administration and profit. (Existing MLRs exist at DMHC and DOI, defined differently. Legislative efforts in CA to increase the MLR have stalled.)
* Regulatory review of insurance rate increases. (No process now; CA legislation stalled.)

The article describes the predicament of how to describe what’s in the bill. At one level, we appreciate the significant insurance oversight in the bills that goes well beyond our current framework, but will it be sufficient?

Here’s two lines from the article that sum it up:

“In any other year, these changes would be cause for a White House signing ceremony with bands and fireworks,” said William Vaughan, health policy analyst for Consumers Union.

Like any regulatory framework, however, this one has holes.

Some of the holes are specific and have been identified. As Brian Leubitz of Calitics reports, a majority of the California Congressional delegation–led by Reps. Jackie Speier and Susan Davis, former state legislators that sponsored state consumer protections that Health Access sponsored and/or supported back when–wrote to their leadership to fix a concern about provisions that would make it easier for plans to be sold in one state from states with weaker patients’ rights law.

Other holes are one about degree–is it enough? And that’s why we need to push hard in conference committee to make it better.

For example, California’s Senator Dianne Feinstein has been championing a “rate authority” amendment that would beef up the rate review sections of the bill. Health Access California joined several groups in support of her proposal. We’ll see how that effort fares.

We hear Senator Majority Reid’s “Manager’s Amendment” will include a higher medical loss ratio, incorporating a popular amendment by Senator Al Franken.

But that suggests an issue in other provisions: what is enough? I am pretty sure that the minimum actuarial values proposed in the bills are too low, especially in the Senate. There are those who defend a lower actuarial value, as providing consumers a choice of a lower premium product, even if it provides a lower value. I would argue that a product that ends up only covering on average only 60% of a patient’s health expenses shouldn’t be called coverage–as a someone said on Twitter, that’s just splitting the bill.

But even the mere fact of having a standard on actuarial value, on out-of-pocket costs, on other issues, is a major reform. Would it have been worth it to pass a minimum wage, even if the wage were to be set lower than was really needed? Or does it provide some protection to get rid of the worst abuses, and provide a policy construct for the future? Or it the standard that is set so low as to be meaningless?

Either way, we need to continue to press for strengthened insurance oversight.

Final thoughts: When focusing on a public option and on regulatory oversight, the LA Times article neglects a third strategy regarding insurer accountability regarding insurance company abuses and unjustified rate increases, by using government as a regulator, a negotiator, and a competitor. Without the competitor of a public health insurance option, there needs to renewed focus on the other two strategies.

The strategy of negotiation should merit attention. The new health insurance exchanges are seen as a way to bring individuals and small businesses together, to get both the efficiencies and group purchasing power of large purchasers. The combined Senate bill includes Senator Kerry’s “active purchaser” language–which is similar to the House—to allow the exchange to negotiate with health insurers for the best possible price. Large employers and purchasers typically get better rates and insurers have less overhead and profit. The House is even stronger in this regard, and that’s what we hope can come out of conference committee. It’s another piece of the effort to control costs.

The key point is that these accountability strategies are not either/or. Given that no consumer protection is airtight, there is a need to try multiple efforts to provide the security that families so desperately need. That’s why, in addition to the provisions in the bills, and the improvements being attempted, we need to continue to work for a public health insurance option, even if we doesn’t get included in this package.

Health Access California promotes quality, affordable health care for all Californians.

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