“Association Health Plans” Likely to Cost Patients More

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Bush Plan Would Eliminate Patient Protections and Increase Fraud and Abuse

Santa Monica, CA — President Bush‘s proposal to eliminate state oversight of some group health care plans will undercut hard-fought state patient protections and are likely be more expensive for patients because the plans rarely cap co-payments and other out of pocket costs, according to the Foundation for Taxpayer and Consumer Rights (FTCR).

FTCR, which played a significant role in crafting land-mark Patients’ Bill of Rights legislation, said that the so-called “Association Health Plans” will weaken consumer protections by removing state oversight and distract the nation from real health care reform. The legislation is scheduled for a vote today in the House of Representatives during this week’s “Health Week.”

“Bush’s plan to remove state oversight will take away critical state-based consumer protections and turn the House of Representatives’ ‘Health Week’ into ‘Hell Week’ for patients,” said Carmen Balber of FTCR. “Far from being the health care solution for overcharged small business owners and the self-employed, Association Health Plans will likely lead to higher costs and fewer choices for patients.”

The president’s plan, H.R. 525, would allow health care plans sold to small business owners and the self-employed through affinity groups and trade associations to avoid state consumer protections in favor of weaker federal rules. Many states have adopted Patients’ Bill of Rights legislation, including California which is often regarded to have the most comprehensive patient protections, which would no longer govern association plans if H.R. 525 were to become law.

The bill would require the U.S. Department of Labor to take over regulation of these Association Health Plans but would not provide the department with additional funding. FTCR said that federal oversight would be far less responsive to fraud and abuse than state regulation of health insurance.

Association health care plans are already the most subject to fraud and abuse, with 41 companies shut down by state regulators between 2000 and 2002 for selling phony health insurance. FTCR called for stronger state regulation to rein in fraud and abuse.

Inadequate Patient Protections Under Federal Oversight

The proposed legislation would release Association Health Plans from state laws and regulations that currently protect patients, allowing association plans to:

* Eliminate coverage now required by the states of essential health services such as mammograms and diabetes;
* Reject claims and refuse patients the right to appeal now guaranteed under state laws;

* Hold inadequate reserves, thereby defaulting on medical bills because they do not retain enough money to pay claims; and,
* Drastically extend the time necessary to stop fraudulent schemes because the federal government cannot shut down plans through immediate administrative action.

A Department of Labor official testified in 1997 that, under similar legislation that proposed federal oversight of health plans, that Department had the ability to review each health plan just once every 300 years (according to the Health Policy Institute). The current Department Secretary has stated that the Department could take on the responsibility without any additional staff.

Many “Association” Plans Are Not Insurance

Far from being an answer to the health care affordability crisis, association health plans are more costly for patients and often do not resemble traditional insurance. In many association plans, the fine print hides the plans’ true costs:

* Patients are told that some services are covered “100%,” with a maximum amount allowable per day. However, most patients will not realize until they begin receiving hospital bills that, as one plan offers, 100% coverage for hospital stays but a daily maximum of $200 falls well below the typical charge for a day’s hospital stay. Patients are responsible for the balance.

* Many plans also fail to cap co-insurance payments. Traditional health insurance will cap co-payment amounts anywhere from $250 to $5,000. Association plans have no limit, meaning patients must pay a percentage of a hospital bill, even if that amount reaches hundreds of thousands of dollars. Combined with the plans’ low maximum benefit amounts, this feature leaves patients open to financial catastrophe, usually what consumers buy insurance to avoid.

* Though they are represented and sold as group policies, association health plans are in fact individual coverage. As such, patients are not protected from arbitrary, frequent or individually targeted rate increases that are restricted under group plans.

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The Foundation for Taxpayer and Consumer Rights (FTCR) is California’s leading nonpartisan consumer advocacy organization.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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