Washington, D.C. — In a letter sent to House Speaker Nancy Pelosi (D-CA) today, Consumer Watchdog called for strengthened oversight of the health insurance industry and greater affordability protections for consumers in negotiations with the U.S. Senate on final health reform legislation.
In the letter, Consumer Watchdog wrote:
"With the public option apparently off the table, thanks to a single Senator allied with the insurance industry, it is more important than ever for the House to insist on comprehensive regulation of the industry to ensure affordability and accountability for Americans who will now be required to buy private insurance."
Click here to download the letter, or see full text below.
Consumer Watchdog called on Pelosi to make eight affordability and accountability changes to the health reform legislation before it is sent to President Obama:
1. Rate regulation. The House and Senate legislation require every American to buy coverage under threat of tax fines, yet both bills fail to regulate insurer premium increases.
2. Fully defined benefits. The “essential health benefits” called for under the mandated insurance policies in the House and Senate bills are left undefined in the legislation.
3. Preserve superior state patient protections. The Senate bill’s new “multi-state” plans and the House and Senate bill’s interstate “compacts” allow insurance companies to override more protective state patient laws.
4. Legal accountability for all health insurance providers. The House and Senate bills provide no legal accountability for insurers when employers pay for health coverage.
5. Employer fair-share payments. The weak employer penalties of the Senate bill would create financial incentives for employers to drop coverage, pushing workers into state exchanges where they would be forced to buy individual policies that offer less care for more money.
6. Better plan value. The Senate bill has lowered the overall value of the cheapest “bronze” plan to below that of almost any current employer-sponsored plan, which will result in individuals and families bearing more of the cost of coverage.
7. Tougher ban on policy rescissions. The Senate bill allows insurers to game its rescission ban.
8. No annual coverage limits. The Senate bill allows insurers to place “reasonable” annual limits on insurance policy coverage.
The group also called on Pelosi to support changes to Senate filibuster rules to provide that legislation may be approved without a 60-vote supermajority at every major step. Consumer Watchdog wrote:
"Real health care reform and the coming climate change legislation are too important to be held hostage by one lawmaker with parochial, personal or industry-allied motives, be it Joe Lieberman, Kent Conrad or Ben Nelson."
LETTER TO SPEAKER PELOSI:
Tuesday, January 12, 2010
The Honorable Nancy Pelosi
Speaker of the House
U.S. House of Representatives
Washington, DC 20515
Dear Speaker Pelosi,
You have stated clearly that the House will fight for strengthened oversight of the health insurance industry and greater affordability for consumers in negotiations with the Senate on final health reform legislation. With the public option apparently off the table, thanks to a single Senator allied with the insurance industry, it is more important than ever for the House to insist on comprehensive regulation of the industry to ensure affordability and accountability for Americans who will now be required to buy private insurance.
We also hope that you will join in growing calls for a change to Senate rules to provide that legislation may be approved without a 60-vote supermajority at every major step. This change is necessary to help ensure the success of other progressive legislative priorities and, in the longer term, end the increasing abuse of the filibuster privilege.
Neither the current House bill nor the Senate bill goes far enough to protect health care affordability for ordinary Americans or to hold insurers accountable. By improving affordability and accountability protections, thereby increasing systemic efficiency, the final legislation could provide access to care to at least some of the approximately 20 million Americans who would still lack coverage under the current bill. Such protections will also ensure that those that are covered get the care they paid for when they are sick and need it most.
You and your leadership team must assure that the following eight affordability and accountability protections are added before the bill is sent to President Obama:
1. Rate regulation. The House and Senate legislation require every American to buy coverage under threat of tax fines, yet both bills fail to regulate insurer premium increases. Current provisions of the House and Senate bills requiring health insurers to state their reasons for rate increases are insufficient checks on insurance companies seeking to use the mandate as a profit enhancer. Government must ensure that coverage is affordable by requiring insurers to seek “prior approval” of health insurance rate increases, as auto insurers are required to do under California’s Proposition 103, which has saved Californians $62 billion since 1988. (Read about Proposition 103 at: http://www.ConsumerWatchdog.org/insurance). In addition, the current House and Senate bill requirements that insurers spend 80% or 85% of the premiums they collect on health care services will—absent strict rate regulation modeled on California’s successful Proposition 103—perversely encourage insurers to raise their premium rates. In the same way that a Hollywood agent who gets a 20% cut of an actor’s salary has an incentive to seek the highest salary, insurers will have incentive to increase health care costs and raise premiums so that their 20% cut is a larger dollar amount. Furthermore, though the House’s nationwide Exchange is superior to the Senate bill’s state Exchanges, neither will provide consumers the bulk-purchasing power, or provide sufficient competitive pressure, to force the highly consolidated insurance industry to provide fair prices for their policies.
2. Fully defined benefits. The “essential health benefits” called for under the mandated insurance policies in the House and Senate bills are left undefined in the legislation. In effect, the current legislation requires Americans to buy insurance policies under threat of tax fines, fails to limit what insurers can charge for those policies, and punts key decisions about what Americans will receive for their money until after the bill is passed. Insurers, with legions of lobbyists, will target these regulatory decisions to chip away at the minimum benefits they are required to provide. Though both bills list the types of benefits that all Americans will supposedly be guaranteed access to – i.e. doctor visits, maternity benefits, hospitals stays, and prescription drugs – neither bill defines the scope of these benefits. For instance, will Americans have access to all prescription drugs, or will insurers be allowed to limit access to drugs listed on each company’s “formulary”? Will the promised “maternity benefits” continue to bar the drive-thru deliveries common in the 1990s and later made illegal by Congress? Will key treatments and health services like HIV testing, reconstructive surgery, and home health services be covered? Those benefits must be robustly defined in the legislation in order to ensure that Americans get the coverage they pay for.
3. Preserve superior state patient protections. The Senate bill’s new “multi-state” plans and the House and Senate bills’ interstate “compacts” allow insurance companies to override more protective state laws. Under the Senate bill, “health care compacts” would only be subject to the health benefit mandate laws and regulations of the State in which the plan was “written or issued.” Assuming that the proposed new national minimum “essential benefit” requirements would apply to the compacts, the national minimums would become default rules because insurers would certainly choose to be regulated by the weakest state. The House provision allowing the compacting states to “choose” which state’s law should apply offer little protection since insurers lobbying for the compacts will certainly flex their political muscle to ensure that the weakest standards apply. Similarly, provisions in the House and Senate bills allowing states to “opt-in” to interstate compacts offer little protection. The 1,000 health insurance lobbyists estimated to be working the federal health reform bill, and the industry’s unlimited capacity to buy votes with campaign contributions, would be marshaled to advance the insurers’ interest at the state level. The Senate’s “multi-state” plans, offered as a surrogate to the public option, include yet another of the insurance industry’s legislative priorities: even the weak “opt-in” provision does not apply. Further, the “Exchange” policies of the House and Senate bills will also weaken more protective state laws by forcing state budgets to fund the cost of additional protections. Federal health care reform must continue to allow states to be laboratories of innovation in health care and utilize their ability to respond quickly to local needs. Minimum federal standards should set a floor, not a ceiling, on state health care protections.
4. Legal accountability for all health insurance providers. The House and Senate bills provide no legal accountability for insurers when employers pay for health coverage. For patients who receive health coverage through a private employer, HMOs and health insurers face no financial consequences for mishandling claims. The injustice of the current system was dramatized by the story of Nataline Sarkisyan, who died after CIGNA denied her a potentially life-saving liver transplant. (Read about Nataline at: http://www.consumerwatchdog.org/patients/articles/?storyId=29906). Neither the House nor Senate bills closes a loophole created by a 1987 Supreme Court decision in Pilot Life v. Dedeaux, which bars those with private employer-paid health coverage from holding insurers legally accountable for denying medically necessary treatments. Under the Employee Retirement Income Security Act (ERISA) and the Pilot Life decision, lawsuits are removed to federal court where victims can only recover the cost of the procedure or service denied in the first place—no damages or penalties are allowed. As a result, 132 million Americans cannot recover damages against an insurer even if the company’s failure to approve doctor-requested treatment kills or maims a patient. HMOs and insurers are largely free to deny access to care without fear of reprisal or financial consequences. If government requires the purchase of health insurance policies, it must also guarantee access to justice when insurers wrongfully deny treatment to patients.
5. Employer fair-share payments. The weak employer penalties of the Senate bill would create financial incentives for employers to drop coverage, pushing workers into state exchanges where they would be forced to buy individual policies that offer less care for more money. The Senate bill would require employers with 50 or more employees to provide health coverage or pay a fine of up to $750 per employee each year, though only if any of its employees qualify for a subsidy to buy coverage on their own through an Exchange. Health insurance for a family of four costs $13,375 each year. Allowing business owners to choose between paying for health coverage or paying a small fine will likely result in individuals and families bearing more of the cost burden. Employers must be required to pay a fairer share of the cost of health care in line with the requirements of the House bill.
6. Better plan value. The Senate bill has lowered the overall value of the cheapest “bronze” plan to below that of almost any current employer-sponsored plan, which will result in individuals and families bearing more of the cost of coverage. The bronze plan has an actuarial value of 60%, 5% below the previous Senate plan, and 10% below the House plan. That means patients will have to pay, between premiums and out of pocket costs, 40% on average of their supposedly covered costs. No matter what the premium price, strapped middle-class Americans who buy these plans will get horrible sticker shock on their deductibles and copays when they need to use the policy for anything beyond basic preventive care. Such costs deter families from seeking needed treatment for themselves and their children. The lowest-level plan should provide benefits of at least 70% of actuarial value of care as proposed by the House bill.
7. Tougher ban on policy rescissions. The Senate bill allows insurers to game its rescission ban. Health insurance rescission – the insurance company practice of retroactively canceling coverage after a patient gets sick – makes a mockery of insurance coverage, as evidenced by the high-profile media coverage of this insurer fraud in California. Companies simply rescind coverage, citing an “omission” or “misrepresentation” in the patient’s application for coverage, after the patient is diagnosed with an expensive-to-treat illness. Under the U.S. Senate bill, health insurers could rescind a policy if the patient committed fraud or made an intentional misrepresentation. However, insurers would be left to define the basis for such rescissions in the “terms of the plan or coverage.” The bill must clarify the grounds on which a rescission of coverage is justified, not leave it up to the fine print of insurers’ coverage contracts. The House bill’s limitation on rescission to instances of “clear and convincing evidence of fraud” is preferable.
8. No annual coverage limits. The Senate bill allows insurers to place “reasonable” annual limits on insurance policy coverage. A cornerstone of national health reform is to ensure that patients get the care their doctor prescribes when they are sick and need treatment the most. Insurers’ current practice of placing annual limits on how much health care a patient can receive means that patients with serious illnesses can be left without coverage in the midst of a medical crisis. As a result, patients face bankruptcy even though they have insurance. In fact, a Harvard Medical School study released last year found that 62% of U.S. bankruptcies were caused by big medical bills even though 78% of those declaring bankruptcy had insurance. A loophole in the Senate bill would allow health insurers to impose unspecified “reasonable” annual limits on the annual dollar value of benefits that patient can receive this year. However, for a for-profit insurance company a “reasonable” limit on annual health care costs is one that increases shareholder profits by cutting off access to necessary care. This provision is a major departure from previous versions of the Senate bill, and the House legislation, which bar any annual caps. The limits must be removed from the final bill.
These changes must be made before the bill becomes law, while Congress still holds leverage over an insurance industry whose chief aim is to secure the individual mandate. However, regardless of when these reforms are passed into law, Congress’s work on health care reform must be ongoing: This sweeping legislative act, which captures the health care market and delivers Americans, under threat of the government’s tax power, to the insurance industry, creates a greater responsibility on federal government to monitor and police corporate behavior, fixing failures as they occur.
Historically the filibuster has been used to stall progressive change, including the Civil Rights Act of 1957, when Strom Thurmond set a record of 24 hours and 18 minutes of talking a bill to death. However, the filibuster is now being used to stall or kill nearly every bill of consequence introduced by the majority.
Rule 22 of the Senate, governing filibusters, can be changed or eliminated by a simple majority vote of the Senate according to the U.S. Supreme Court’s 1892 decision in U.S. v. Ballin. Senate rules call for an affirmative vote by 67 senators to change the cloture rule, but Democrats should be able to rewrite those rules as well, since Democrats control the Senate Rules Committee.
Real health care reform and the coming climate change legislation are too important to be held hostage by one lawmaker with parochial, personal or industry-allied motives, be it Joe Lieberman, Kent Conrad or Ben Nelson.
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Consumer Watchdog is a nonpartisan consumer advocacy organization with offices in Washington, D.C. and Santa Monica, CA. Find us on the web at: www.ConsumerWatchdog.org.