Contact: Jerry Flanagan, (310) 889-4912; Carmen Balber, (202) 629-3043
WASHINGTON — The U.S. Senate bill’s historic expansion of health care coverage cedes control of a much greater portion of the health care system to the medical and insurance industries. This sweeping legislative act creates a responsibility for federal and state governments to monitor and police these industries and fix failures as they occur. For example:
* While the legislation requires every American to buy coverage under threat of tax fines, provisions requiring health insurers to justify 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. The Senate bill’s requirement that insurers spend 80% or 85% of the premiums they collect on health care services will—absent strict rate regulation—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.
* The “essential health benefits” called for under the mandated policies are left undefined in the legislation. Those benefits must be robustly defined in order to ensure that Americans get the coverage they pay for, rather than the current cycle of delay and denial of care.
* Weak employer penalties may create incentives for employers to drop coverage, pushing workers into the state exchanges where they would be forced to buy individual policies that offer less care for more money. Employers must be required to pay their fair share of the cost of health care.
* The Senate bill’s new “multi-state” plans and interstate “compacts” allow insurance companies to override more protective state patient laws. “Exchange” policies will also weaken more protective state laws by forcing state budgets to fund the cost of additional protections. Minimum federal standards should set a floor, not a ceiling, on state health care protections. States have traditionally been the laboratories of innovation in health care and have a greater ability to respond quickly to local needs.
* The bill provides no legal accountability for insurers when employers pay for health coverage. Patients who have health coverage paid for in part or full by employers will not be able to hold insurers legally accountable for denying medically necessary treatments. 132 million Americans with private employer-paid health coverage cannot recover damages against an insurer even if the company’s failure to approve treatment kills a loved one. The legislation does not fix this loophole denying patients justice that was created by a 1987 Supreme Court decision in the case of Pilot Life v. Dedeaux even as it requires individuals and employers to share in the cost of health coverage or face tax penalties. If government requires the purchase of health insurance policies it should guarantee access to justice when insurers wrongfully deny treatment to patients.
"If Congress is going to cede such a huge increase in control over our health to the insurance industry, it is incumbent upon Congress to fix the major consumer protection problems with the bill," said Jerry Flanagan of Consumer Watchdog. "The Senate bill will provide health insurance for roughly 30 million Americans and allow those with coverage more freedom to switch policies if they choose. However, by requiring most Americans to buy health insurance policies or face stiff tax penalties without adequate constraints on what insurers can charge for coverage, the bill looks more like a health insurer holiday present than a consumer protection bill."
The Senate bill’s additional requirements of transparency—for instance, on the costs for common treatments, use of simple language in insurance documents, studies on coverage denials by insurers, and disclosures of insurer claims and payment practices—are beneficial. They will certainly lead to greater public awareness. But regulators must also respond by using the information to improve the system, said Consumer Watchdog.
Consumer Watchdog is a nonpartisan consumer advocacy organization with offices in Washington, D.C. and Santa Monica, CA.