Obama, Congress: Fix 10 Health Care Loopholes and Repel Insurer Attempts to Undermine New Consumer Protections, Says Consumer Watchdog

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Washington, DC — Consumer Watchdog called on President Obama and Congress in a letter sent today to fix ten problem areas in the new federal health reform law that, if not addressed, will be exploited by health insurers and drug companies looking to charge more for less health care.

Download the letter here:

In the letter sent today, Consumer Watchdog wrote:
“The enactment of broad health reform into law is, as you know, only the start of providing health coverage to all Americans at a fair price.  Not only must the White House and Congress close loopholes in the newly enacted law, but the White House must also strongly repel efforts already under way by insurers and other corporate interests to undermine Department of Health and Human Services regulations while they are being written. . . .
“Key questions left unanswered in the legislation—including the scope of health benefits that insurers must provide under the new law—will be addressed over the next months and years by federal regulators.  Congress must stand ready to continuously clarify and strengthen the law against efforts to nullify its broad and progressive intent. . . .
“Consumers will brook no excuses for failure by the White House or Congress to strongly defend newly won consumer protections, fill dangerous loopholes in the new law, and ward off an onslaught of well-funded lobbyists.”
The ten loopholes and problem areas are (see letter at link above for more details):
* Lack of Insurer Rate Regulation.  The federal law fails to adequately limit what insurers can charge American families and business owners for coverage, even though tens of millions of Americans are required to purchase private health insurance policies. Without the strongest possible review and prior approval of health insurance rates insurers will be able to raise rates nearly without limit and use rate-setting as a vehicle for continuing to cherry-pick the healthiest customers.

* Weakening of benefits. Pre-emption of stronger state benefit requirements by so-called Nationwide and Multi-state plans will threaten the survivability of the state Exchanges and eliminate key health and consumer protections in many states. This is a “race to the bottom” provision that may allow insurers to sell highly profitable bare-bones policies under the guise of cutting costs. Consumers who fall seriously ill would suffer the consequences.
* States Rights to Innovate.  Under the current law, states must wait until 2017 for waivers from the federal government to use federal Medicaid, Medicare, tax subsidies and other funds to support state alternatives to the private insurance market, whether that be by adopting a state single-payer model or a state "public option."  If the federal government will require all Americans to purchase private insurance by 2014 or face tax fines, then by 2014 the federal government must also give states the right to use their share of federal funds to support alternate, state-based health reform.
* Medicare Advantage pushback. Private, for-profit Medicare Advantage systems will spend hundreds of millions of dollars on glossy marketing to attract a higher percentage of healthier seniors into such plans. The result could be a lobbying coup that prevents cuts in Medicare Advantage overpayments, cripples efforts to stabilize Medicare costs and may even push traditional Medicare into an economic death spiral. 

* Pharmaceutical price spiral. Pharmaceutical companies’ large and unwarranted recent price increases on heavily used drugs have already eliminated any cost savings from an industry promise to “reduce” Medicare drug prices by $8 billion a year.  Further Congressional action is needed to allow direct bargaining for drugs by Medicare, which is the only way to steadily curb drug prices.

* Continued rescission. The federal law allows insurers to define the terms of future coverage rescissions when customers fall seriously ill in the fine print of their policies.  The law limits rescission of health policies to instances of fraud or “intentional misrepresentation,” however no new regulatory oversight of rescission is provided to ensure that omissions or errors are indeed fraudulent or intentional, rather than innocent mistakes.
* No legal accountability for insurers that deny care. Patients who have health coverage paid for in part or full by employers cannot hold insurers legally accountable for denying medically necessary treatments.

* Definition of medical expenses.  Consumer Watchdog has called on the Obama Administration and the Department of Health and Human Services (“HHS”) to probe insurance giant WellPoint Inc. in light of a message to its investors describing how WellPoint would simply re-label administrative costs as “medical care” in response to the new health reform law. HHS must narrowly define what constitutes medical care to block gaming of the new medical loss ratio requirement by health insurers.
* Inadequate Federal Fallback. Consumer Watchdog advocates for frontline state enforcement with strong federal fallback if states fail to act.  States are the local cops on the beat and can respond faster to local threats and with greater knowledge of the local market.  But there should be pathways for federal regulators to become fully aware of the failure of state fraud enforcement through public intervenor groups and reporting requirements that tip federal regulators to local inaction. 

* Sick kids. The ink was hardly dry on the health reform law when the insurance industry started saying that no matter what Congress thought it passed and no matter what President Obama said, they did not have provide coverage to sick children right away. The main private insurer lobbying group, Americans Health Insurance Plans, has since said it will not fight the new coverage of previously excluded children and conditions, but the provision must also be clearly stated in regulations implementing the law.
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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:

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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