Pre-emption of State Health Benefit Laws Is a Major Retreat; Insurance Rate Justification Shows Promise

Consumer Watchdog released a list of the 10 key positive and negative consumer protection provisions of the U.S. Senate health reform bill, HR 3590, which passed an important procedural vote this weekend.

The group lauded the bill’s dramatic expansion of coverage for those currently without health insurance and subsidies to help consumers afford care, but called for amendments as the bill is debated next week.

Consumer Watchdog said that two provisions allowing for pre-emption of state laws by less protective federal standards amounted to a major step backwards in coverage and affordability. Provisions requiring insurance companies to justify their rates and providing grants to states to develop “prior approval” systems are promising, but need further development to protect Americans from price gouging by health insurers.

“The ‘bad’ and the ‘ugly’ of the Senate bill threaten to undermine the ‘good.’ In particular, provisions of the Senate bill that would pre-empt more protective state standards will result in insurance policies that do not provide needed services and treatments when patients get sick and need health care the most,” said Jerry Flanagan, Health Care Policy Director for Consumer Watchdog. “If the government is going to require all Americans to have health insurance, then the government has the duty to ensure coverage is affordable. Insurance rate justification and prior approval of rates are essential to achieve affordability. However, even some of the ‘good’ provisions of the bill need additional clarifications and fixes to ensure that consumers get the coverage they pay for when the health care reform bills become law.”

The List of 10 of Consumer Protections: (details are below)

The Good:

1. Rate review. Insurers must publicly justify “excessive” rate increases, and federal grants would encourage states to require full “prior approval” of such increases. (Needs strengthening of prior approval, definition of “excessive.”)

2. Public Option. Bill retains an op-out public option and allows states to expand access to large employers.

3. Consumer rebates. Requires insurer rebates to consumers of administrative and overhead costs higher than 20% to 25%.

4. Minimum “loss ratio.” Insurers in some cases must assure that 85% of premiums are spent on medical care. (Should be expanded to all policies.)

5. Rescission ban. Insurers may not rescind policies except for “intentional misrepresentation” of material facts as determined by the coverage contract. (Needs much tighter definition.)

6. Guaranteed issue. Health insurance must be available to all, renewable for all, and rate differences, such as for age, are limited.

The Bad:

7. Mandate. Proof of insurance coverage is required of all Americans, while insurers are still largely free to charge what they want. (To keep insurers in check the bill needs a broader public option and mandatory rate approval to curb prices.)

8. Poor minimum coverage. Allowable minimum health plan, the “bronze” level, would cover only 60% of overall patient costs, including copays and deductibles. (Should be at least 75%.)

9. No employer requirement. Employers face only very weak fees for failing to even offer coverage. (Need more realistic requirements in House bill.)

The Ugly:

10. Race to the bottom on state protections. State benefit requirements would be preempted by “nationwide plans” and multistate “compacts,” which would be ruled by laws of the weakest states; weaker federal requirements would become the norm. Coverage of AIDS/HIV testing, reconstructive surgery, home health care services, and child delivery and mastectomy minimum hospital stays and more would likely be lost. (States must retain freedom to require stronger coverage for all types of policies.)

Source: Consumer Watchdog

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