Insurers Will Still Not Be Regulated Enough

We’ve heard a lot about how much health insurers will be regulated after health reform. The claim is that insurers will be regulated so much that a public health insurance plan will not be needed to compete with them to keep them honest.

The fact is, however, that neither of the Senate health reform bills regulate health insurers enough and, even if they did, we would still need a public health insurance plan option because insurers cannot be trusted to abide by regulations.

First, the regulations included in the Senate bills apply only to plans in the newly created health insurance exchange. They do not apply to the insurers that contract with companies to provide health benefits to their workers. That means nothing will change for most Americans — those who get insurance through an employer.

Secondly, the most talked about regulations in the reform bills — mandating that insurers cannot deny anyone coverage because of a pre-existing condition, that they cannot charge someone more because of their health status, and that they cannot cancel someone’s coverage when they get sick — already apply to employer insurance. Such new regulations only really help people who cannot get insurance through an employer and are at the mercy of the individual insurance market — about 5 percent of the population.

Lastly, the regulations included in both the Senate Health, Education, Labor and Pensions (HELP) Committee bill (PDF) and the Senate Finance Committee bill (PDF) for plans in the exchange are still insufficient to ensure people will get the care they need when they need it.

It is easy to see how inadequate the regulations in the Senate committee health reform bills are when they are compared to the Bipartisan Patient Protection Act (PDF) (informally known as the McCain-Edwards-Kennedy Patients' Bill of Rights). Senate Bill S.1052 of the 107th session of the U.S. Senate was an attempt to provide comprehensive protections to all Americans with private health insurance. The House of Representatives and the Senate passed slightly differing versions of the bill in 2001, but a final bill was never passed.

This summary of the Bipartisan Patient Protection Act outlines the rights the bill would have provided to everyone covered by a private health insurance company (unless otherwise noted below, the insurance regulations detailed are not included in either Senate committee health reform bill). The Bipartisan Patient Protection Act would have:

Applied to all Americans in all health plans.
Ensured a swift internal review process and a fair and independent external appeals process.
The HELP committee bill includes mention of external appeals process but leaves the details to be decided by the Secretary of Health and Human Services and applies only to plans in the exchange.
The Finance committee bill includes details of an external appeals process but applies only to plans in the exchange.

Ensured that chronically ill patients receive the specialty care they need by mandating they have access to standing referrals to specialists and allowed them to designate a specialist as their primary care provider if the specialist could better coordinate their care.
Ensured that patients could access emergency room care in or out of the plan's network and without prior authorization under the ‘prudent layperson’ standard.
The Finance committee bill includes the right to seek emergency care in or out of the plan’s network but it does not include the ‘prudent layperson’ standard — which is recommended by the American College of Emergency Physicians — and applies only to plans in the exchange.

Assured that health plans could not prevent doctors and nurses from discussing all treatment options with their patients.
Ensured that doctors would not face excessive financial incentives limiting necessary care.
Protected health care providers from the threat of retaliation or firing when they advocate on behalf of their patients or report quality issues to the appropriate regulatory agencies.

Clearly, the claim that new regulations in the reform bills will be enough to protect people covered by a private health insurance company are unfounded. More regulations are needed that will apply to all health insurance plans, not just those in the exchange. But even then, we cannot trust insurance companies to not continue to try to get around regulations (PDF) as they always have.

We need a public health insurance plan option to set a benchmark against which the performance of private insurers can be measured.

As Wendell Potter, a 20-year public relations executive in the health insurance industry turned whistle blower, explains:

“Back in 1993, 95 cents of every premium dollar was used to pay medical claims. Now, it's down to about 80 cents. That is a direct result of the demands of Wall Street.

“What I'm talking about here is something that's referred to in the industry as a medical-loss ratio. Insurance companies consider what they pay in medical claims to be a loss, so they want to lose less money. In other words, they want to spend less and less of every premium dollar on claims, and that's been happening. So more and more is available to pay executives and to reward shareholders. That's why it's been bad for us.

“That's why we really need to have a public health insurance option as part of health care reform, to be a counter to the pressure and expectations from Wall Street and try to reverse that trend.”

If you doubt him, see this chart of private insurers' medical loss ratios over the years:

Make insurance companies compete:

Sign the petition demanding a public health insurance plan option: Tell Washington to pass real health care reform for the people, not insurance company executives.

Views expressed on this page are those of the authors and not necessarily those of Campaign for America's Future or Institute for America's Future