[Congressional Record Volume 145, Number 129 (Wednesday, September 29, 1999)]
[House]
[Pages H9001-H9007]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
MANAGED CARE REFORM
The SPEAKER pro tempore (Mr. LaTourette). Under the Speaker's
announced policy of January 6, 1999, the gentleman from Iowa (Mr.
Ganske) is recognized for 45 minutes as the designee of the majority
leader.
Mr. GANSKE. Mr. Speaker, I thank the Majority Leader for yielding me
the balance of his time.
One can never say that the floor of Congress is a dull place. So this
afternoon we have heard about art exhibits showing the blessed virgin
with elephant dung on them. We had a 5-minute speech from the gentleman
from Minnesota (Mr. Ramstad) who had told us that he lives in Lake
Woebegone. So I am going to speak about managed care.
I just thought I would ask the Majority Leader a question. I was
wondering if the Majority Leader, in the spirit of a little levity,
could tell me the difference between a PPO, an HMO, and the PLO.
Mr. ARMEY. Mr. Speaker, if the gentleman will yield, I will rise to
debate. Let me say to the gentleman, though, I am sorry I cannot tell
him the difference between a PPO, an HMO, and a PLO.
Mr. GANSKE. Well, Mr. Speaker, one can negotiate with the PLO.
Mr. Speaker, I am going to use the balance of the time to discuss
managed care reform legislation that we are going to be debating here
on the floor next week. I appreciate the Majority Leader and the
Speaker of the House for setting up this debate for next week.
The rumors are that we will be using the bipartisan consensus managed
care bill as the base bill. That is the bill that I support. It is a
strong managed care reform bill.
We are uncertain at this time as to what type of rule we will have. I
would request that we have a clean rule; in other words, a rule that is
limited to patient protection legislation and does not involve tax
matters for which one could then get into discussions about offsets and
other difficult problems.
Well, Mr. Speaker, humor sometimes shows that the public is aware of
a problem. I remember, a few years ago, my wife and I went to the movie
``As Good As It Gets.'' Many people saw this movie. It featured Helen
Hunt and Mr. Nicholson.
It was about a waitress played by Helen Hunt. She had a young son who
[[Page H9002]]
had asthma. In one of the lines of the movie, which I cannot repeat
here on the floor, Helen Hunt, with expletive waste language described
her HMO as preventing her son who had asthma from getting the type of
care that he needed. The forcefulness of her statement caused
audiences, not just to laugh, but in many instances to stand up and
clap and cheer, as occurred in the movie theater that my wife and I
attended this movie, indicating that the public understands that there
is a problem in the delivery of health care by HMOs.
It is not so funny when we look at real life cases. We have
headlines, and this probably is directly related to the humor or at
least the understanding of the statement by Helen Hunt in the movie
``As Good As It Gets.'' We have a headline here from the New York Post:
``HMO's cruel rules leave her dying for the Doc she needs.'' Just like
the HMO's cruel rules would not allow Helen Hunt's son in the movie to
get the asthma care that he needed, so he was also ending up in the
emergency room.
How about this headline from the New York post: ``What his parents
did not know about HMOs may have killed this baby.''
Which brings us to an issue in HMO reform that we have been working
on which deals with an issue that started this debate several years
ago.
Now, before I came to Congress, I was a reconstructive surgeon in Des
Moines, Iowa. I still go overseas and do charitable surgery. So I am
still involved with the practice of medicine in some respects.
But a few years ago, it became known that HMOs were writing contracts
in which they said that, before a physician could tell a patient all of
their treatment options, they would first have to get an okay from the
HMO. These are called gag rules. That then spawned a number of
cartoons.
Here we have one, and I will read this for my colleagues because it
is hard to see. We have a physician sitting at his desk, and he says:
``Your best option is cremation, $359, fully insured.'' The patient is
sitting there saying, ``This is one of those HMO gag rules, isn't it,
doctor?''
Or how about this one. The physician is sitting, talking to his
patient. The physician says, ``I will have to check my contract before
I answer that question.''
Now, think of that. Now say one is a woman, one has a lump in one's
breast, and one goes in to see one's doctor, he takes one's history,
does one's physical exam. Then he says, ``Excuse me. I have to leave
the room.'' He goes out in the hallway. He has to get on the
phone, phone the HMO, and says, ``Mrs. So-and-So has a lump in her
breast. She has three treatment options, one of which may be expensive.
Is it okay if I tell her about all three treatment options.''
Is that bizarre? Is that ridiculous? Does that strike at the heart of
a patient having confidence that his physician is going to tell him all
of his treatment options.
Well, it was not such a funny story for a real life patient. This
woman in the middle of this picture is dead today because her HMO
prevented her from knowing all of her treatment options. This story is
fully documented in Time Magazine from about 2 years ago.
Or how about the problem that one has had with HMOs in delivering
emergency care. Frequently, HMOs, if one has gone to an emergency room,
will deny payment.
Let me give my colleagues an example. You wake up in the middle of
the night. You have crushing chest pain. You are sweaty. You know that
the American Heart Association says this could be a sign that you are
having a heart attack. So you go to the emergency room right away like
you should, because if you delay, you may be dead. You have the tests
run, and the electrocardiogram shows it is normal. But, instead, you
have severe inflammation of your stomach or your esophagus.
So the HMO, ex post facto, says, ``See, the EKG was normal. You were
not having a heart attack. You are stuck with the bill, man, because
you did not need to go.''
Next time somebody thinks about that and then delays going to the
emergency room when they should under what a common layperson would say
is truly an emergency, they may not get a second chance.
So here you have a cartoon that sort of deals with this. You have a
medical reviewer saying, ``Cuddly Care HMO. My name is Joan. How may I
help you? You are at the emergency room, and your husband needs
approval for treatment? He is gasping, writhing, eyes rolled back in
his head? Does not sound all that serious to me.'', the medical
reviewer at the HMO says.
Then she says, ``Clutching his throat? Turning purple? Uh-huh? Have
you tried an inhaler? He is dead? Well, then, he certainly does not
need treatment, does he?''
Then the medical reviewer from the HMO turns to us and says, ``Gee,
people are always trying to rip us off.''
That is black humor. That is black humor, I will tell my colleagues.
But that rings a bell with a lot of people who have trouble with their
HMOs.
Here you have a picture from a TV show a long time ago. You have a
nurse here. She is on the phone, and she is saying, ``Chest pains? Let
me find the emergency room preapproval forms.''
How about a real life example of an HMO patient having significant
problems with their HMO during an emergency. This young woman who is
strapped to a board was hiking not too far from Washington. She fell
off a 40-foot cliff. She was lying at the base of the cliff, semi-
comatose with a fractured skull, a broken arm, and a broken pelvis.
Fortunately, her boyfriend had a cellular phone, and they got her
airlifted into an emergency room. She was in the ICU on morphine drip
for a long time, but she is doing okay now. But then she got a refusal
of payment from her HMO. They would not pay for her hospitalization. Do
my colleagues know why? They said, well, she did not phone ahead for
preauthorization.
I mean, think of that. She was supposed to know that she was going to
fall off the cliff, break her skull, break her arm, fracture her
pelvis. Maybe her HMO thought that, as she was laying at the bottom of
the cliff, she should wake up, with her nonbroken arm, pull a cellular
phone out, dial a 1-800 number, and say, ``Hello. I just fell off a
cliff. I broke my pelvis. I need to go to the emergency room.''
{time} 1400
And then when she was in the hospital on a morphine drip in the ICU,
after it became silly, when the HMO was confronted with their denial,
they said, well, she was in the hospital and she did not notify us in
the first couple of days, so now we are not going to pay for it on that
reason.
Well, she was finally able to get some help from her State ombudsman,
but many people who have health insurance, particularly through their
employers, would not have that option. So what we have in the bill that
we are talking about, the patient protection bill, the bipartisan
consensus managed-care reform bill, is a provision that says, look, if
an average person has what they would say truly is an emergency, they
get to go to the emergency room and the HMO has to pay.
How about some of these plan guidelines the HMOs use to determine
medical necessity. Remember these? Remember when the HMOs were talking
about drive-through delivery of babies or mandating only 24-hour stays
in the hospital? Boy, they were embarrassed by that. But under Federal
law, they can define medical necessity anyway they want to. And even if
a patient suffers an jury, they have no recourse under Federal law.
Here we have a cartoon with Dr. Welby, and he is saying, ``She had
her baby 45 minutes ago. Discharge her.'' I mean, imagine that line on
that program years ago. People would have thought that was absolutely
crazy, and yet that is what the HMOs have mandated in some cases.
Here we have a cartoon that says maternity hospital, and then we have
the drive-through window with the caption, ``Now only 6-minute stays
for new moms.'' And the person at the window says, ``Congratulations,
would you like fries with that?'' And look at the mother. Her hair is
all out like this; the baby is crying. And then there is a little thing
that says, ``Looking a little like scalding coffee situation,'' in the
corner.
Now, this may be a little bit funny, but it was not funny to a woman
by the name of Florence Corcoran, whose baby was sent home within the
mandated 24
[[Page H9003]]
hours. The baby ended up dying of an infection that would have been
discovered had the baby been allowed to stay in the hospital just a
little bit longer.
I was talking a little bit about the HMO's ability under Federal law
for employer plans to define medical necessity any way they want to.
Well, I have taken care of a lot of children with this birth defect, a
cleft lip and a cleft palate. There are some HMOs out there that are
defining medical necessity as the ``cheapest, least expensive care.''
Think of that for a minute. They can deny any treatment that is not the
cheapest, least expensive care.
So for this child with this birth defect, instead of authorizing a
surgical correction of the roof of this child's mouth that would enable
the child to be able to learn to speak correctly, not to mention not
having food go out of his nose, that HMO, under Federal law as it
currently exists, could say, no, that is not the cheapest care. We are
going to prescribe a little piece of plastic to shove up in that hole
in the roof of the mouth, what is called an obturator. Of course, will
the child be able to learn to speak properly with that? No. But quality
does not matter to the HMOs when they are defining care as the
cheapest, least expensive care. And under Federal law they could do
that with impunity. We need to fix that.
Here we have another cartoon. We have the operating table. We have
the doctors, the HMO bean counters, and anesthesiologist at the head of
the table. And the doctor says, scalpel. The HMO bean counter says,
pocketknife. The doctor says, suture. The HMO bean counter says, Band-
Aid. The doctor says, let us get him to intensive care. And the HMO
bean counter says, call a cab.
They can do that under current Federal law, because they can define
medical necessity as the cheapest, least expensive care.
Here is a cartoon that says, ``Remember the old days, when we took
refresher courses in medical procedures?,'' one doctor is saying to a
colleague as they walk in the HMO medical school. And the course
directory in the HMO medical school is: First floor, basic bookkeeping
and accounting; second floor, advanced bookkeeping and accounting;
third floor, graduate bookkeeping and accounting.
Now, look, I think some HMOs do a reasonable job, and they should be
a choice for people to have. And some HMOs are truly trying to do an
ethical job as well. But the HMO field is very competitive,
particularly on prices, and there are some bad apples out there that
are cutting corners too close. And they are able to do that because
this Federal law that I was talking about that passed 25 years ago put
nothing in place of State insurance oversight. It took the oversight on
quality away from the States. Not a very Republican idea. It took it
away from the States, put it in the Federal arena, but then placed
nothing in its place in terms of some standard rules on fairness to
patients or on quality.
Here we have another cartoon that says, ``the HMO bedside manner.''
``Time is money'' is the sign on the edge of the bed. ``Bed space is
loss. Turnover is profit.'' And the health care provider is saying,
``After consulting my colleague in accounting, we have concluded you're
well enough. Now, go home.'' And here we have a patient with his arms
in traction looking like he has a fractured face with his jaw in
traction.
The bottom line should not be the bottom line if it is going to
interfere with quality health care.
Here we have another cartoon where the patient is saying to the HMO
physician, ``Do you make more money if you give patients less care?''
The HMO spokesperson says, ``That's absurd, crazy, delusional.'' The
patient then says, ``Are you saying I'm paranoid?'' And the answer is,
``Yes, but we can treat it in three visits.''
It reminds me of the well-known joke about the three physicians who
died and went to heaven. One of them was a neurosurgeon, and he said to
Saint Peter, You know, I fixed people who were in accidents and had
blood clots on their brains and I saved their lives. And Saint Peter
said, Enter my son. The next person is an obstetrician, and she says to
Saint Peter, I have delivered hundreds of thousands of babies, and I
have given a lot of free care. And Saint Peter says, Enter, my
daughter. And the last one is an HMO medical director who says, Well,
Saint Peter, I was able to save millions of dollars by denying care and
getting people out of the hospital earlier. And Saint Peter says,
Enter, my son, for 3 days.
Here we have a cartoon that is the HMO claims department, and the HMO
bureaucrat says, ``No, we don't authorize that specialist.'' Then she
says, ``No, we don't cover that operation.'' And then she says, ``No,
we don't pay for that medication.'' And then, apparently, there is some
strong language or something as she is listening, and then she looks
rather cross and says, ``No, we don't consider this assisted suicide.''
Now, look, if all of this seems a little off the wall, let me just
say that it has real-life consequences when HMOs are not accountable
for their medical decisions. And is there anyone that doubts that HMOs
are making medical decisions every day? Not by the hundreds, not by the
thousands, but by the tens of thousands every day they are making
medical decisions. And under Federal law they are not liable for the
bad results, the negligent results of those decisions that could result
in loss of life or limb.
Now, if an insurance company sells a policy as an individual, and
they are under State insurance oversight, that insurance company does
not have that kind of legal liability shield. But under this antiquated
Federal law, it is the only group in this country, other than foreign
diplomats, that have legal immunity for the decisions that they are
making. The automobile manufacturers do not have that kind of legal
immunity, the airplane manufacturers or the airlines do not. Only the
group that provides health care for employers is totally immune from
the consequences or responsibility of their decisions.
So let me tell my colleagues about a case where this makes a real
difference, where an HMO made a medical decision. I have here a picture
of a little boy who is tugging his sister's sleeve. He is about 6
months old. A few weeks after this picture was taken he is awake at
about 3 in the morning with a temperature of about 105, and he is sick.
And as a mother can tell, he is really sick and he needs to go to the
emergency room.
So Mom does what she should do. She phones that 1-800 number for that
HMO and says, My baby, Jimmy, is sick. He has a temperature of 104,
105, and he needs to go to the emergency room. And this voice from some
distant place, certainly not familiar with her State, says, Well, all
right. I will authorize you to take little Jimmy to this hospital. And
Mom says, Well, where is it? And the reply from the medical bureaucrat
is, Well, I don't know. Find a map.
Well, it turns out that it is a long ways away. But Mom and Dad know
that if they take little Jimmy to a different hospital, then their HMO
is not going to cover any of the cost. So they wrap up little Jimmy and
start the trek. Halfway through the trip they pass three emergency
rooms with pediatric care facilities that could have taken care of
little Jimmy, but they cannot stop. They are not medical professionals,
but they do know if they stop at those unauthorized hospitals they
would be stuck with potentially a huge bill. So they keep driving.
Before they get to the hospital that has been designated, little
Jimmy has a cardiac arrest and he stops breathing, and his heart stops
beating. Imagine that, while Mom and Dad are driving, Mom is trying to
keep this beautiful little boy alive.
They come screeching finally into the emergency room. Mom leaps out
screaming, Help me, help me, help my baby. A nurse runs out and does
mouth-to-mouth resuscitation. They start IVs, they give him medicines,
they pound his chest, and they get him back alive. But because of that
medical decision that that HMO made, they do not get him back whole.
Because of that circulatory arrest, he ends up with gangrene of both
hands and both feet. And they have to be amputated.
Here is little Jimmy after his HMO treatment, sans hands and sans
feet. Under Federal law, the HMO which made this medically negligent
decision is liable for nothing, zero, nada, because they have already
paid for his amputations, and that is all they are liable for.
Is that fairness? Is that justice?
This little boy will never play basketball. I would remind the
Speaker of
[[Page H9004]]
the House that this little boy will never wrestle. I would remind my
colleagues that some day when he grows up and he gets married he will
never be able to caress the cheek of the woman that he loves with his
hand. I would remind the HMO people who always say do not legislate on
the basis of anecdotes like little Jimmy Adams that this little boy, if
he had a hand and you pricked his finger, it would bleed.
We need justice. I am a Republican. I have stood on this floor and I
have voted for responsibility for one's actions. If a murderer or a
rapist is convicted, they should suffer the consequences. When we
passed the welfare reform bill, we said it is your responsibility if
you are able-bodied and you could work, it is your responsibility to
get some education. We will help you with that, but you need to get out
and get a job and support your family.
Republicans are big on responsibility. But look, are my fellow
Republicans going to say to the HMOs when they are responsible for a
little boy losing his hands and feet that that HMO should not be
responsible? And furthermore, we Republicans have said, you know what,
we should devolve power back to the States. Let us get these things
back to the States. This was a Federal law that took this oversight
away from the States.
In the name of justice, we should say that if an HMO makes this type
of decision that results in this type of injury, they should be
responsible for that. That is only fair.
I will tell my colleagues what: Those bottom-line HMOs that are
cutting the corners too close will be much more careful so we will not
see injuries like this. A judge reviewed this case. The judge, in
reviewing the HMO's decision making on this, said that their margin of
safety was ``razor thin.'' I would add to that, as razor thin as the
scalpel that had to cut off little Jimmy's hands and feet.
What we are talking about next week when we have this debate is an
issue that has a lot of importance to people every day around the
country. We will have an opportunity to correct a wrong, to right a
wrong. The bill, as it was written in ERISA 25 years ago, did not
anticipate the changes that we have seen in the management of health
care by HMOs where they are now managing medical decisions.
I am a physician. I would never argue that if I had made a negligent
decision that had resulted in an injury like this that I, as a
physician, should be immune from the consequences. I do not know any
physicians who would make that argument.
I do not know an airplane manufacturer that, if it is negligent and a
plane goes down and 200 people are killed, would make an argument on
this floor that anyone would vote for that would give them legal
immunity for their negligent actions. I just do not see it.
Well, Mr. Speaker, we are going to have an opportunity to debate
several bills next week. There is a difference in those bills. There is
a bill that my good friends, the gentleman from Oklahoma (Mr. Coburn)
and the gentleman from Arizona (Mr. Shadegg), have introduced.
I would point out that the Health Insurance Association of America
does not think that that is a very good bill because of the liability
provisions that it has in it. But I would say that there are some
problems with that bill.
Let me give my colleagues an example. They have a provision in the
bill that requires the exhaustion of all remedies and the internal and
external review procedures in order to permit a cause of action against
an HMO that would make this type of decision. I think that is a
problem.
For example, a patient like little Jimmy Adams could have already
suffered an injury or he could have died before he ever went through an
appeals process. Or, for instance, a patient might not discover an
injury that is a result of an HMO decision until after the time period
in which administrative remedies of internal and external review could
have been used.
There are some significant problems in the way that liability
provisions are written, and I would encourage my colleagues to not
support it.
We are going to debate on the floor possibly a medical access bill. I
think that bill should be handled on a separate bill. We will have to
deal with that issue in the rule. But when it comes to the floor, I
would encourage my friends to be very careful about the Talent-Hastert
bill.
Let me just read to my colleagues a press release that was put out by
the Health Insurance Association of America. This is the insurance
folks. On this issue I think they are correct.
They say, there are two provisions in the plan announced by the
gentleman from Illinois (Mr. Hastert) that are cause for concern.
``HIAA opposes the plan's call for Association Health Plans and
HealthMarts because they would hurt many small employers who provide
coverage to their employees.'' Let me repeat that. This is the
insurance industry talking about a bill to increase access. They oppose
Association Health Plans and HealthMarts because they would hurt many
small employers who provide coverage to their employees. ``This, in
turn, will cause many of these employers to drop their coverage because
it will become too costly.''
A press release from the same organization speaks about a similar
provision in the bill of the gentleman from Ohio (Mr. Boehner). His
bill ``contains expensive mandates and problematic Association Health
Plans and HealthMarts.''
Then we have a press release that says, ``These bills,'' referring to
bills that have Association Health Plans and HealthMarts, ``could
destroy employer-sponsored health insurance.''
I have a memo from the Blue Cross-Blue Shield Association entitled
``Association Health Plans: The Unraveling of State Insurance
Reforms.''
I have another memo from Blue Cross-Blue Shield Association Health
Plans. ``Association Health Plan legislation would require billions in
Federal regulatory spending.''
Here is another memo from the Blue Cross-Blue Shield plan.
Association Health Plan legislation would reduce insurance coverage. I
have another memo from the Blue Cross-Blue Shield Association Health
Plan. ``Study claims coverage would increase under Association Health
Plan legislation is fundamentally flawed.''
I am pointing this out because of this bill that I support, the
bipartisan consensus managed care bill, we do not have Association
Health Plans in it.
Here is another memo from Blue Cross-Blue Shield. ``Association
Health Plan legislation would increase administrative costs for small
businesses.''
Here is another memo from Blue Cross-Blue Shield Association Health
Plan. ``National survey finds that small businesses reject this type of
legislation.''
Mr. Speaker, we will soon have, hopefully, a full debate on the floor
on patient protection legislation. There is one bill that has generated
the endorsement of over 300 organizations around the country. We have
not seen this type of coalition since the days of the civil rights
bills. These are all of the patient advocacy groups, the consumer
groups, the professional provider groups on board, the American Cancer
Society, the American Heart Association, the American Lung Association.
You could go down the list. They support one bill. And that is H.R.
2723, the bipartisan consensus managed care improvement act of 1999.
This is a bill that has reached across the aisle. It has come to a
reasonable compromise on the liability issue. It says that an employer
is not liable if an employer has not entered into the decision making
that the contracted HMO has made.
I have a clear legal brief that says our language is rock solid on
that protection for employers. It says that if there is a dispute, a
patient can then take that denial of care from the HMO and take it to
an independent panel in order to get that reversed by the HMO. But, in
fairness to the HMO, if they follow independent panel's recommendation,
then the HMO is no longer liable for any punitive liability.
This is a fair compromise, and it applies across the board not just
to group health plans but to all plans. This would apply to insurers
who are in the individual market, as well. That would be a good thing.
That would be not leading to lawsuits but preventing injuries so that
you do not end up with a little boy who has lost his hands and his
feet.
This is a fair compromise, Mr. Speaker. Let us gather together. Let
us get past the $100 million that the HMO industry is spending to
defeat this legislation. Let us do something right. Let
[[Page H9005]]
us agree with the American public that says, by an 85 percent margin,
we think Congress should pass Federal legislation to protect patients
from HMO abuses like this one.
Mr. Speaker, next week we will have a historic opportunity to show
whether we, as individual Members of Congress, are on the side of
patients or on the side of the HMO bureaucrats. Support H.R. 2723.
Mr. Speaker, I include the aforementioned articles for the Record:
AHP/MEWA Study: National Survey Finds That Small Businesses Reject MEWA
Legislation
Performed by: American Viewpoint, Inc.; Sponsor: BCBSA;
April 15, 1998.
American Viewpoint, Inc., conducted a national survey of
small business owners and employees in order to assess their
views on proposed regulatory reforms regarding Multiple
Employer Welfare Arrangements (MEWAs) and Association Health
Plans (AHPs). A total of 500 interviews were conducted with
small business owners and 300 interviews were conducted with
employees of small businesses. Interviews were conducted by
telephone between March 20 and April 15, 1998.
Summary and Conclusions
After arguments on both sides of the debate are presented,
small business rejects this proposal by 42%-26%. That is, 42%
say Congress should not pass it and just 26% support passage.
By 54%-21% small business owners and employees say their
state insurance commissioner is better able than the U.S.
Department of Labor to regulate health insurance in their
state.
In fact, there is very little confidence in the U.S.
Department of Labor's ability to enforce the law without a
major increase in the size of the bureaucracy. Only 17% think
the Labor Department could enforce the law while 68% say it
cannot.
Overall, anti-federal government sentiment is a major
factor in the opposition to proposed legislation on MEWAs and
AHPs. In all, 63% are less favorable and only 26% are more
favorable toward the legislation when they learn that these
plans would be regulated only by the federal government--not
by the states.
Small Business Does Not Favor the Use of Federal Legislation to Avoid
State Laws
63% are less favorable toward the legislation, and 20% are
more favorable, in response to the argument that this
legislation ``creates a large loophole through which healthy
small employers and certain individuals could exit the state
regulated markets, leaving only the sickest remaining in
these insurance pools.''
59% are less favorable and 26% more favorable toward the
legislation when they learn that plans would be exempt from
other state laws such as limits on out-of-pocket expenditures
and requirements to include certain specialists.
A majority (55%) are less favorable toward the legislation
when they learn that it would exempt affected small group
health plans from more than 1,000 consumer protection laws at
the state level. Only 24% are more favorable.
54% are less favorable (31% are more favorable) toward the
legislation because it would allow health plans to operate
without having to comply with each state's laws on premiums,
benefits, and financial standards.
Fairness is also an issue. A majority (54%) say it is not
fair that exempting these groups from state regulations would
allow them to escape the cost of state assessments for
programs to help low-income and high-risk individuals who are
unable to find affordable health coverage.
A majority (52%) say that federally-regulated group health
plans should not be allowed to have lower financial standards
than those now required by the states. Only 23% say they
should be allowed to have lower standards.
Small employers are very sensitive to price. A 55% majority
say they would not be able to continue offering insurance if
their premiums went up by 20%. One in three say they would be
unable to continue offering insurance to their employees if
premiums rose by 10%.
Clearly, anti-federal government sentiment is a major
factor in small businesses' rejection of the AHP legislation.
However, several other factors are also important
considerations. First, they think the bill is unfair to those
with a less healthy work force. Second, they think it would
lower standards for exempted plans and expose them to health
and financial risks from which they are now protected under
state law. Third, only one in three think the bill would have
a positive impact on their ability to provide health
insurance.
In short, although small business may agree with the
motivations for this legislation, they realize that the bill
itself threatens their ability to provide health insurance to
employees, the quality of their coverage, the security of the
state-regulated insurance pools, and the quality of insurance
regulatory oversight. As a result, a plurality (35%) would be
less likely to vote for a Member of Congress who supports
this legislation and just 27% are more likely. 22% say it
depends.
Note: The margin of error for a random sample of N=800 is
3.5 percentage points at 95% confidence. The margin of error
for N=500 is 4.5 percentage points and the margin for N=300
is 5.8 points.
____
AHP/MEWA Study: Association Health Plan Legislation Would Increase
Administrative Costs For Small Businesses
Performed by: William M. Mercer, Inc.; Sponsor: BCBSA;
March 22, 1999.
An analysis by the benefits consulting firm of William M.
Mercer found that AHPs/MEWAs have unique administrative
costs, such as royalties and membership dues, that make it
more expensive for small firms to purchase coverage through
these groups. Moreover, Mercer found that general
administrative costs for AHPs/MEWAs are similar to insurance
companies and that this legislation provides no opportunity
for AHPs to reduce administrative costs for small firms.
key findings:
Associations often require additional administrative loads:
According to a 1995 survey of associations, 80% of group
health insurance programs sponsored by associations produce
revenue for the association. Association revenue comes from
marketing fees, administrative fees, and royalties and
licensing fees. Association-specific fees can be substantial.
According to one survey, association administrative fees
averaged 3.8%, while royalties (i.e., licensing fees charged
to insurers) average 2.2% of premiums for national plans.
Association membership fees can add to the cost of
coverage: Association membership fees are an additional cost
that must be borne by small firms that purchase health
coverage through an AHP. ``As a result of the fees required
to join an association, firms and individuals may face higher
total costs in the association market than they would if they
purchased coverage directly from a health insurance company
without joining an association.''
AHPs and insurers have similar administrative costs:
``Administrative costs borne in the small group market would
generally apply to federally certified AHPs as well.'' Sales
commissions, employer billing, and underwriting expenses tend
to be higher for small employers as compared to those for
large employers. However, offering small group health plans
through AHPs does not eliminate these costs.
AHPs would not reduce administrative costs: ``Based on our
review, this legislation would provide no material
opportunity for AHPs to reduce health insurance
administrative costs for small businesses.'' AHPs could
assume responsibility for administrative activities.
``However, it is unlikely that AHPs could perform these
activities at lower cost than insurers. Negotiating prices
with vendors that are below the insurers' costs would be
equally unlikely.''
Mercer concludes that, ``. . . for small group health plans
offered by AHPs, the potential administrative cost increases
typically would exceed the potential administrative cost
savings. We estimate that the additional costs for small
firms who buy AHP coverage typically would range from 1.5% to
5% of premiums.''
____
AHP/MEWA Study: Study Claiming Coverage Would Increase Under
Association Health Plan Legislation is Fundamentally Flawed
Performed by: Barents Group/KPMG; Sponsor: BCBSA; February
12, 1999.
A recent analysis by the Barents Group/KPMG found that a
National Federation of Independent Business (NFIB) funded
study that asserted that AHP legislation would help solve the
uninsured problem contains serious deficiencies that
undermine its credibility. Moreover, the NFIB study,
performed by CONSAD Research Corp., neglects the primary
problem with this proposal: that it would undermine state
reforms, thus reducing access for many small employers.
The Barents Group's review of the NFIB study found problems
that ``. . . raise serious concerns regarding the accuracy of
the estimates.'' Given these problems, Barents concluded that
``. . . the report fails to provide an adequate justification
for the assertion that coverage would increase under the
proposed association health plan (AHP) legislation.'' Flaws
identified include:
Unsubstantiated claims of AHP savings: The projected
increase in coverage is based on assumed savings for AHPs of
between 5 and 20 percent. According to Barents, ``. . . these
assumptions . . . are not based on any evidence that such
savings would actually exist. In fact, other studies have
shown that AHPs would actually increase costs for many small
firms by skimming off employers with healthy workers and
undermining state reforms.''
Unrealistic assumptions: Barents found the results of the
NFIB study to be ``. . . implausible because they are
inconsistent with the existing body of literature on working
health insurance coverage.'' For example, the study inflates
the estimates by assuming that people are three to six times
more likely to buy coverage than one would expect based on
the academic literature.
Use of inflated numbers: The base population used for the
estimate is ``inflated, which results in overestimation of
the number of people who would obtain coverage.'' For
example, it appears that individuals covered by Medicare,
Medicaid and other public programs may also be in this base,
despite the fact that they would typically not participate in
AHPs.
[[Page H9006]]
Neglecting the effects of income on the decision to
purchase insurance: The report fails to account for the fact
that low-wage workers would be less likely to obtain
coverage. ``The net effect of not accounting for
affordability is to overestimate the number of workers that
would obtain coverage,'' according to the Barents analysis.
The Barents analysis supports BCBSA's position that the
principal effect of this legislation would be to force
employers to move from the small group insurance market to
AHPs--not increase the number of people with insurance. As
the Barents analysis points out, ``. . . if AHPs are
successful in reducing costs by attracting a healthier risk-
pool, any increase in coverage could be offset by reductions
in coverage for the rest of the small group market.''
____
AHP/MEWA Study: Association Health Plan Legislation Would Reduce
Insurance Coverage
Performed by: Len Nichols, Ph.D., of the Urban Institute;
June 16, 1999.
Although association health plans are touted as a
``solution'' for the uninsured, preliminary results of an
Urban Institute study indicate that AHP legislation would
actually reduce overall health insurance coverage. The
results of this study, which were outlined in testimony by
Len Nichols, Ph.D. before the House Commerce Health
Subcommittee, reaffirm concerns raised by numerous groups
regarding the potential for this legislation to undermine
state reforms and make coverage more expensive for firms and
individuals with greater health care needs.
Key findings
AHPs will be most attractive to healthy individuals:
According to Nichols, ``. . . our research simulations
suggest that by far the most important factor determining the
attractiveness of various health insurance options is the
pool with whom the firm's workers will be joined for premium
rating purposes. AHPs and Health Marts . . . will be more
attractive to the good risks and less attractive to high
risks in search of more heterogeneous pools.''
AHPs would undermine pooling in the insurance market: AHPs
will appeal to good risks since they can practice more
segmented premium rating practices than the commercial
insurance industry. . . . This segmentation increases the
chances that firms will be pooled only with firms with
similar cost structures.'' In other words, AHPs will fragment
the insurance market into smaller and smaller pools, rather
than increasing pooling as proponents claim.
AHPs will pull people from existing insurance arrangements,
rather than attract the uninsured into the market. Nichols
found that ``. . . extremely few new firms are enticed to
offer health insurance which did not offer [coverage] before
the reform options were made available. The net effect would
be a lot of churning of insurance policies, but few uninsured
would gain coverage and some firms with insurance would drop
coverage.
AHPs will result in more uninsured Americans. Nichols said
his projections indicate that ``net coverage is reduced
because the commercial and [existing] MEWA pools lose some of
their best risks to the AHPs, and thus their pools
deteriorate. Because of this risk pool deterioration, some
firms drop coverage rather than pay the new higher prices
that go with this deteriorating risk pool. These firms do not
join the AHPs . . . because that risk pool is too segmented
for their taste and risk profiles.''
These preliminary results are part of a growing body of
literature that refutes claims that AHP legislation would
reduce costs for small firms or help the uninsured. BCBSA
believes that AHP/MEWA legislation would raise costs for many
small firms without making any progress toward solving the
uninsured problem.
____
AHP/MEWA Study: AHP Legislation Would Require Billions in Federal
Regulatory Spending
Performed by: Bill Custer, Ph.D. and Martin Grace, Ph.D.,
Georgia State University; Sponsor: BCBSA; June 2, 1999.
In this update of a 1996 study of MEWA regulatory costs,
Georgia State University researchers Bill Custer and Martin
Grace conclude that AHP legislation would create a
significant regulatory burden for the federal government.
They estimate that billions of dollars in federal regulatory
outlays would be needed to oversee AHPs. Moreover, they
conclude that provisions that allow federal officials to cede
regulation of certain AHPs back to the states would require
the creation of a duplicative regulatory system that would
actually increase overall regulatory costs.
Key findings
The proposal requires major new regulatory outlays: Custer
and Martin estimate that regulatory costs would increase by
between $431 million and $3.2 billion over a seven-year
budget period. Federal regulatory costs could be as high as
$2.4 billion over seven years, while state regulatory costs
could exceed $1.1 billion.
The AHP proposal creates new federal bureaucracy: The
legislation requires federal officials to create a new
regulatory bureaucracy to regulate AHPs, which are now
overseen by the states. ``Although the federal government
already has regulatory responsibility for ERISA plans, AHP
regulation should result in significantly higher federal
regulatory costs. The Department of Labor (DOL) has testified
that they have the resources to review each ERISA health plan
once every 300 years. This level of oversight will not be
adequate for AHPs, which are much more like insurers than
single-employer health plans.''
The proposal creates costly dual regulation scheme: Custer
and Grace dismiss proponents' claims that allowing states to
enforce certain federal standards will limit regulatory
outlays. ``In fact, the most costly regulatory model is one
in which the federal and state governments take an equal role
in regulating AHPs, which is the most likely regulatory model
under this legislation. This is because dual regulation would
require both the federal government and the states to develop
and maintain duplicative and costly regulatory systems.''
Undermines state insurance laws: Many states have passed
reforms that limit insurers' ability to compete on the basis
of risk. Although the legislation attempts to limit the
ability of AHPs to exclude groups on the basis of claims
experience, ``. . . the primary factor in deciding to form
one of these groups will be risk. . . . As such, both insured
and self-funded AHPs would pull better risks out of the small
group market, increasing premiums for those who remain in the
state-regulated market or are without access to the
association plan.''
____
[Blue Cross Blue Shield Association, Washington, DC, September, 1995]
AHPs/MEWAs: The Unraveling of State Insurance Reforms
As Congress considers federal health care reform, Congress
should reject proposals to exempt Association Health Plans
(AHPs) and Multiple Employer Welfare Arrangements (MEWAs)
from state law and regulation. These proposals would unravel
insurance reforms that most every state has enacted to assure
access to health insurance for small firms and their workers.
Rather than enhancing the ``pooling'' of small firms, as
claimed by AHP/MEWA proponents, this legislation would lead
to smaller and smaller insurance pools as healthy groups
leave the state market. The result will be large premium
increases for many firms and more uninsured.
what are ahps/mewas?
Association Health Plans are health plans sponsored by
business and professional groups. Many AHPs exist today under
state regulation and can play a valuable role in providing
health coverage to their members. Associations and other
business groups that provide health benefits to two or more
employers are generally called Multiple Employer Welfare
Arrangements (MEWAs).
MEWAs can self-fund or purchase insurance from health plans
that are regulated by the states. States currently have
authority to regulate MEWAs and require self-funded MEWAs to
comply with state insurance standards because they are risk-
bearing entities and operate like insurers.
impact of congressional proposals to preempt state law for ahps/mewas
Congressional AHP proposals would exempt self-funded AHPs/
MEWAs from state law and transfer oversight to the Department
of Labor (DOL). These entities would be exempt from numerous
state standards, including solvency requirements, managed
care rules, benefit mandates and certain rating laws. Minimal
federal standards would replace state rules. This change
would:
Allow AHPs/MEWAs to ``Cherry-Pick'': Exemption from state
mandated benefits would allow MEWAs to avoid offering
benefits that attract sick individuals (such as autologous
bone marrow transplants). This proposal also would allow
AHPs/MEWAs to be experience rated, rather than pooled with
other small groups for rating purposes, as required in many
states. Despite certain rules against discrimination in the
proposal, AHPs/MEWAs could be designed and marketed in a
manner that would attract members with lower expected health
care costs.
Destroy State Insurance Reforms and Increase Premiums:
Preemption of self-funded AHPs/MEWAs from state regulation
would allow a large segment of the health insurance market to
escape state regulation. The movement of healthy individuals
into self-funded arrangements would leave high risk
individuals in the insured pool, but reduce the number of
enrollees over which to spread costs. The resulting premium
increases would drive away more healthy individuals and
ignite another round of premium increases. States would be
unable to stabilize rates because such a large portion of
individuals would be outside their authority.
Increase the Number of Uninsured: Rather than being a
solution for the uninsured, a recent Urban Institute analysis
found that AHP legislation would actually reduce overall
health insurance rates. According to testimony by Dr. Len
Nichols of the Urban Institute, net coverage is reduced
because the state-regulated pools lose some of their best
risks to the AHPs, and thus the pools deteriorate. Because of
this risk pool deterioration, firms drop coverage rather than
pay the new higher prices that go with this deteriorating
risk pool.
Transfer Insurance Regulation to the Federal Government:
This proposal would allow large numbers of AHPs to avoid
state rules through self-funding. The number of plans
regulated by DOL would increase dramatically, requiring a
significant increase in federal regulatory capacity. Under
the current
[[Page H9007]]
staffing structure, DOL could review each AHP only once every
three hundred years, which is inadequate for these new
federally licensed insurance arrangements. The regulatory
burden for these AHPs could be up to $3.2 billion over 7
years, according to a recent analysis by researchers at
Georgia State University.
Expose Federal Government to Monumental Regulatory
Responsibilities: by transferring regulatory authority to the
federal government, DOL would become responsible for
regulating the solvency of hundreds of AHPs/MEWAs across the
country. MEWAs have a history of fraud and have left
thousands of consumers and providers facing millions of
dollars in unpaid medical claims. The National Governors'
Association, the National Conference of State Legislatures
and the National Association of Insurance Commissioners have
stated that solvency standards in the proposal remain
inadequate to protect consumers.
BCBSA also opposes proposals to apply special rules (i.e.,
ratings and exemption from mandated benefits) to insured
AHPs/MEWAs. These rules would allow insured AHPs to be
experience rated instead of pooled with other small groups
and individuals. This provides an opportunity for
segmentation of the market. The end result: higher premiums,
an unstable market and states that are powerless to address
the problem because federal law has overridden their
authority.
bcbsa recommendation
BCBSA believes that the federal government should allow
states to retain the authority to regulate the health
insurance market. States are the most appropriate decision-
makers to craft legislation that expand across without
disrupting insurance markets. However, the federal government
should take an active role in encouraging small firms to
provide health coverage though targeted tax incentives, such
as the small employer tax proposal that BCBSA unveiled in
February of this year.
____
[Press Release--Health Insurance Association of America, September 29,
1999]
New ``Patient Protection'' Bills Could Destroy Employer-Sponsored
Health Insurance
Washington, DC.--Despite the assertions of Congressional
sponsors, new so-called ``patient protection'' legislation
would allow employers to be sued over health benefits
voluntarily provided to their employees, and could destroy
the employer-based health insurance system, according to a
new legal opinion released today by the Health Insurance
Association of America (HIAA).
The new HIAA legal opinion demonstrates that the Shadegg-
Coburn bill introduced last week--as well as the ``Dingwood''
bill introduced last month--expressly authorize lawsuits
against any employer shown to exercise any oversight over its
health coverage. The opinion also states that the ``shield''
in both bills--which the bills' sponsors claim would protect
employers against lawsuits--would apply only if an employer
gives up any involvement with any coverage decision.
Under these bills, even an employer's simple act of
choosing health coverage for employees would be considered
exercising oversight over health coverage, thereby exposing
the employer to the possibility of a lawsuit.
``This legal opinion shows how both bills offer employers
who sponsor health coverage a `Hobson's choice' between the
horrific and the horrendous,'' remarked HIAA President Chip
Kahn. ``Employers either could pay for higher cost coverage
that they cannot control, or retain control and expose
themselves to costly lawsuits. Given these choices, many
employers are likely to throw in the towel and simply drop
coverage altogether, leaving millions more Americans
uninsured.''
HIAA's new legal opinion was prepared by Washington, D.C.-
based attorney William G. Schiffbauer.
HIAA is the nation's most prominent trade association
representing the private health care system. Its members
provide health, long-term care, disability, and supplemental
coverage to more than 115 million Americans.
____
[Press Release--Health Insurance Association of America, September 29,
1999]
Boehner ``Care'' Bill A Mixed Bag
The following statement was released today by Chip Kahn,
President of the Health Insurance Association of America
(HIAA):
Consumers and employers can take some solace that the
``Comprehensive Access and Responsibility in Health Care
(CARE) Act,'' offered today by Rep. John Boehner (R-OH),
would not saddle them with higher premiums due to expanded
liability. Our nation's health care dollars should go toward
providing coverage for Americans, and for improving quality-
not for lining the gilded pockets of trial attorneys.
Although Rep. Boehner's bill prudently lacks liability, it
does contain certain costly mandates and a problematic
provision calling for ``Association Health Plans'' and
``HealthMarts.'' HIAA opposes Association Health Plans and
HealthMarts because they would undermine-not enhance-the
small employer market by increasing premiums for many, and
causing many of them to drop their coverage because it will
become too costly.
On the one hand, Rep. Boehner's bill lacks liability, and
would make coverage more affordable because it calls for an
immediate, above-the-line deduction for the purchase of
individual health and long-term care insurance. On the other
hand, Rep. Boehner's bill contains expensive mandates and
problematic Association Health Plans and HealthMarts. All
told, Rep. Boehner's bill becomes a mixed bag of pluses and
minuses for American consumers and employers.
____
[Press Release--Health Insurance Association of America, September 29,
1999]
Well-Intended Hastert Plan Has Pluses And Minuses
The following statement was released today by Chip Kahn,
President of the Health Insurance Association of America
(HIAA):
Speaker Dennis Hastert (R-IL), along with Reps. Jim Talent
(R-MO) and John Shadegg (R-AZ), clearly recognize the need
for increasing the number of Americans with health insurance.
The proposal that they released today is a step in the right
direction because it would allow a 100 percent tax deduction
for individuals and for self-employed Americans. Also, it
would provide a similar deduction for private long-term care
insurance, and allow people to set up Medical Savings
Accounts (MSAs).
In this respect, their proposal is similar to HIAA's
``InsureUSA'' proposal. HIAA also commends the Speaker and
Reps. Talent and Shadegg for recognizing that expanding
liability provisions undoubtedly will increase costs and
force employers to drop coverage for their employees.
Two provisions in the plan announced by Speaker Hastert are
well-intended, but are cause for concern. HIAA opposes the
plan's call for Association Health Plans and HealthMarts
because they would hurt many small employers who provide
coverage to their employees. This, in turn, will cause many
of these employers to drop their coverage because it will
become too costly.
____________________