Decision Upholds Key Protections Requiring Insurance Companies To Sell and Price Insurance Regardless of Health Status

Today’s decision by the United States Supreme Court to uphold the Affordable Care Act and its mandate that individuals purchase health insurance makes rate regulation the next essential phase of health reform, said Consumer Watchdog today.

Consumer Watchdog praised the court for requiring health insurance companies to sell to people regardless of pre-existing conditions, eliminating medical underwriting, and barring practices like rescission that made health insurance disappear when patients needed it most. These reforms will expand Americans’ access to health insurance and help policyholders get the coverage they are promised, said Consumer Watchdog.

“Upholding the individual mandate makes rate regulation the next essential phase of health reform and we hope the President will join in helping us to keep premiums low now that people are going to be taxed for not having health insurance,” said Jamie Court, president of Consumer Watchdog. “We must ensure health insurance premiums are affordable if Americans are going to have to buy it. The future of health care reform depends on regulating premiums and making health insurance more transparent and accountable.”

Consumer Watchdog’s campaign affiliate, Consumer Watchdog Campaign, is sponsoring a ballot initiative to force health insurance companies to justify rate increases and get approval before they take effect. The ballot initiative is awaiting certification for the ballot. More on the ballot measure at: http://www.JustifyRates.org.

A Consumer Watchdog report finds that strong rate regulation is necessary to hold down costs and keep insurance affordable under health reform. The report examined Massachusetts where rate regulation has begun to successfully hold down premiums after the state’s individual mandate, which was the model for federal reform, failed to control costs.

Download the report “Health Reform and Insurance Regulation: Can’t Have One Without The Other”

In a remarkable act of either stupidity or brinksmanship, the Obama Administration challenged the US Supreme Court to either keep the federal individual mandate to buy health insurance or throw out with it some of the most important consumer protections in the federal health care overhaul.

The Justice Department argues in a brief to SCOTUS that if the mandate is unconstitutional, then insurance companies cannot be forced to sell health insurance to people regardless of their preexisting conditions or to price their policies based on factors other than a patient’s medical condition.

In other words, give us mandatory health insurance or take from sick patients the right to have access to insurance at an affordable price.

WTF? Has the White House lost its mind?

New York has a system with NO mandatory health insurance, but the very take-all-comers provision and community rating pricing, which excludes price gouging based on illness, that the Justice Department says cannot work without the mandate.Obama advocated for such a system while running for president and distinguishing himself from Hillary Clinton. Now, according to his Justice Department, it’s just not possible?

New York may have high premiums, but so does Massachusetts, which has mandatory health insurance. Both states have recently adopted premium regulation to deal with reining in premiums. Consumer Watchdog’s study earlier this year found premium regulation to be the essential component for health reform to work, not mandatory insurance.

Obama’s attempt to force the hands of a Supreme Court that couldn’t even be shamed out of throwing the 2000 election to George W. Bush seems to be more than legal sophistry. The President seems to have said to himself so many times that mandatory health insurance is necessary for any pro-consumer reform that his Justice Department believed it.

Lower courts have ruled the mandatory purchase provision — which is wildly unpopular with public, unfair without premium regulation and possibly unconstitutional — could be struck from the federal law without losing the pro-consumer provisions. Now the Justice Department just gave the Supreme Court the blade it needed to gut the prohibitions against insurance companies refusing to sell insurance to people who need it most. Read the rest of this entry →

The San Francisco Chronicle reported this morning on the front page about the landmark insurance reform we expect to be spending the next fifteen months working for.
Insurance companies, the legislature and recent court rulings have all turned against consumers, much like they had in 1988, when California voters struck back with the toughest insurance reform in America: Proposition 103.
By 2014, all of us will be required to buy health insurance or face tax penalties. The problem is that health insurance companies can charge whatever they like and raise premiums at will in California. This is the same scenario that drivers faced in 1988 when mandatory auto insurance laws forced drivers to pay for policies many couldn’t afford. Voters then required auto insurers to pay drivers a 20% refund and to get permission before they ever raised rates again.
Just like in 1988, insurance stalwarts in the statehouse are now holding insurance premium regulation hostage. The companies have given the politicians millions so they can make billions overcharging you. And, as in 1988, the California Supreme Court has issued several rulings taking away the right of policyholders to hold insurance companies accountable.
If we go to the ballot with a 1988-style 20% rollback in health insurance premiums, will you be with us?
Our “Proposition 103 Part Two” ballot measure will have to be filed by November 2011 in order to begin signature collection so it gets on the ballot for November 2012.
The main provisions of the ballot measure are as follows:
1- A 20% rate rollback in health insurance rates to reverse five years of unwarranted double-digit price gouging;
2- Require health insurance companies to seek permission from the elected insurance commissioner before raising rates, as auto insurance companies must, and application of other Prop 103 protections to health insurance companies;
3- Prohibit all insurance companies from raising your rates or refusing to renew you because of your credit score, claims or insurance history;
4- Allow consumers to join a non-profit public health plan administered by CALPERS instead of having to buy insurance from private insurance companies;
5- Correct court rulings that have misinterpreted the law to benefit the insurance industry;
6- Create a “three strikes and you’re out of California” law for insurance companies that repeatedly violate the state’s consumer protection laws
7- Prohibit health insurance companies from forcing you to sign arbitration agreements as a condition of enrollment.

We want to go to the ballot in November 2012. Will you be with us? Click here to sign up!
Together we can move health care reform forward in California and America.
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Jamie Court is president of Consumer Watchdog and author of The Progressive’s Guide To Raising Hell.

Washington D.C. — It's hard to imagine that a briefing on rate regulation and a new Consumer Watchdog report would draw a fascinated audience, but this is DC.  Journalists and nonprofit advocates spent 90 minutes Wednesday as Sen. Dianne Feinstein and an expert panel made an impassioned call for getting health insurance companies under control with tough regulation of the rates they can charge. As the senator put it, without mincing a single word:

“While insurance premiums continue to spiral out of control, CEO's paychecks are getting bigger, and insurance companies are spending less on medical care and more on profits. Today, in 17 states including California, state regulators do not have authority to block or modify insurance rate increases that are excessive, unjustified, or discriminatory. In order to protect consumers from skyrocketing insurance premiums, state regulators need this explicit authority to ensure rates are justified. This is why I have introduced the Health Insurance Rate Review Act of 2011, and why I have endorsed state legislation in California, AB 52, to close this loophole.”

The senator was the lead speaker as Consumer Watchdog released a report leaving no doubt that the only way to protect consumers from spiraling rate increases is what's called prior approval rate regulation: The insurance commissioner gets to see rate increases well ahead of time and can reject them outright or demand modification. Consumers can challenge excessive rates on their own, and be paid for their time. It's the only way to keep insurance companies honest, and also enlist them in actually helping to keep down overall health costs.

The report, called "Health Reform and Rate Regulation: Can't Have One Without The Other," outlines why California has the best, most protective model of rate regulation–except it applies only to auto and other property and casualty insurance. The report illustrates both successes and failures in other states, and outlines a role for the federal government in making sure states protect consumers.

For the short version, here's the news release.

Consumer Watchdog founder Harvey Rosenfield, Washington director Carmen  Balber and Maine Superintendent of Insurance Mila Kaufman (a creative and fair consumer advocate) held a lively panel discussion–the journalists present stuck around for the whole thing, which is not the usual way.

Video is to come–I know that with a topic as delicious as rate regulation, no one can wait.

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Posted by Judy Dugan, research director for Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

At the National Governors Association, President Obama just threw his weight behind a bi-partisan effort in the US Senate to allow states to innovate with health reform, including adopting a public insurance system or single payer health care system by 2013 instead of 2017.

The governors embraced the state innovations waiver proposal, since conservative states want to weed back the federal health reform and states like California might like to push ahead with public insurance options or single payer health care systems.

The idea is to let states meet federal targets anyway they want to, rather than how the federal government prescribes, by 2013 rather than the current 2017 deadline.

This is one of Obama’s only moves left, and a smart one. It gives progressive reformers in California and elsewhere the ability to move forward on ambitious reform plans that can pass at the ballot box in 24 states but would never get the time of day in Washington.  . . . Read the rest of this entry →

Massachusetts has the highest or near-highest health insurance premiums of any state in the nation and it's the only state that mandates the purchase of health insurance by every resident. Yet the health insurance industry, in hunting for ways to sell the mandate to Americans who hate the idea,  has concocted a ruse that a lot of people are actually buying.

The industry's chief lobbying group, America's Health Insurance Plans (AHIP), is claiming that its surveys of members–i.e. health insurance companies– show a drop in annual premiums for single individuals in Massachusetts from $8,537 in 2006, when the state adopted an individual mandate, to $5,143 in 2009. That's 40% off–pretty spectacular! The AHIP claim is being repeated in news stories and blogs, particularly by authors who favor the health insurance mandate, and don't want to look too hard at such statistical manna from heaven.

However, people who work in the Massachusetts health insurance market told me they don't believe these numbers. Federal and state data on Massachusetts also dispute the data AHIP is pushing. Massachusetts never saw a price drop of that size in any market, and any price cut in the individual market was because of a merger with the small business market, and because insurers started selling stripped-down policies in 2007. Price changes had little to no relation to the purchase mandate.

You can see the 2006 and 2009 AHIP surveys for yourself here and here. No one else–not the even the state of Massachusetts–regularly makes public state-level year-to-year data on  private health insurance sales of individual and family policies It's all a trade secret. So much for transparency and consumer empowerment.

The few available other sources show dramatically different numbers.

A report by the National Conference of State Legislators in 2007, citing individual survey data from the Joint Economic Committee of the U.S. Congress, stated that Massachusetts’ average premium in the individual market in 2006 was $4,841 a year, barely over half of the purported AHIP number. See the study data here (in final table).

A recent report by the federal Agency for Health Research and Quality on Massachusetts’ employment-based group insurance market gives these historical premiums for single coverage in the employer-based health insurance market:

2004:  4,141

2006:  4,448

2009:  5,268

While the group and individual markets are not identical in pricing, they roughly follow one another.

Massachusetts also began its reforms with a lower rate of uninsured people than any other state, and its increase in nongroup private insurance purchases since the 2006 mandate amounts to only 12% of the newly insured. (Data from Milbank Quarterly.)

A 2010 report on health costs in Massachusetts shows that AHIP is  mixing apples and oranges. The individual market and the small-group market in Massachusetts merged in 2006, and the inclusion of small businesses pulled down prices in the individual market by a couple of percentage points (though prices for small businesses went up by nearly the same amount). Insurers were also allowed to offer cheaper, stripped-down plans in the merged market. From the state report:

“The lowest-cost small group premium fell markedly in July 2007, when carriers introduced new low-cost products in the newly merged market (see Appendix, Figure C.2). These new products may have been introduced as Bronze coverage products made available to individuals through the Health Connector’s Commonwealth Choice program (as many

of the carriers in the study participate in Commonwealth Choice) or for other strategic reasons. … Overall, individual premiums declined significantly in 2008 [from $5,364 per year to $4,752) due to the shift in membership toward lower-premium products in the merged market. However, premiums for individuals in pre-merger products continued to increase.”

Even if the policies being bought were equal, which they were not, the one-time 13% decrease described in the state report is a far cry from the 40% drop being trumpeted by AHIP. And the drop was only for new policies–those who were already insured continued to see premiums increase.

AHIP should be ashamed of itself for touting its surveys as real data, though lobbyists are not well-acquainted with the concept of shame. What surprises me, though, is how easily AHIP has gotten people to believe its numbers. Then again, maybe not so surprising: Bernie Madoff didn't get rich off of skeptics.

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Posted by Judy Dugan, research director for Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

70 million Americans who get health insurance through their employer cannot take their insurance company to court when the insurer doesn’t provide the benefits it promised, even if the insurer’s decision to delay or deny life-saving treatment results in an employee’s death.

Now the federal health reform law requires every American to prove they have health coverage by the year 2014. We’re about to force even more people to buy health insurance without the legal protections to make sure they get the benefits they pay for. That’s not the quality coverage the President and Congress said health reform would deliver.

No one knows what this loophole in the law means better than the family of Nataline Sarkisyan, who died hours after the liver transplant she needed to survive was finally approved after a long fight with her insurance company Cigna.  Watch Nataline’s story on Dateline NBC.

Senator Max Baucus made the point perfectly in a Finance committee hearing last Tuesday: "An insurance policy is only good if the insurance company actually compensates the consumer, when there’s a loss. And insurance law is only good if it helps to make that happen. It’s time to make sure that the law does that."

The hearing was technically about long-term disability insurance, not health insurance, but so was the case that stripped so many Americans of their right to make insurers provide the benefits they promise.

A 1987 Supreme Court decision, Pilot Life Insurance v. Dedeaux, applied a federal law about pensions called the Employee Retirement Insurance Security Act (ERISA) to employer-provided insurance coverage, despite the fact that was never Congress’s intent. (Read more about the law here.)

ERISA preempts the state laws that insurance policyholders use to sue insurance companies for bad faith under state common law. It moves cases about benefit denials to federal court where a judge must meet an impossibly high standard to find in favor of the consumer. Even then, the most a consumer can get is the coverage they were already entitled to. If the person dies before the case is settled, the insurer owes nothing. Without legal liability, insurers have every incentive to delay and deny care indefinitely. Insurance companies count on the fact that very few consumers have the money to take them to court and, even if they do, the most the insurer will have to pay is the cost of the treatment. That’s no more than they would have paid if they’d dealt honestly with the consumer to begin with. 

The financial incentive is for insurance companies to delay and deny care as long as possible.

Now more than ever, with the requirement that we all have insurance by 2014, it’s time for Congress to close that loophole. Consumers with employer-based health insurance should have the same right that members of Congress, and consumers who buy their coverage direct from the company, have to hold their insurer accountable.

In Tuesday’s (unfortunately sparsely-attended) hearing, Senator Baucus outlined the problem and the solution after telling the stories of two individuals whose disability claims were unfairly denied, one without a company doctor even examining him (download the statement):

How do insurance companies get away with these abuses? Unfortunately, loopholes in the law permit them.

First, ERISA preempts state insurance measures to address these abuses.

That means that claimants cannot get jury trials, pre-trial discovery, or the right to submit evidence to the court. And claimants cannot receive punitive or consequential damages."

Second, companies can include what’s called a "discretionary clause" in their insurance plan document.

In most states, these clauses mean that it’s not enough for a claimant to prove that the company’s reasoning is weak when it decides to deny benefits. To win the case, the claimant has to prove that the company’s reasoning is arbitrary or capricious. That’s a significantly higher standard.

It’s time to close these loopholes. It’s time to end these abuses.

Just as it’s true for disability insurance, it’s also true for millions of Americans who will soon be required to have health insurance under the federal reform law, but will have no recourse if their insurer denies life-saving treatment. It’s time to close the ERISA loophole for health insurance too.

Fortunately in a polarized Washington, this is not a black and white partisan issue. During markup of the recent health reform bill, Republican Rep. Shadegg introduced an amendment to close the ERISA loophole. As Rep. Shadegg put it: "Your doctor may recommend that you receive certain health care treatment, but with the stroke of a pen, an ERISA plan can deny coverage for that treatment.  And, if you are injured or killed because of that denial, the plan can walk away."

No one, Republican or Democrat, can support insurance companies walking away from their obligations to patients like Patrick Gannon, who suffered two strokes and a heart attack, but was denied the timely therapy he needed to have a strong chance at recovery. Watch Patrick’s story on Dateline or download it here.

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Posted by Carmen Balber, director of the Washington D.C. office of Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.