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A critique of US Senate bill 1955, the “Health Insurance Marketplace Modernization and Affordability Act” - or - How bad law gets a good name - By Michael Phillips, Ph.D.:
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I am astounded and amazed by what constitutes health care reform in the eyes of the US Senate.  In a country where more than 40 million American citizens are without health care benefits, the US Senate comes up with Senate Bill 1955 entitled the “Health Insurance Marketplace Modernization and Affordability Act”.   Particularly distressing to me is that New Hampshire’s own Judd Gregg is the 2nd highest ranking republican on the committee that drafted this bill, the committee on Health Education Labor and Pensions (HELP).  Senator Gregg voted in favor of this bill, and he should know better based on our experience with similar legislation in New Hampshire .  Senate Bill1955 would create a series of federal regulations that would override many longstanding, vital state consumer-protection laws (including mental health parity laws which give equal benefits for treatment to mental and physical illnesses) that now regulate the individual, small-group and large-group health insurance markets. 

 * 39 State mental health parity laws that prevent discriminatory coverage of mental health services by insurers would be preempted.

* 32 State minimum mental health benefit mandate or mandated offering laws would be preempted. These laws ensure that consumers have some level of coverage should mental health disorders arise.

* 42 State and the District of Columbia psychology "freedom of choice" laws would be preempted. These pro-competition laws give consumers the option to choose a psychologist when their health plan covers psychiatrist services.

In addition, under this measure, an insurer would have to offer only one alternative to a “bare-bones” insurance plan. The alternative plan would have to resemble one of the options available to state employees in one of the five largest states called the "enhanced option."   But this option, chosen by the insurer, not the consumer, may not meet their needs given the variability among those states' employee-benefit plans. Many of these state employee plans offer very limited coverage and do not provide mental health parity. As a result, beneficiaries who now have strong protections could find themselves with little to no mental health benefits. 

The bill also defines a class of plans called Small Business Health Plans (also known as Association Health Plans or AHPs) SBHPs are health plans sponsored by small business and professional groups and regulated by State laws. State laws would be preempted to allow SBHPs to provide only barebones plans, as long as they also provide an "enhanced option" plan.

Small employers have a true health insurance affordability crisis. But S.1955 could actually make insurance MORE expensive for many—particularly for people with more than minimal healthcare needs. In seeking to provide for lower-cost health insurance, the bill would fail those most in need of good coverage. It would do so by weakening the fundamental protection that insurance provides, that of “pooling” risk. Various state laws currently prohibit insurers from discriminating on the basis of age, gender or health status in setting insurance premium rates. But S. 1955 would override those laws and allow insurers to set far higher rates for those who are older and sicker, thereby driving up costs for those with the greatest needs. Look at our own experience in this state.  When New Hampshire threw out its protections regarding premium costs and adopted the policy proposed in S.1955, premiums rose for 80% of small employers in the state.

It is time that our leadership look for solutions that don’t solely rely literally on the blood sweat and tears of American citizens.  For example- you will not find in S. 1955 a requirement that insurers limit how much profit that they make, or that they limit the burden imposed by their own administrative expense.  Insurers year after year report record earnings, but our leadership says to solve the health care problem we have to restrict benefits to our most vulnerable citizens? 

Examine for instance the trends in what are called Medical Cost Ratios.  These statistics describe what percentage of each premium dollar goes toward payment of actual health care benefits.  Ten years ago many plans had medical-cost ratios in the high 80s or 90s, now the highest percentage among large, publicly traded health insurers is Health Net, at 83.9%. Aetna , which had a medical-cost ratio well into the 90s when CEO John Rowe, MD, took over in 2000, recorded a ratio of 76.9% in 2005, Dr. Rowe's final full year before his retirement. That was the lowest medical-cost ratio for the nation's largest publicly traded plans.

 

 Medical-loss ratios for 2005 (Source: Company 10-K, year-end filings with
the Securities and Exchange Commission):

76.9% - Aetna
82.3% - Cigna
83.9% - Health Net
83.2% - Humana
78.6% - UnitedHealth Group
80.6% - WellPoint

http://www.ama-assn.org/amednews/2006/03/06/bisd0306.htm

Clearly, one-fifth of health insurance premium dollars are not being spent on health care, but are consumed by the insurers. What does not show up in these numbers is the cost of the administrative burden that these insurers place on the health care delivery system. The billing and insurance related functions for physicians and hospitals burn up another 12 percent or so of the premium dollar (Kahn et al, Health Affairs, Nov/Dec 2005).   Add
these together, and that is about one-third of the premium dollar that goes to bureaucracy and salaries of insurance company employees.  

The only people to which such legislation makes sense are those who work for the insurance industry, those whose political careers are supported by the insurance industry, and perhaps those who have guaranteed health insurance benefits available to them and their families for the rest of their lives (like all of congress).   Contact Senators Judd Gregg and John Sununu and let them know that this is unacceptable.  Stand up and demand better solutions for our citizens!






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