Fine print of Senate health reform bill would lead to pre-emption of state patient protection laws

Dec 18 2009

Key members of the U.S. House of Representatives have sent a warning to Senate and House leaders that the fine print of the Senate health reform bill would strip many states, including California and Maine, of hard-won patient rights and benefit requirements, reported Consumer Watchdog.

The letter, signed by all of the Democratic members from California and both members from Maine, lists key patient rights that will be lost in both states if the bill continues to allow insurers to sell policies in multiple states, while disregarding any state benefit requirements that are stronger than those of the weakest state.

Download the letter, spearheaded by Congresswoman Jackie Speier (D-CA), at: http://www.consumerwatchdog.org/resources/CompactLetter.pdf

"The fine print of the Senate health reform bill would deliver yet another of the insurance industry's top agenda items -- pre-emption of state patient protection laws," said Jerry Flanagan, Health Care Policy Director for Consumer Watchdog. "With the apparent elimination of the public option and the Medicare buy-in for those over 55, coupled with these pre-emption provisions, health reform has shifted from patient protection to insurer profit protection."

Insurance companies have long demanded the right to sell nationwide and multi-state plans to small businesses and individuals, arguing that the premiums would be cheaper if the plans did not have to obey state laws. However, Consumer Watchdog noted that patients would soon find that maternity care, reconstructive surgery after cancer and even HIV/AIDS testing, among many other benefits, were not covered. Regulators in all but the state in which the policy was issued would have their hands tied, with no power to compel any coverage or treatment.

17 states, which currently have more than 50 health benefit mandates in state law, have the most to lose under the pre-emption provisions. Those states, representing 54% of the U.S. population, include: California, Colorado, Connecticut, Florida, Louisiana, Massachusetts, Maryland, Maine, Minnesota, New Mexico, Nevada, New York, Pennsylvania, Rhode Island, Texas, Virginia and Washington. (Source: Craig Bruce & J.P. Wieske, "Health Insurance Mandates in the States 2009," Council for Affordable Health Insurance," page 4 (2009)).

The Congressional Budget Office found that five of the state coverage mandates considered by insurers to be the most expensive have in fact only a marginal impact on premiums, ranging from 0.28 to 1.15 percent.(1) Massachusetts, which has among the strongest state mandates, calculated the total net cost on premiums to be only 3 percent to 4 percent (2) compared to the 25 percent to 27 percent of premiums that insurers spend on overhead and profit.(3) What insurers are not saying, according to Consumer Watchdog, is that state coverage mandates that ensure access to basic health care needs are necessary to prevent and manage disease, or to treat it before it becomes severe and more expensive to care for.

Senate Bill Rehashes Bush-Era "Association Health Plan" Agenda

Both the "nationwide plans" and "state compact" pre-emption scenarios are similar to a failed 2006 bill, S. 1955, by Sen. Mike Enzi (R-Wyo.) who championed President Bush's health agenda. Pre-emption of state health care laws was a bad idea in 2006, and it is a bad idea now, said Consumer Watchdog.

Instead, the final Senate health reform bill should be modeled on existing federal health care laws which provide for a federal-state partnership rather than federal pre-emption of more protective state standards. Minimum federal standards should set a floor, not a ceiling, on state health care protections said Consumer Watchdog.

Fine Print of U.S. Senate Health Reform Bill

Section 1333, beginning on page 219, of the Senate bill, HR 3590, would allow insurers to form "health care compacts" (page 219) and "nationwide plans" (page 222) which would only be subject to the health benefit mandate laws and regulations of the state in which the policy was "written or issued."

Assuming that the proposed new national minimum benefit guidelines (page 102, section 1302) would apply to the compacts and Nationwide plans, these national minimums would become default rules because insurers would certainly choose to be regulated by the weakest state.

An amendment proposed by Senator Snowe (R-ME) and Senators Landrieu (D-LA) and Lincoln (D-AR) would eliminate a state's ability to "opt-out" of allowing nationwide plans to be sold. Download the Snowe/Lincoln/Landrieu amendment here: http://www.consumerwatchdog.org/resources/SnoweAmendment.pdf

"The Snowe amendment would make a difficult task impossible. Under the current version of the bill, state legislators may nominally refuse to allow insurance companies to sell bare-bones 'nationwide' policies in their state. However, the 1,000 health insurance lobbyists estimated to be working the federal health reform bill, and the industry's unlimited capacity to buy votes with campaign contributions, would be marshaled to advance the insurers' interest at the state level," said Flanagan.