Consumer Protection in a Reformed Health Care & Insurance System

Implementation is critical to the success of translating universal coverage into access to appropriate health care for all.  Sound follow-through demands the design and execution of well-tailored consumer protection regulations. The first step is a prohibition of underwriting or rating decisions based on preexisting illness.  Insurers have agreed to this reform, as a quid pro quo for the millions of new customers they’ll get from coverage mandates.  Universal coverage and this prohibition of discrimination go together.  Insurers are right that it doesn’t make business sense to ignore preexisting illnesses if consumers can wait for illness to appear before contributing to the insurance pool.  They seem to agree that coverage mandates can adequately do the work of preexisting illness exclusions, rendering them superfluous.

Insurers’ position on non-discrimination would clearly change if folks like Rep. Tom Price (R. Ga.) have their way.  Price objects to mandates because they would allow the government to define “insurance” thereby disadvantaging some forms of currently-marketed coverage, such as bare-bones and HSA-linked consumer-driven products.  But underinsurance has been devastating the American middle class for years; real reform must establish basic levels of fiscal security, as well as medical coverage.  Representative Price’s attack on standards is, then, merely a back door attack on universal coverage.  It is a necessary package deal: either we have universal coverage with an end to preexisting illness exclusions, or markets will continue slicing and dicing “insurance,” leaving huge gaps in coverage.

Enforcing a ban on underwriting and rating based on preexisting illness is easy, at least on the surface; either insurers take all comers without consideration of existing conditions, or they don’t.  But that’s not the end of the regulatory task.  The skewed nature of health demand creates a strong temptation for insurers to game the system with a “subtler form“  of discrimination (even with the best risk adjustment we can offer).  Keeping the healthy and driving away the sick, in other words, can be risk selection through other means.

Two types of consumer protection regulation are essential combat this temptation –one procedural, one substantive.  Examples of the procedural protections in the bills are the creation of ombudsman services, and the requirement of transparency in plan design.  States are required, at p. 46 of the Finance Committee’s October 2d amended draft, to create an ombudsman’s office to “act as a consumer advocate for those with private coverage in the individual and small group markets.”  Such programs can be effective in assisting consumers facing disparate treatment.  But the ombudsman’s responsibilities are defined too narrowly: assisting in delayed appeals and helping to resolve premium and cost-sharing issues.  Suppose, for example, an insurer imposes burdensome paperwork, or drags its feet in approving referrals, for all children with cerebral palsy seeking referrals for physical or speech therapy.  An ombudsman can help cut through the red tape in each case, but should also be empowered to discover patterns of “lemon dropping“, and to demand sanctions or de-licensing.

Transparency protection appears at pp. 47-49 of the Finance Committee draft.  An interesting process requires the National Association of [state] Insurance Commissioners to produce standards for understandable and straight-forward benefits terms, allowing insureds and their advocates to know exactly what the insurance covers.  Among other things, the standards will require insurers to provide information on “exceptions, reductions and limitations on coverage.”  Consider the benefit to parents of the child with cerebral palsy having trouble obtaining medically necessary adjunctive therapies.  At a minimum, the NAIC process would pin down each insurer, allowing the parent (and ombudsman) readily to assess whether denials were contractually proper.

The second type of consumer regulation is substantive.  The NAIC process could be used to revisit the arcane and archaic exceptions and limitations imposed by insurers on people with disabilities and chronic illness.  That is, the NAIC could recommend that standard plans not exclude medically necessary adjunctive therapy for a child with cerebral palsy when it would be permitted for a child with a traumatic injury.  The current language doesn’t clearly anticipate such substantive analysis by the NAIC; it is essential that Congress clarify that we care about not just the form of insurance (are we all covered?), but that it cares about the content of coverage (are we all meaningfully covered?).

The draft takes this issue on more clearly with respect to public programs.  At p. 92 of the Finance Committee draft, Medicaid would be improved by creating a new state plan option for medical homes for children with serious chronic conditions.  These programs would be required to provide:

comprehensive care management; care coordination and health promotion; comprehensive transitional care, including appropriate follow-up, from inpatient to other settings; patient and family support; and referral to community and social support services….

For Medicare, the draft creates at pp. 113-116 an Innovation Center in CMS, to evaluate and implement “structures and methodologies to foster patient-centered care.”

Why limit these reforms to public plans?  These changes in coverage and practice patterns are necessary, as Ken Thorpe has argued,  both to bring the treatment of people with chronic illness into the 21^st Century, and to address significant drivers of cost increase.   Procedural imprecations against “discrimination” don’t quite get the job done here.  These changes are indeed substantive, and they go to the heart of reforming our health care system.  It could be in the course of setting the parameters of standard private sector products that these hugely beneficial changes find there way into the new competitive marketplace.  They are substantive provisions indeed; as Representative Price has suggested, we have a choice.  He might prefer that we leave health plans as they are, permitting them to skew coverage against chronic care needs.  In its determination to set standards for private sector plans, Congress can reject that view, and reform access to care, not just coverage.