Consumer Protection Under the Health Reform “Deal”

News of the Senate “deal” on the public option is trickling out.  It appears to comprise a swap, in which the public option will be dropped in favor of the creation of a nationwide program mimicking the Federal Employees Health Benefits Plan (FEHBP) (along with a Medicare buy-in for people 55 years of age or older).  Will the FEHBP model (for those under 55) accomplish what the public option would have done?  Tim Greaney’s post here yesterday raises well-founded concerns that it will be less likely to increase competition in concentrated markets.   But we had additional hopes for the public option.  I’ve previously argued that the public option could help assure adequate coverage of people with chronic conditions.  They’re the most vulnerable and increasingly the most costly; sound coordination of their care is necessary to serve their complex needs and to contain costs.   Whether this nascent deal will do that work depends on how the FEHBP model translates to an open exchange model, and in particular on benefits design and process rights components.  The new enrollees are likely to be more vulnerable than the FEHBP’s membership, and sound consumer protections are necessary to assure that their needs are met.  Two components of the program will be critical here: benefits design and process rights.

The FEHBP is mostly a mechanism for contracting with and managing private health insurers.  This deal would, therefore, likely create a form of private health insurance exchange, piggy-backing on private plans’ benefits design.  Congress should be aware of private insurers’ history with coverage of chronic care services.  It is widely documented, for example, that children with special health care needs have more sharply restricted access to necessary therapies through private than public coverage.  Ruth Benedict, of the University of Wisconsin, described access problems for children with functional limitations in 2006:

Public health insurance predicted greater use of supportive services and therapeutic services outside the school setting, a finding that may be attributable to the commitment of public programs to serve vulnerable populations such as children with special needs.  * * *   In contrast to public insurance, private insurance provided children no advantage in accessing therapeutic and supportive services relative to their uninsured counterparts.

The Office of Personnel Management (OPM) has historically addressed benefits design with a broad brush, negotiating and contracting directly with insurers, and balancing premium level against benefits richness.  Unless the bill directs OPM to incorporate the needs of people with chronic illness — physical and speech therapy, home care services, and case management, for example — the sickest of the newly covered will find only coverage that poorly matches their needs.  And state law that would otherwise benefit the private insurers’ benefits design is specifically preempted in the FEHBP statute:

The terms of any contract under this chapter which relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any State or local law, or any regulation issued thereunder, which relates to health insurance or plans.

Unless the bill mandates that the OPM protect vulnerable populations in its benefits design contracting, people with chronic illness will likely be left without coverage for vital services that they might have obtained through a public option.

What of process rights under the FEHBP?  Suppose a plan participating in the new national exchange were to deny coverage for a service with the benefits design on, say, medical necessity grounds.   As Nan Hunter described in her 2006 article, Managed Process, Due Care: Structures of Accountability in Health Care, the process by which covered persons may vindicate their rights of access to covered health care is fractured and often frustrating to participants.  Two features of the FEHBP bear note in this regard.  First, it allows participants “an independent system of external review,” which Nan Hunter argues can assist individuals and society by improving plans’ accountability and enhancing the deliberative process by which coverage decisions are made.  She also identifies, however, the pervasive lack of effective member notice of review options.  Second, judicial appeal from the administrative and independent review process is quite limited.  It is available only after exhaustion of internal plan review, external review independent review, and OPM review, and the scope of the judicial review itself is quite limited:

A covered individual may seek judicial review of OPM’s final action on the denial of a health benefits claim. A legal action to review final action by OPM involving such denial of health benefits must be brought against OPM and not against the Carrier or the Carrier’s subcontractors. The recovery in such a suit shall be limited to a court order directing OPM to require the Carrier to pay the amount of benefits in dispute.

The adequacy and accuracy of the administrative process, then, must be protected by thoughtful and specific statutory and regulatory language.

Insurance coverage does not equate to access to care.  Necessary benefits must be contractually covered, and the insurer must follow through where required.  The benefits design and due process provisions in the FEHBP in many ways mirror those of large, self-funded employers.   The population newly covered by this bill will, however, not be employees of large firms and federal agencies, and instead will be a more economically and medically marginal population with a higher percentage of people with disabilities and chronic illness.  The bill should, then, anticipate the issue directing OPM to set benefits design and review standards serving all, including those with chronic conditions.   If Congress hopes to contract out the responsibility of serving a vulnerable population, it needs to ensure that its contracting partners are charged clearly on the nature of their responsibilities.