Health Plans Contend Patient Protection Bill Will Cause Millions To Lose Coverage

By

Washington

The House of Representatives began consideration of patient protection legislation last week that health insurance plans say will cause 6.5 million people to lose their employer-based coverage.

Reps. Charlie Norwood, R-Ga., John Dingell, D-Mich., Greg Ganske, R-Iowa, and Marion Berry, D-Ark., on Thursday jointly introduced in the House the identical patient protection bill that was previously approved by the Senate.

Meanwhile, House Republican leaders are advocating an alternative bill, H.R. 2315, introduced by Reps. Ernest Fletcher R-Ky., and Collin Peterson, D-Minn., that is similar to the Senate bill, although with a less severe liability regime.

Under the Norwood-Dingell bill, which at this writing did not have a House bill number, health plans and those employers who “directly participate” in coverage decisions would face liability under state law in the same manner as medical malpractice.

But in an effort to shield employers from some liability, the legislation contains language deeming an insurance company or third-party administrator as the designated decision-maker.

Moreover, the bill imposes new federal liability on plan administrators for certain nonmedical issues such as enrollment eligibility and cost sharing. In addition to facing liability for damages, plan administrators could be hit with a civil penalty of up to $5 million.

By contrast, the Fletcher-Peterson bill establishes an independent administrative procedure to review adverse coverage decisions. A health plan could be sued in state court only if it refused to follow an independent reviewers decision to reverse the denial.

Health plans could also face federal liability for wrongful delays in making a benefit claim decision, although liability for non-economic damages would be capped at $500,000.

At a press briefing last week, the Washington-based Health Insurance Association of America released an actuarial study of the Norwood-Dingell bill, which said that the increased costs imposed by the legislations liability regime would cause many people to lose their health insurance.

Donald A. Young, HIAAs interim president, says that the massive expansion of liability contained in Norwood-Dingell will have significant negative consequences.

The estimate of 6.5 million people losing their employer-based coverage comes from two sources, he said. First, Young says, many employers will simply stop offering health insurance.

Second, he says, even among employers that continue to offer coverage, many employees will opt out because of the higher premiums they will have to pay.

Mark A. Behrens, an attorney in the Washington office of Shook, Hardy & Bacon, adds that while the Norwood-Dingell bill contains language added in the Senate that was presented as shielding employers from some of this liability, that shield is illusory.

He referred specifically to the language that deems a health insurer or third-party administrator as the designated decision-maker.

Behrens says that the sponsors of this language insist that by naming a designated decision-maker, any lawsuit would be filed against the decision-maker rather than the employer.

But Behrens argues that is not the case. Any good plaintiffs attorney, he says, will bring the employer into the lawsuit and subject it to expensive discovery proceedings in order to determine whether the employer was pulling the decision-maker’s strings behind the scenes.

Moreover, Behrens says, designated decision-makers are not going to assume unlimited liability for nothing. The costs of liability insurance, if it is even available, will be passed on to the employer, he says.

The designated decision-maker language, Behrens says, simply shifts liability; it does not limit liability. Thus, he says, it does not solve the problem.

Because of the increased costs, the HIAA study says, which the Congressional Budget Office estimated would raise health insurance premiums by at least 4.2%, 6.5 million people would lose their employer-provided coverage.

Of that number, the study said, 3.7 million would remain uninsured. The other 2.8 million, according to the study, with incomes below 200% of the federal poverty level, might enroll in government health programs such as Medicaid.


Reproduced from National Underwriter Life & Health/Financial Services Edition, July 27, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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