The second, third and fourth parts of a major Senate association health plan bill, S. 1955, could change conventional state health insurance oversight far more than many AHP supporters realize, an opponent says.

Jerry Flanagan, a spokesman for the Foundation for Taxpayer and Consumer Rights, Santa Monica, Calif., says he believes the non-AHP parts of S. 1955 could lead to dramatic new limits on states’ ability to regulate small group health insurance rates and set minimum requirements for any insured health insurance policies.

Health insurers and health insurance broker groups have lobbied for years for a reduction in benefits mandates, arguing that the free market is the best mechanism for setting plan standards.

But Flanagan says some single-state health insurers seem to believe big, national carriers could use the non-AHP parts of S. 1955 to squeeze them out.

The third and fourth parts of S. 1955 would eliminate so many popular state patient protection requirements that they could end up alienating rank-and-file members of the business groups that have been supporting the bill, Flanagan says.

AHPs would give small businesses the ability to buy health insurance through multi-state groups that would be able to enjoy much of the freedom from state benefits mandates that large self-insured employers now enjoy.

Health insurance and health insurance broker groups say an AHP system could destroy the health insurance market, by letting poorly capitalized, poorly regulated plans use rock-bottom prices to lure the healthiest groups away from traditional health insurers, and then, in many cases, failing.

Industry groups also have argued that any reform efforts should reduce the burden of state benefits mandates on all health insurers, not just AHPs.

The first part of S. 1955, introduced by Sen. Michael Enzi, R-Wyo., would get around objections to concerns about lack of state oversight by requiring an AHP to offer fully insured coverage and giving regulators in the AHP’s state of domicile oversight over the AHP.

Flanagan, who opposes AHPs, says he believes the other sections of the latest version of S. 1955, which deal with “Market Relief,” “Affordable Plans” and “Harmonization of Health Insurance Laws,” would alarm some members of Congress and business people who support the AHP concept.

Market Relief

The Market Relief section would set standard national standards for small group health insurance rates.

Many states now require health insurers to offer the same rates to all small groups within a given community or use on a few rating factors, such as location and industry.

The second part of the version of S. 1955 reported out of the Senate Health, Education, Labor and Pensions Committee in March would eliminate many of those restrictions, by permitting non-AHP small-group insurers to consider age, gender and participation in wellness programs when setting rates, according a copy of the 81-page amended bill posted on the Web site of Families USA, Washington.

A small group carrier could establish up to 9 separate classes of business, excluding AHP plans.

In 6 months, the secretary of Health and Human Services would have to come up with Model Small Group Rating Rules, in consultation with the National Association of Insurance Commissioners, Kansas City, Mo. Those rules would take effect immediately in some states and within 5 years in other states.

At least one analysis has suggested that the new rating system could let an insurer charge the least-favored customers 25% more than it charges the most-favored customers for comparable coverage, Flanagan says.

Affordable Plans

The third part of the S. 1955, the “affordable plans” section, would require the secretary of Health and Human Services to create “Benefit Choice Standards” for national health insurance benefit plans. Issuers of those plans, which could serve the individual, small-group or large-group markets, could ignore state benefits mandates as long as they also offered an “enhanced option,” according to the bill text.

The enhanced option plan would have to include the “covered benefits, services and categories of providers as are covered by a state employee coverage plan in one of the 5 most populous States as are in effect in the calendar year in which such enhanced option is offered,” according to the bill text.

The secretary of Health and Human Services would have to help insurers comply with the law by publishing annual descriptions of the state employee benefits plans in the 5 most populous states.

State insurance regulators would continue to have the authority to help consumers make insurers comply with the Benefit Choice Standards, according to the bill text.

Harmonization

The fourth section of S. 1955, the harmonization section, would require the secretary of Health and Human Services to work with a Health Insurance Consensus Standards Board to set national health insurance standards for form and rate filing; market conduct; prompt payment of claims; and internal claim review procedures.

The board would include 4 insurance commissioners; 2 governors; 2 state lawmakers; 4 representatives of health insurers; 2 representatives of health insurance brokers; 2 representatives of the American Academy of Actuaries; and a representative of the HHS secretary.

A separate advisory council that would advise the standards board would include 2 representatives of small business health plans; 1 representative of small employers; 1 representative of large employers; 2 representatives of health care providers; and 2 representatives of consumers.

States would have to allow the sale of health insurance policies meeting the new national standards.

Flanagan says the lack of consumer and employer representation on the standards board and the weak representation of consumers and employers on the standards advisory council are troubling.

In addition, even many groups that oppose some state benefits mandates might strongly favor mandates for benefits such as coverage for cancer testing and diabetes supplies, Flanagan says.

Insurance industry advocates of S. 1955 contend that the standards board system might adopt the most popular, most cost-effective mandates, such as those requiring coverage for certain types of screening tests and preventive care, while cutting mandates that provide only limited benefits and contribute to skyrocketing health coverage costs.

Advocates point to surveys showing that most U.S. residents are satisfied with the quality of their own health coverage and that they now are far more concerned about the cost of health coverage than about issues such as choice of physicians.

Requiring U.S. residents with beer budgets to buy champagne plans or no coverage at all is bad public policy, S. 1955 advocates argue.

Bill opponents, in turn, say few patients know enough about health care or health coverage to have any idea which plan features are frills and which features are basics until they become seriously ill.

Information about S. 1955 and links to information about the bill, including the original version of the bill, are on the Web at Document Link:

A copy of the new version of S. 1955 that was reported out of the Senate Health, Education, Labor and Pensions Committee in March is on the Web at Document Link

A summary of S. 1955 and other health finance reform bills written by analysts at the Robert Wood Johnson Foundation, Princeton, N.J., are on the Web at Document Link