Insurance Reforms Pass California Senate Health Committee
10 04 08 - 13:23
SB1522 (Steinberg) would set standards for coverage, weed out "junk" insurance
. SB1440 (Kuehl) would require a minimum percentage of premium dollars for patient care
. Health reforms geared to improve the value of coverage, while not costing state money
By Hanh Kim Quach
Health Care Policy Coordinator
Health Access California
Two bills that would begin to tame the state's "wild, wild west" health insurance market passed the first policy committee on Wednesday, maintaining the forward momentum of health reform discussions.
SB1522 (Steinberg) would organize the individual insurance market to enable apples-to-apples comparison shopping for consumers, and also weed out junk coverage by requiring that plans met minimum standards to cover doctors visits, hospital and preventive services. The bill would also ask state regulators to set overall limits on out-of-pocket costs.
SB1440 (Kuehl) would require plans to spend at least 85 percent of premium dollars on health expenses – rather than administration and profit.
Other bills of note coming up in the next few weeks are described at the Health Access California website.
INSURANCE STANDARDS AND ELIMINATING JUNK INSURANCE
SB1522(Steinberg), sponsored by Health Access California, would categorize all plans offered in the individual market. It would create five tiers of coverage with different standards that would need to be met in each tier. That way, consumers would have a better sense of which plan are more comprehensive, and which are less so.
Currently, consumers searching for a health plan on their own must sort through a confusing array of at least 100 plans on the market with different premium prices, deductibles, covered services, and copays--and since none of these plans are exactly the same, it is now hard to make these comparisons. And by requiring the plans to offer "benchmark" plans, the bill would allow for apples-to-apples comparisons between plans, and thus encourage direct competition based on price and quality.
Finally, the bill would set a minimum standard for coverage, so people have a better sense of security that when they have coverage. The bill states that the the lowest tier plans would cover physician visits, hospitalization, and preventive care.
All these concepts was part of AB x1 1 (Nunez), the comprehensive health reform bill supported by Gov. Arnold Schwarzenegger. The bill got votes from the Democrats on the committee, and was opposed by the Republican members. The bill also sets a foundation for further efforts. "I am carrying this bill as an important component of what will hopefully be comprehensive health reform at some point," Steinberg said.
One testifier, Susan Braig, a self-employed Blue Cross policy holder in Altadena, told committee members how she bought her Basic PPO 1000 plan seven years ago, knowing that it was "catastrophic" hospital-only coverage that carried a $1,000 deductible, $3,500 maximum out of pocket. She knew it would not cover her doctor's visits, nor would it cover prescription drugs, but she bargained that she would be able to afford the "small stuff" and that her plan would cover any "catastrophic" illnesses.
Shortly afterward, she was diagnosed with breast cancer. None of her doctors visits, labs, MRIs, prescription drugs were covered. Neither was chemotherapy, which was not covered as it was considered a "doctor's visit" unless she went an hour away to a hospital to receive the treatment. While Blue Cross did pay a portion of a lumpectomy and radiation, Braig is still more than $40,000 in debt due to her illiness and medical expenses and will continue to rack up debt for years to come as she continues to pay out-of-pocket for cancer follow-up treatments. She is stuck with her Blue Cross plan because no other insurance company will take her now due to her cancer as a pre-existing conditions. She pays premiums, and over $6,000 a year in out-of-pocket costs a year, yet her insurance isn't covering any of it. "I'm paying insurance premiums for what?" she asked.
OPPOSITION: Health plans opposed the legislation, saying that any requirements to cover health care would cost money and increase premiums. They also opposed SB1522 on grounds that it would take "lower costs options off the market" and reduce "product flexibility."
SUPPORT: Beth Capell for Health Access conceded there is "price sensitivity, but there is a balance to both price and benefits." Additionally, hospital-only coverage functionally leaves a consumer paying to be uninsured, as most services – as in Braig's case – are left uncovered. For example, about 70 percent of surgical procedures are outpatient. "We run into these cases and people obligated for hundreds of thousands of dollars when they believe they have purchased insurance."
Other organizations testifying in support included Western Center on Law and Poverty, CalPIRG, AARP, Jericho for Justice, MALDEF, California Medical Association, ACORN, CARA, Congress of California Seniors, and AFSCME.
VALUE FOR THE PREMIUM DOLLAR AND MEDICAL LOSS RATIONS
SB1440 (Kuehl) is also a bill that places oversight on insurers, that would assure that consumers received more value for their premium dollar requiring health insurers to devote at least 85% of what consumers pay to patient care, rather than administration, marketing, and profit. While HMOs are already required to approximate this standard, PPOs are not. Some spend as little as 51 cents of every dollar on patient care, spending nearly half on overhead and profit. The bill to set a "medical loss ratio" passed with Democrat votes.
Some of the overhead dollars are used to keep consumers from benefiting from coverage they buy. A February 2007 article in the Wall Street Journal described how insurers and health providers combined spent approximately $20 billion annually in administrative costs fighting each other on claims expenses. Administrative overhead also includes the employees hired to scrutinize applications for justification to cancel coverage, or deny other consumers a policy altogether.
OPPOSITION: Insurers opposed Kuehl's bill, saying it would eliminate low-cost products (which ironically have higher "overhead" costs), and complained that they were being picked on compared with other health industries that also had high overhead costs. Insurers also argued that SB1440 would discourage competition to keep premiums low.
Kuehl responded, "Then I guess we don't have (a competitive market) now," reminding the audience of double digit increases over many of the past 15 years. "We must be thinking of emulating the oil companies, because we're competing to see how fast we can raise prices."
SUPPORT: Supporters included the California Medical Association, Congress of California Seniors, Jericho for Justice, AARP, CARA, California Academy of Family Physicians, California Labor Federation, and Health Access California.
The deadline for legislation to pass out of policy committees is April 18th. A number of bills of interest to health consumers will be coming up the next two weeks.
Hanh Kim Quach is the Health Care Policy Coordinator for Health Access California. Before joining the organization, she worked as a journalist for nearly 9 years covering issues in California. Health Access California is a statewide health care consumer advocacy coalition of over 200 groups. This article has also been published on the Health Access Weblog.