Both the pending House health care bill and Senate HELP
Committee bill include provisions that would, if enacted, result in
sweeping, complex, and highly discretionary new federal regulation
of health insurance. Yet virtually all of the proposed new health
insurance requirements are completely unnecessary to achieving the
legislation's intended objectives of expanding health insurance
coverage and reducing health care costs.
Indeed, many of the provisions would make the current situation
worse either by driving costs higher or by encouraging more
employers and individuals to drop coverage.
Federal Health Insurance Benefit
The Senate bill would actually result in three different sets of
health insurance regulations. The bill reported out by the Senate
Health, Education, Labor and Pensions Committee would:
- Impose new federal benefit mandates on existing state-regulated
health insurance and federally regulated employer-sponsored
- Authorize the Department of Health and Human Services (HHS) to
establish a second set of insurance regulations on policies offered
through new state "gateways" as well as on the insurers offering
those policies; and
- Specify yet another set of rules for HHS to implement for the
new "community health insurance option," or public plan, to also be
offered through the gateways.
The House bill proposes a single minimum coverage standard that
will eventually apply to nearly all health plans and establishes a
new "Health Benefits Advisory Committee" within HHS to make
detailed recommendations, which the secretary of HHS would then
impose through regulation.
Indeed, both bills set forth the basic components of a
standardized benefit package while giving HHS the task of
promulgating further specific requirements under each of the basic
categories. This grant of authority is broad enough that the
secretary of HHS would be able to specify through federal
regulations not only specific items and services than must be
covered but also the minimum frequency or duration of a required
covered service and the maximum allowable patient cost sharing.
Gutting State Authority
In effect, HHS would supplant both existing state insurance
regulation of commercial health insurance and existing Department
of Labor regulation of employer self-insured health plans. HHS
would become the de facto national regulator of all health
insurance, both private and public.
Furthermore, HHS would be given authority to continually update
and revise its promulgations of health insurance regulations, with
the likely result that all health insurance coverage, both private
and public, would need to be annually revised to conform to the
latest versions of what will become a constantly evolving set of
comprehensive and detailed coverage requirements.
For example, the legislation would require plans to cover
"preventive services," with plans prohibited from charging patients
more than nominal cost sharing (in the Senate bill) or any cost
sharing at all (in the House bill) for those services. Among the
"preventive services" that both bills would require health plans to
cover are those "recommended with a grade of A or B by the Task
Force on Clinical Preventive Services." Currently, that task force
has 30 separate such recommendations and would be expected to issue
many more in the future.
Many of the current recommendations are fairly specific and
already included in most existing health insurance plans, such as
mammographies for women over age 40 every one to two years.
However, some are more general, such as the recommendation of
"intensive behavioral dietary counseling for adult patients with
hyperlipidemia and other known risk factors for cardiovascular and
diet-related chronic disease. Intensive counseling can be delivered
by primary care clinicians or by referral to other specialists,
such as nutritionists or dietitians."
Nor are the preventive health requirements in the bills limited
to just this list. The legislation goes on to specify additional
sets of required preventive services. Again, some are fairly
specific, such as "vaccines recommended for use by the Director of
the Centers for Disease Control and Prevention." Others are broader
and will require detailed regulations to further define and
implement, such as, "maternity care" and "well baby and well child
care and oral health, vision, and hearing services, equipment, and
supplies at least for children under 21 years of age."
The problem is that the legislation would require HHS to turn
these recommendations--which health plans are now free to
adopt and tailor as they see fit--into minimum benefit
requirements for which all health plans must pay. So, for
example, in the case of the "behavioral dietary counseling"
recommendation, HHS would need to draft and promulgate regulations
detailing the type, scope, frequency, and duration of the specific
services that must be covered, along with rules on which providers
must be paid for providing which services, and the criteria under
which specific patients qualify for specific services.
The same would be true for the rest of the "minimum benefit"
requirements for physician, hospital, and other services, as well
as drugs and medical devices.
Furthermore, the House bill also instructs HHS to set limits on
the patient cost sharing that health plans could apply to the
required services, and even the form of such cost sharing,
specifying: "In establishing cost-sharing levels for basic,
enhanced, and premium plans under this subsection, the Secretary
shall, to the maximum extent possible, use only copayments and not
Killing Existing Coverage
The vast majority of Americans already have health insurance. A
major concern for them with any new health care legislation is
whether they will be able to keep their current coverage, something
that both the President and congressional leaders have repeatedly
promised. So, not surprisingly, the heading for Section 102 of the
House bill reads; "Protecting the Choice to Keep Current Coverage,"
while the heading for Section 131 of the Senate bill proclaims, "No
Changes to Existing Coverage."
However, the truth is that, while both those sections would
"grandfather" existing individual and employment-based coverage,
both bills also include other provisions that would eventually lead
to nearly all current plans either adopting the new federal
coverage standards or being replaced by new coverage that meets
The Senate bill stipulates that any "significant" subsequent
modification of the "benefits or cost sharing requirements" of a
prior plan would trigger the loss of its grandfathered status. Also,
within five years all Americans would be subject to the individual
mandate to either purchase "qualifying coverage" or pay a fine. The
Senate bill neither permits grandfathered plans to count as
qualifying coverage nor exempts individuals enrolled in
grandfathered plans from the individual mandate.
Thus, under the Senate bill, beginning in 2014 anyone retaining
prior individual or employer-group coverage would be fined annually
for not obtaining new coverage that meets the new requirements.
In contrast, the House bill does allow grandfathered
coverage to count as "acceptable coverage" for purposes of the
individual mandate, but it gives grandfathered employer-sponsored
plans only a five-year "grace period"--after which those plans
would also be required to meet the new coverage standards.
Thus, under the House bill, after 2017 the only prior coverage that
would be left unchanged would be individual policies--but only so
long as insurers continued to renew them.
Soaking the Young through Community
Both bills would also limit age rating of premiums to no more
than a two-to-one difference between highest and lowest.
Thus, a 64-year-old could not be charged more than twice the
premium of an 18-year-old. The effect is that younger individuals
will be required to heavily subsidize older individuals, creating
both social inequities and practical problems.
Younger individuals consume less medical care than older ones,
while younger workers generally earn less than older (more skilled
and experienced) workers in almost any given occupation.
Significantly increasing the cost to younger individuals will
encourage more of them to avoid coverage, thus necessitating higher
fines and penalties to get them to comply with the individual
mandate in the legislation, as well as greater subsidies to make
coverage "affordable" for them.
Consequently, significant funding that could be better targeted
to a relatively small population of older workers with low incomes
will instead be diverted to subsidizing younger, healthier
individuals to buy overpriced coverage.
Nullifying the ERISA Preemption
It should be of particular concern to employers that, in both
bills, the new insurance regulations are not limited to only
commercial insurers but would also be imposed on employer
self-insured plans as well. For the past 35 years, most large
employers have relied on provisions of the 1974 Employee Retirement
Income Security Act (ERISA) to design and manage their own
customized health benefit plans for their employees--exempted by
ERISA from state insurance regulations imposed on commercial
In 2008, among all workers with health insurance, 45 percent
were covered by commercial group insurance (also known as "fully
insured" plans), and 55 percent were covered by employer
self-insured plans. Among firms with 5,000 or more employees, 89
percent of workers with health insurance received it through an
employer self-insured plan.
However, both bills would effectively nullify the value to
employers of that "ERISA preemption" by placing self-insured plans
under the same new, sweeping, federal health insurance
regulatory regime as commercial insurers.
The House bill would require that within five years every
employer-sponsored plan become a "qualified health benefits plan,"
or QHBP, making the sponsoring employer a "QHBP-offering entity"
under the legislation. As a result, the federal micromanagement
of employer-sponsored plans under the House bill would be far
greater than anything previously attempted by state governments,
whose insurance regulations employers have used the ERISA
preemption to avoid.
For example, only the 1993 Maryland law establishing a standard
benefit package for small group health insurance in that
state--together with a commission to annually modify that benefit
package--even comes close to the kind of broad, discretionary
authority that the House bill would grant HHS to define and
continually revise the specific requirements of a federal
standardized benefits package.
The House legislation would also require all "QHBP offering
entities" (including employers) to comply with the prompt payment
of claims statutes and regulations currently imposed on Medicare
Advantage plans and the private vendors who contract with HHS to
process claims for fee-for-service Medicare.
In addition, the House bill would establish the "Health Choices
Administration" as a new, independent federal agency under the
direction of a commissioner. Among the commissioner's
duties will be to "promote accountability of QHBP offering entities
in meeting Federal health insurance requirements, regardless of
whether such accountability is with respect to qualified health
benefits plans offered through the Health Insurance Exchange or
outside of such Exchange."
The commissioner will have the authority to assess civil
monetary penalties on both commercial insurers and
employer-sponsors of plans that fail to comply with the new federal
requirements. In addition, the legislation also gives
the commissioner the power to "conduct audits of qualified health
benefits plans compliance with Federal requirements. Such audits
may include random compliance audits and targeted audits in
response to complaints or other suspected non-compliance."
The legislation goes on to further provide that "[t]he Commissioner
is authorized to recoup from qualified health benefits plans
reimbursement for the costs of such examinations and audit of such
QHBP offering entities."
Thus, after 2017, any private employer still willing to offer
its workers a heath benefit plan can expect to also pay for the
privilege of being harassed by federal bureaucrats seeking to
determine if it is in compliance with all federal rules
micromanaging the operations of its plan--and to be fined for any
failures that may be discovered in the process.
The Wrong Direction
Both of the pending House and Senate health care bills would
establish new, federal health insurance regulatory regimes that are
needlessly complicated, needlessly burdensome, needlessly invasive,
needlessly regulatory, and needlessly expensive.
The insurance regulation sections of the bills, as currently
drafted, are utterly superfluous and even contrary to the
legitimate objectives of sensible health care reform--namely,
expanding health insurance coverage and reducing health care costs.
Congress should simply delete those provisions from its proposed
Haislmaier is Senior Research Fellow in the Center for Health
Policy Studies at The Heritage Foundation.
Sections 101, 3101, and 3106. All citations of the "Senate bill"
refer to the Senate HELP Committee's "additional Chairman's mark on
coverage" at /static/reportimages/32F64079BFF9305D1599A945EBCC76EC.pdf(July 22, 2009). As of this writing, the Senate
HELP Committee has not yet released a version incorporating
amendments adopted by the committee during its markup of the
Affordable Health Choices Act of 2009, H.R. 3200, 111th Cong., 1st
Sess., Sections 123-124.
Ibid., Section 122(a)8. Similar language is included in
the Senate bill in § 2708(a)1.
of Health and Human Services, Agency for Health Care Policy and
Research, "Guide to Clinical Preventive Services, 2008: Metabolic,
Nutritional, and Endocrine Conditions: Behavioral Counseling in
Primary Care to Promote a Healthy Diet," at http://www.ahrq.gov/clinic/pocketgd08/gcp08
Affordable Health Choices Act, Section 122(a)8, 9, and
Ibid., Section 122(c)(2)C.
Section 131(e). The language of this section goes on to also
require HHS to define what the term significant means by
specifying that "[t]he Secretary shall by regulation establish
criteria to determine whether a plan or health insurance coverage
has been modified to a significant extent under the preceding
Affordable Health Choices Act, Sections 401 and 102(b).
While an insurer
could not decline to renew any particular individual's existing
policy, it could opt to discontinue offering individual coverage.
Under such circumstances, affected individuals could obtain only
new coverage that met the new federal standards. The mandate
provisions would take effect in 2013, and the grace period for
grandfathered employer coverage would apply from 2013 to
Affordable Health Choices Act, Section 113(a)1, and Senate bill,
Affordable Health Choices Act, Section 100(c)19.
Affordable Health Choices Act, Section 135.
142(d)(2)A. This section authorizes the imposition of fines
"applicable under similar circumstances for similar violations
under section 1857(g) of the Social Security Act," which applies to
insurers offering Medicare+ Choice plans (42 U.S. Code
§1395w-27(g)). That statute specifies penalties of "not more
than $25,000 for each determination" but also specifies a number of
exceptions under which the fines could be significantly