Battle over regulation ahead - health insurance and managed care industry

Business & Health, Dec, 1997 by Steven Findlay

Although employer groups are poised to fight it, federal regulation of managed care is gaining momentum.

The stage is set for a roiling debate next year on federal regulation of the health insurance and managed care industry. By definition, that debate must include ERISA. For the first time since Congress killed health reform in 1994, our nation's legislators will confront the complex trade-offs that have shaped the country's health benefits system for more than 30 years. It won't be a polite fight.

Consider the forces driving the debate:

* President Clinton has not lost his appetite for reforming the system. He'd like the last laugh when he leaves office, and he has his eye on history now. Last month, Clinton embraced the recommendations of an advisory commission for a consumer "bill of rights" in health care, which includes the right to external review when a plan rejects a patient's appeal. He said he'd urge that some of those rights be written into law, although which ones he referred to isn't clear, and he ordered a government-wide review of all federal benefit plans and health programs, including Medicare and Medicaid, to move toward compliance.

* Most Democrats in Congress and many Republicans have come to understand that Americans feel insecure, even angry, about the changes afoot in health care. What's more, 1998 is an election year, and lawmakers could see political gain in continuing the work they began with Kassebaum-Kennedy in 1996 and kids' health insurance this year. More importantly, legislators' deep fear of amending ERISA and creating federal law that governs health insurance appears to be on the wane.

* States have moved aggressively to regulate managed care and enact consumer protections in the last two years. Some 20 states now have fairly extensive requirements. As was the case with welfare reform, this lays the groundwork for a federal law.

* There is emerging consensus around a set of basic consumer protections. These include access to and reimbursement for emergency care; more direct access to specialty care, especially for those with chronic or serious medical conditions; continuity of care when a provider drops off an HMO's panel; full disclosure, with easier-to-understand explanations of plan operations and coverage; and the right to appeal the denial of care.

* The managed care industry, while clearly divided on the issue, is beginning to think that one federal law setting such basic standards may be preferable to 50 state laws. And industry leaders may want to take their chances that a Republican Congress won't go overboard. In October, three large non-profit HMOs - Kaiser Permanente, the Health Insurance Plan (HIP) of New York and Group Health Cooperative of Puget Sound (Washington) - joined forces with several consumer groups to embrace a series of "legally enforceable" consumer protections.

Several pieces of legislation are gathering momentum and elements of all will be melded in producing any final bill, if things get that far. The bill triggering the fiercest debate now is, not surprisingly, the most extensive. Spearheaded by a southern Republican, Rep. Charles Norwood of Georgia, the Patient Access to Responsible Care Act would pretty much gut ERISA and impose broad new standards on health insurers and self-funded employers. These include granting consumers the right to sue managed care plans directly for malpractice for injuries linked to denial of care or other screw-ups in the "management" of care. Self-funded employers could also be liable if they were directly involved in decisions about care.

The forces allied against health regulation are considerable. Virtually all employer groups, from the Business Roundtable to the National Federation of Independent Businesses, have vowed to fight hard to preserve ERISA and keep the federal government out of the private health insurance marketplace. And their argument that regulation would increase the cost of health care and force more small businesses to drop coverage is potent.

The outcome of this fierce debate - and the effort the Republican leadership calls "Clinton Care II" - remains uncertain. But like many industries before it that ran afoul of consumers, managed care may soon be facing federal rules.