Health Care Reform Has Insurance Industry On The Hot Seat

Health Care Reform: Insurance Is The Issue

There is agreement over health care reform on a few points - very few.

An overhaul of health care delivery in the U.S. would lead to the biggest changes since the 1965 creation of Medicare and affect one-sixth of the U.S. economy or about $2.5 trillion.

To not do something will lead to bankruptcy, both sides agree.

Eventually the House and Senate will have to reconcile their differences and agree on one bill to be sent to President Obama for his signature into law.

But it’s not looking good for an agreement.

On CBS’s “Face the Nation,” Sen. Lindsey Graham said, “The House Bill is dead on arrival in the Senate.”

He calls it a bill written by liberals for liberals.

The Issue Is Insurance

The House bill sets up exchanges from which people could buy either private insurance or insurance from a government-run or public option, which the insurance industry opposes.

It would also offer subsidies so low-income Americans could buy into the insurance pool 36 million uninsured would be helped or about 96 percent of the population.

All of this represents competition to the insurance industry. On Sunday, Bruce Josten of the U.S. Chamber of Commerce said his group is firmly opposed to the public option.

Speaking on “Meet the Press” Josten said the business community is concerned because Medicare and Medicaid under-reimburse doctors and hospitals, forcing premium payers to make up the difference.

“But when you under-reimburse and you’ve got a doctor practicing defensive medicine out of a fear of liability, you are corrupting the system. A public plan is an unlevel playing field. It will destabilize private insurance,” he said.

A chamber-sponsored ad takes a whack at the government-run swine flu delivery program and asks, “Can we trust them to run the health care system?”

Insurance Immunity On The Hot Seat

The House bill also ends an anti-trust exemption for insurers known as the McCarran-Ferguson Act.

It’s not well known but its impact is sizable.

Approved by Congress in 1945, the Act exempts health insurance companies from federal anti-trust legislation that applies to most businesses. The law gives states the authority to regulate the insurance business without federal interference.

That means consumers are at the mercy of insurers for their health insurance costs and doctors over what they pay in medical malpractice coverage.

It works like this.

A patient uses an out-of-network doctor and the health insurance industry collaborates in deciding that about 75 percent of the charge is “reasonable and customary.” The rest is left for the consumer to pay. But what is “reasonable and customary?”

A January editorial in the New York Times says that is calculated by a firm called Ingenix, owned by United Health, which provides the same “reasonable and customary” service for a number of health care insurers, in an apparent conflict-of-interest.

The Consumer Federation of America predicts repealing the Act could result in an at least 20 percent savings in premiums for doctors.

Sen. Patrick Leahy has introduced the Health Insurance Industry Antitrust Enforcement Act to remove the immunity the industry has enjoyed.

“There is no justification for health insurers engaging in egregious anticompetitive conduct to the detriment of consumers,” said Leahy. “Price fixing, bid rigging and market allocation are ‘per se’ violations of our laws precisely because there is no procompetitive justification for them. Health insurers should not be accorded immunity to engage in such otherwise illegal conduct.”

Leahy is working with Senate Majority Leader Harry Reid who promises the repeal will be in an amendment to the Senate version of health care reform. Senators Feinstein, Feingold, Schumer, Durbin, Specter and Franken are all supporters. On the Republican side, Trent Lott has supported a repeal in the past.

The National Association of Insurance and Financial Advisory is very concerned that a repeal for the health and medical malpractice insurers opens up the industry to the regulation authority of Federal Trade Commission.

And the leading physician insurance trade association, the Physician Insurers Association of America, says repealing McCarran-Ferguson would “undermine competition.”

President, Lawrence E. Smart says in a statement:

“It may well be that this bill is essentially payback to the trial lawyers who have made large contributions to the campaign of congressional leaders and who have been alarmed to find that President Obama and others have suggested that medical liability reform should be included in the healthcare reform bill. They hope to scare insurers into abandoning efforts to reform a tort system that has allowed personal injury lawyers to reap large profits, while their clients take home a fraction of the settlements and awards they receive.”

Joanne Doroshow of the Center for Justice & Democracy, a national consumer nonprofit says, “It’s going to be tough if they have to get 60 votes but the obvious advantage of this is so clear. Really the outrage this industry has had for 60 years and the impact it’s had on doctor rights is finally being understood.”

Consumer groups believe even though Congress has failed to repeal McCarran-Ferguson in the past, the momentum is now there and will be a first step to revoking the federal anti-trust exemption for all lines of insurance, saving Americans at least 10 percent of premiums or as much as $50 billion a year. #