Congressman John Garamendi

Representing the 3rd District of California
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Leaders Warn Premium Hikes, Health Insurers’ Abusive Practices Could Continue Without Stronger Regulation

January 12, 2010
Press Release

Rep. Garamendi (former California insurance commissioner), Georgetown University expert, former Blue Cross medical director, Ex-industry insider Wendell Potter, and HCAN: House regulations needed to keep insurers from ‘gaming’ the system 

Washington, DC – Congress should adopt the stronger health insurance industry rules in the House version of reform in order to stop insurers from continuing to game the system and outmaneuver state regulators, said Congressman John Garamendi (D-CA) and other health care experts and former industry insiders on a national press conference call with reporters today.

"As a former insurance commissioner, I know firsthand that health insurance can burden people with unaffordable coverage unless we demand accountability from insurance companies," said Garamendi, California’s first elected insurance commissioner and former chair of the California Senate Health Committee. "As we merge the House and Senate health care bills, we must not leave consumers and small businesses unprotected from insurance company greed. The House bill creates a national exchange that will give consumers an opportunity to get health insurance at a lower cost with expanded benefits, and it will provide more oversight. This is superior to the Senate bill, which expects all states – regardless of size, wherewithal, or existing insurance infrastructure – to manage new marketplaces in smaller state exchanges."

In addition to Rep. Garamendi, Karen Pollitz, a Georgetown University health policy expert, Michael McGarvey, a former Blue Cross chief medical officer and former state regulator, Wendell Potter, former industry insider, and Richard Kirsch, National Campaign Manager for Health Care for America Now (HCAN), urged passage of the House’s stronger insurance regulations. The House bill includes a federal health insurance marketplace rather than weaker state insurance exchanges.

"Give insurance companies an inch, and they will take a mile," said Kirsch. "We need the House bill’s stronger rules and national exchange model to keep insurance companies in check. Without a national standard, insurers will use their lobbying clout in state capitals to undermine reform."

If the Senate provisions survive the conference process, large-group health plans would be exempt from reforms that would prevent insurers from hiking premiums based on health status, gender, age, and other factors. Large-group plans that include older or sicker Americans would still face higher premiums because of health status. Many workforces dominated by women, such as in the child-care and home-care industries, would continue to face staggering health costs.

"The Senate’s plan would leave tens of millions of working Americans subject to insurance company abuses," said McGarvey. "We need to be sure that whether you work for a big company, a small company, or are self-employed, you are protected from the bad practices of insurance companies."

Both the House and Senate's insurance exchanges create organized marketplaces to bring affordable, quality health plans to millions of Americans. But the federal exchange contained in the House bill would ensure immediate implementation and provide a national watchdog to unite fragmented markets and subject them to uniform accountability regulations.

"Accountability provisions under the Senate bill aren’t strong enough," said Pollitz. "The federal government simply must step up and play a strong, proactive, pro-patient role in health insurance regulation.  In addition, there needs to be a national exchange – both to reinforce new market regulations and to ensure that all consumers get reliable, accurate, and accessible information to compare plans. Especially with so many states facing fiscal and economic crisis, they just don’t have the resources to rigorously and flexibly manage exchanges."
 
The Senate’s plan to give states responsibility for creating and monitoring exchanges could allow insurers to game local systems and undermine implementation of health reform from the start. If state-run exchanges don’t extract big enough discounts from insurance companies, that could result in higher out-of-pocket costs for consumers and increase subsidies needed to help lower- and middle-income Americans buy coverage. Under the House plan, innovative states would be able to run their own exchange but only if doing so makes financial sense for the public.

"The industry wants to play by these weaker rules because they designed them," said Potter, former spokesman of national insurer Cigna Corp. "From the get-go, the insurers will use their time-tested  playbook to outmaneuver regulators in state capitals and stick with business as usual, overcharging too many and giving adequate benefits to too few."