Benefit 'Rescissions' Prompt Wider Waxman Probe of Insurers
By John Reichard, CQ HealthBeat Editor
July 17, 2008 -- The industry practice of retroactively canceling approved health insurance policies obtained in the individual market after their holders get sick and file large medical claims came under sharp scrutiny at a House committee hearing Thursday.
Witnesses testified that state protections against the practice are often weak and that the federal government hasn't stepped in to fill the breach despite its authority to do so in some cases under the Health Insurance Portability and Accountability Act (HIPAA).
House Oversight and Government Reform Committee Chairman Henry A. Waxman, D-Calif., said he plans to open a broader investigation of insurance industry practices in the individual market, which he noted is increasingly the focus of proposals to expand health insurance coverage.
At issue Thursday were "rescissions," a term for a practice that goes beyond canceling a policy. Cancellations, a California official explained, leave the individual without coverage going forward while rescissions treat the coverage as if it had never been approved and leave the policy holder liable for all medical bills paid by the plan dating back to the start of the policy.
Waxman said he hopes that wider public attention to rescissions would lead state officials to crack down on them and insurers to abandon the tactic. He credited Los Angeles Times coverage of the issue with helping to prompt a crackdown by California regulators.
The California Democrat said it's too soon to say whether legislation is needed at the federal level. "We'll do an investigation first and then we'll see if it makes sense," Waxman said. "For the most part this has been a state issue. Maybe it ought to be a federal responsibility," he observed.
Republicans joined Waxman and other Democrats at the hearing in condemning the rescissions, and an insurance industry official spent no time defending it. But a state official noted that those already harmed are sometimes left with huge medical bills to pay and in some cases, face bankruptcy. They also face difficulty finding coverage.
State regulatory agencies "are limited in what they can do for these now relatively uninsurable consumers who are back in the marketplace with new preexisting conditions they didn't have before and a policy rescission in their underwriting history," said Kevin P. Lembo, the head of a Connecticut state agency that advocates for consumers in their dealings with the health insurance industry.
Much of the focus of the hearing was on the case of a Logan, Utah couple, Keith and Heidi Bleazard, whose testimony highlighted the issue. Heidi Bleazard testified that the couple sought individual coverage in February 2005 and filled out the needed applications with the help of friends who were health insurance agents and a nurse who came out to complete more detailed paperwork.
Keith Bleazard's application referenced a slipped disc followed by surgery in 1996 and a full recovery. He had no trouble for three years after the surgery, then pulled a muscle in his back playing basketball and saw a doctor who prescribed medicine for the pain. After that, he resumed routine, rigorous physical activity, Heidi Bleazard testified.
In August of 2005, Heidi Bleazard said she suffered a mountain bike accident in which she fractured her neck, sustained a brain injury, and broke three ribs. "Several hours of neurosurgery were performed to save my spine." Her medical bills topped $100,000, Bleazard said.
When the bills reached a peak, the couple's insurer, Regence Blue Cross Blue Shield of Utah informed the Bleazards that it would review their medical records. "Then, in a letter dated Jan. 17, 2006, Regence notified Keith and I that they were rescinding our health insurance policy retroactively. They claimed that Keith failed to provide information in the application about his medical history relating to his back. Regence did not respond to our attempts to talk with them to find out where the misunderstanding came from.
"Later we learned they had not received the nurse's report detailing Keith's pain medicine and doctor visits, and that these things should have been included on the form [an insurance agent] helped us fill out. Regence did not try to talk to either me or our agents before they rescinded the policy. If they had, we would have told Regence that our agent and the nurse knew all of Keith's medical history, including the fact that he took pain medication for his back."
"I believe that Regence has taken advantage of this situation to get out of paying the large medical bills that are associated with my biking accident," Heidi Bleazard testified.
Crackdowns in Two States
Waxman asserted that the case is not an isolated one, and that in California over 1,000 individuals have had their policies inappropriately rescinded.
Dale Bonner, a California state official whose office oversees managed care plans in the state, said that rescissions are proper if used to stop fraud on the part of enrollees who have misrepresented their health histories to obtain coverage. But the problem with rescission arises when plans engage in "post-claims underwriting," when they reevaluate an enrollee's coverage provisions after filing a medical claim and in some cases issue a rescission. "One of the things that is most troubling is that these actions are usually taken because enrollees are using health services," Bonner said.
"This public policy debate is not about consumers who intentionally misrepresent their health status," said Lembo, the Connecticut state official. "That is a red herring that is utilized as a distraction for those who rather we not have this conversation."
Bonner said that in California, the state in 2006 launched "the largest investigation of wrongful rescissions ever undertaken in the nation" following numerous consumer complaints. Rescissions dropped 81 percent in the year after the investigation, he said.
In April of this year, regulators said they'd review each and every rescission case involving the state's largest plans—Anthem Blue Cross, Blue Shield of California, Kaiser, PacifiCare, and Health Net—dating back to 2004, he added. Kaiser, Health Net, and PacifiCare announced settlements guaranteeing that rescinded enrollees would be issued coverage and that pre-rescission out-of-pocket medical costs would be paid by the plan.
Lembo said Connecticut regulators saw a spike in 2003 in consumer complaints about rescissions or policies that were limited in some other way.
In one case, a company denied a woman's claims for treating lymphoma on the grounds that she had the disease before getting her coverage and should have sought treatment leading to its diagnosis before the policy was issued, Lembo said.
In another case, a company rejected the claims of a 34-year-old woman diagnosed with lymphoma a month after her policy began, Lembo said. The reason? In a medical visit after enrolling she recalled shortness of breath while exercising six months before and the insurer said the symptom constituted a preexisting condition that should have caused her to seek treatment before enrolling.
One case involved a man diagnosed with multiple sclerosis after receiving coverage who saw his policy rescinded on the grounds that he should have known that headaches disclosed on his application would have led to the multiple sclerosis diagnosis, Lembo said.
Connecticut responded by passing a law requiring insurers to obtain state approval before they rescind, cancel, or limit a policy an existing policy in any way, he said. Since the law was passed the state has received no requests to modify or rescind a policy, he said.
But Connecticut is the only state in the nation that has such a requirement, Lembo said, citing data from a Families USA survey. And 20 states lack laws giving consumers the right to appeal rescissions, he added.
"It is my hope that legislatures across the country, with your encouragement, will take the steps" needed to protect consumers such as standard insurance applications, and limiting rescissions without state approval, Lembo said in his testimony before Waxman.
Questions About CMS
Waxman noted that under HIPAA, consumers are guaranteed the right to renew their individual health insurance policies unless they have defrauded the insurers or intentionally misrepresented their medical condition. But only four employees at the Centers for Medicare and Medicaid Services administer HIPAA and the agency has never taken any action against insurers for post-claims underwriting that violates a consumer's HIPAA rights, Waxman said.
Abby L. Block, director of the CMS Center for Drug and Health Plan Choice, said she shares Waxman's concern about reports that insurers may be using rescission as a way to circumvent HIPAA renewability requirements. HIPAA is very clear that with limited exceptions an insurer must renew or continue in force an individual's existing coverage, Block said.
States have primary responsibility to enforce guaranteed renewability and CMS "can only act if it determines that a state fails to substantially enforce the requirement," she said. But if there were any indications that rescissions may be occurring contrary to HIPAA standards "that would be a red flag" and CMS could investigate and depending on the outcome take over enforcement of guaranteed renewability in a state, she said.
Block said CMS hasn't taken any enforcement action because it hasn't received any specific complaints about states not enforcing protections against rescissions. If cases were brought to her attention about states failing to take action she would look into them, Block said.
That led to criticism of Block by Rep. Jackie Speier, D-Calif., for not following up on reports in the national media about individual cases or rescission.
"It is not my responsibility to do that, it is my responsibility only to determine if in fact a state is substantially enforcing HIPAA rules if a case is brought to my attention," Block said when pressed about whether she had inquired about a case in South Carolina.
Block's point seemed to be that individual cases of rescission are the responsibility of state regulators to oversee and that CMS steps in only when it receives evidence that a state isn't meeting its enforcement duties. "I can't really act simply on information which is never full and complete in a news media report," she said.
"With all due respect, if it is in the national media it is brought to your attention," Speier said, her voice rising. "And if you don't believe that that's brought to your attention ... then there's about $400,000 we can cut from the budget right now," Speier said, referring to the costs of staffing the four positions at CMS cited as the extent of the agency's HIPAA oversight resources.
Rep. Elijah Cummings , D- Md., then asked Block "if right this second, Mr. and Mrs. Bleazard wrote on a piece of paper, Dear Mrs. Block, we believe the state of Utah hasn't done what it needs to do in this regard, would that trigger an investigation from you?"
Block indicated that she would respond to such a request, reiterating after the hearing that the request would have to come from the couple in writing. The couple and their attorney indicated they would make a written request.
Waxman asserted in an interview that proper federal enforcement under HIPAA "could stop a lot of the kind of practices that we're hearing about today, because HIPAA says you have to have a clear intent to defraud" an insurer before your policy in the individual market can be canceled.
Stephanie Kanwit, an attorney with America's Health Insurance Plans, spoke out strongly on behalf of the Bleazards, saying her association's board has endorsed a set of principles to prevent improper rescissions.
A key aspect of the principles is that health plans should clearly inform consumers about their right to appeal rescissions and the review should be handled by an entity outside the insurance company, she said. "We hope to make what happened to these people ... a never event," she said. "We're trying to fix it. We're trying to make sure that what happened to them does not happen again."
Asked by Cummings whether AHIP would contact the Bleazards' insurer to try to resolve the matter, Kanwit assured him it would.
But a spokeswoman for Regence Blue Cross Blue Shield of Utah said in an e-mail the insurer is sticking to its position on the Bleazard's case.
"As health care costs continue to rise, we have an obligation to be good stewards of our members' health care dollars," she said. "Health care fraud costs the system and consumers more than $170 billion each year, and we have a responsibility to ensure that these kinds of activities do not further impact costs for our members. We trust people to tell the truth when they fill out an application. This is an instance of Mr. Bleazard providing misinformation, and absolutely not a case of post-claims underwriting."
Congress Overrides Bush Veto of Medicare Bill
By Drew Armstrong, CQ Staff
July 15, 2008 -- The House and Senate voted Tuesday to override President Bush's veto of a bill blocking a big cut in Medicare payments to physicians.
The bill (HR 6331) now becomes law. Bush had vetoed it just before noon on Tuesday.
A few hours later, the House voted 383–41 to override the veto. The vote comfortably surpassed the two-thirds majority required, and the override produced almost 30 votes more than the 355–59 tally by which the House passed the bill June 24.
The Senate later voted 70–26 to override Bush. It had passed the bill by voice vote July 9 after voting 69–30 to overcome a procedural hurdle.
Tuesday's action represents the fourth veto override of Bush's presidency. Congress enacted a water resources bill (PL 110-114) over the president's wishes, and overrode him twice on the farm bill because of a procedural glitch (PL 110-246, PL 110-234).
Ahead of the House vote, House Republicans seemed resigned to the fact that they would not sustain the president's veto. "I think we all know what's going to happen," said Minority Whip Roy Blunt, R-Mo.
Bush, in his veto message to the House earlier in the day, said that he supported the legislation's goal of stopping a 10.6 percent cut to Medicare's physician payment rates, but objected to the reduction in payments to private Medicare plans, known as Medicare Advantage, that would offset the costs of blocking the physician pay cut.
"Because this bill would severely damage the Medicare program by undermining the Medicare Part D program and by reducing access, benefits, and choices for all beneficiaries, particularly the approximately 9.6 million beneficiaries in [Medicare Advantage], I must veto this bill," Bush said in his message.
The measure would replace a scheduled 10.6 percent cut to Medicare's physician pay rates with 18 months of stable payments. The cost would be offset by cutting bonus payments to private Medicare Advantage plans. Those cuts total $12.5 billion over five years, according to the Congressional Budget Office.
Employer-Based Health Coverage and Wellness Programs Critical to Keeping Workers Healthy, Panel Says
By Danielle Parnass, CQ Staff
July 14, 2008 -- The employer-based health system is crucial to facilitate healthy living among employees and to control spiraling health care costs, said panelists at a Blue Cross Blue Shield Association (BCBSA) briefing on Monday.
"We think that the employer system is a real engine of innovation and change, much more so than the government could be in terms of implementing new ideas, new programs," said Mary Nell Lehnhard, senior vice president of the Office of Policy and Representation for BCBSA. She added that employers can demand changes in care more quickly based on changing workforce and employee needs.
Lehnhard also discussed the need for collaboration between the private sector and government to address chronic illness, which accounts for 75 percent of health care spending and affects every six of 10 Americans, she said.
Research has shown that education programs and activities, such as tracking logs, pedometers, and internal competition, can increase worker participation in wellness programs by at least 21 percent, according to a report also released Monday by BCBSA and Harvard Medical School's Department of Health Care Policy.
But encouraging employees to begin and maintain healthy habits is still a challenge for many employers, according to a separate report also released Monday by the National Business Group on Health, a non-profit organization of mostly 300 large employers.
"We can change plan design, we can increase co-pays, we can put in deductibles, but if the population underlying is still sick . . . you're not gonna do anything other than move the pieces around of an exploding cost scenario," said Helen Darling, president of NBGH.
Darling described employers' approaches to health care over the past five years as "revolutionary."
"They're beginning to understand what they have to change," she said. For example, 83 percent of employers offered health risk appraisals in 2008, an 18 percentage-point change since 2006, the report said.
In addition, a recent NGBH survey showed that 80 percent of employees said employers should actively provide health information. Meanwhile, 66 percent of workers support discounts for employees who show healthy lifestyles. But more than half said they have not seen information to help them compare and assess different health plans or providers and that the medical information available is too difficult to understand.
DTE Energy company in Detroit, a member of Blue Care Network of Michigan's Healthy Blue Living program, reported a decrease in high health risk factors among employees between 2005 and 2008—and a savings of more than $2.2 million from a reduction in missed workdays—after implementing disease management initiatives.
The Health Blue Living program "fundamentally changed the relationship between" doctors and patients, or provider and employees, by changing the focus of health care from "get better" to "stay better," said Richard Lueders, director of human resources for DTE Energy.
Pat Fulcher, vice president of associate services at Food Lion LLC, said the company looked at recent trends to determine what initiatives work best to attract and retain associates by addressing their needs. Fulcher said the company's wellness initiatives have been successful among employees. Programs include nutritional counseling and smoking cessation resources and partnering with the BCBS "Engaging Consumers@Work" program.
In addition, more than 95 percent of Food Lion employees who qualify for case management—another feature of its wellness programs—actively participate, and the number of workers working with a health coach is 29 percent higher than the norm, Fulcher said.
"If we didn't do it as employers, if we were not there to truly show associates that they're valued and what it means to us for them to be well, I'm not sure who would do the work, to motivate, to be innovative, to allow people to understand that their choices everyday affect their lives," Fulcher said.
Health care is not a one-issue problem, but in terms of ensuring health coverage for Americans, employers continue to play a very significant role, said Don Bradley, senior vice president and chief medical officer of BCBS of North Carolina.
"There are going to need to be other plans and programs, but to disassemble the part that is working I think is perhaps foolhardy," he said.
Panelists Call for Revamping of Long-Term Care System
By Whitney Blair Wyckoff, CQ Staff
July 15, 2008 -- Overhauling long-term care policies is a key component of addressing challenges that face the health care system as baby boomers age, said speakers at a recent Brookings Institution event on how to improve the quality and sustainability of long-term care programs.
"Unless we take action soon, our nation will be totally unprepared to meet this challenge," said Sen. Susan Collins, R-Maine, noting that over the next 20 years, the population over 65 is expected to double. The event was held by the Engelberg Center for Health Care Reform at Brookings.
Several of the panelists urged a combination of voluntary and regulatory strategies, and they looked to states as leaders in tackling long-term care issues. Panelist Susan Reinhard of the AARP Public Policy Institute pointed to Washington State, which she said has made "tremendous strides" to improve long-term care.
Although the state augmented its long-term care program, it has been able to decrease costs starting this year, she said. Washington's program considers options beyond traditional nursing homes, which Reinhard and other panelists agreed have been overlooked too often.
Seventy percent of people in Washington who qualify for long-term care are enrolled in home- or community-based care, she said. This figure accounts for 54 percent of Medicaid dollars spent on long-term care for older adults in the state. The state also has started using an electronic information system which can evaluate a patient's eligibility for Medicaid services.
Reinhard also said all new nursing home residents meet with a state-employed nurse when they enter a facility, regardless of whether they are in Medicaid.
"One thing that we really need is that federal regulations support, rather than impede, these systems," Reinhard said, explaining that some of the Medicaid regulations have the potential to discourage similar programs.
Mary Jane Koren, assistant vice president at the Commonwealth Fund, emphasized a need for improvement in quality and efficiency. Nurses' aides have a 70 percent turnover rate in nursing homes, and she said the turnover rate for other staff "is equally appalling."
Congressional Budget Office Director Peter Orszag said attempts to revamp the long-term care system could be hindered if lawmakers cannot find a way to offset the start-up costs.
"It is probably the least effective sector of our economy," Orszag said of the health care system as a whole.
U.S. Again Scores Low in Quality, Efficiency, Access of Health Care System
By Reed Cooley, CQ Staff
July 17, 2008 -- The U.S. health care system has not improved and has even declined in some areas in recent years, but "wide opportunities to improve care" and save billions of dollars still stand well within the reach of stakeholders, according to the authors of a new report commissioned by the Commonwealth Fund.
The United States scored 65 out of a possible 100 on a scorecard evaluating 37 areas of the health care system, a two-point drop from a previous study in 2006. The report evaluated health systems around the world in the categories of healthy lives, quality, access, and efficiency and found that the U.S. system could save 100,000 lives and $100 billion if it met certain benchmarks in each area.
"While there are pockets of improvement and excellence, it is clear that we need strong leadership and concerted public and private efforts to achieve and raise standards of performance nationwide and ensure that significant progress occurs in the future," said James J. Mongan, chairman of the study's commission and CEO of Partners HealthCare in Boston.
Researchers found that the U.S. health care system suffers from a severe dearth of efficiency, a category in which the United States received a score of 53 out of 100. Although use of electronic medical records among U.S. physicians spiked from 17 to 28 percent between 2001 and 2006, the United States still lagged behind five other industrialized countries in this area, according to the report. Superior scores ranged from 42 percent in Germany to 98 percent in Netherlands, and, among those surveyed, only Canada received a lower score, at 23 percent, it said.
However, Commonwealth Fund officials pointed to access as the biggest problem with America's health care system and said that it should be the priority target area for a new administration and the next Congress.
"Whenever you look outside the U.S., one of the core differences you see is everyone is in the health care system," said Cathy Schoen, the Commonwealth Fund's senior vice-president and the study's lead researcher.
The study recorded a nine point decline since 2006 in the United States' access to care score, from 67 to 58 out of 100. The biggest reason for this drop was a spike in the number of Americans who went underinsured as opposed to uninsured, researchers said. Another Commonwealth Fund report, released last month, found that the number of Americans "insured but poorly protected" rose by 60 percent from 2003 to reach 25 million people in 2007, a year in which 37 percent of health care consumers reported going without needed care.
"We now have 75 million Americans who are uninsured or underinsured. Poor access pulls down quality and drives up costs of care. The U.S. leads the world on health care spending—we should expect a far better return on our investment," Schoen said in a press release.
Schoen and others praised state and local efforts to improve quality and access to care, but said that only a coordinated, "top-down" effort would allow the United States to reach the benchmarks necessary to save lives and cut costs on a significant scale.
They pointed to the next administration as the next opportunity to begin this effort.
When asked which presidential health care plan she would support, Commonwealth Fund President Karen Davis did not immediately express a preference. She noted similarities between the plans of Sens. John McCain, R-Ariz., and Barack Obama, D-Ill., in terms of their cost containment strategies and support of health information technologies, but said they differ in how they would expand access.
When pressed, Davis said, "On coverage, Obama's plan is preferable."
Wanted: A Few Good States (and the Feds) to Overhaul Health
By John Reichard, CQ HealthBeat Editor
July 15, 2008 -- House Ways and Means Health Subcommittee Chairman Pete Stark sent a mixed message at a hearing Tuesday on the role of states in overhauling health care—on the one hand, states face too many roadblocks to bring about universal coverage and no single state offers the nation a model of how to get it done. On the other hand, the California Democrat noted, states making a serious effort to reach the goal have lessons to offer federal policy makers on the role they can play in bringing about universal coverage.
The panel's top Republican, Dave Camp of Michigan, sounded more upbeat about the state role, saying their efforts in overhauling welfare set a good example for health care. "Instead of enacting overly broad national mandates, we gave states greater resources and flexibility to craft programs that fit their own populations," he said. "It is my opinion that states are the most appropriately situated to design health care plans that meet the needs of its citizens. Congress should be looking at what works, and what does not work, in the states."
But state officials at the hearing, while speaking proudly about their accomplishments, were consistent in saying that the federal government must lead the way in any overhaul. And to no one's surprise, they emphasized that stable funding is a key missing piece of the puzzle—but certainly not the only missing piece.
"Only three states—Maine, Vermont, and Massachusetts—have adopted comprehensive approaches to health care reform within the last decade," testified Alan R. Weil, executive director of the National Academy for State Health Policy. "Meanwhile reform efforts remain stalled in larger states such as California, Illinois, and Pennsylvania. While state efforts make a real contribution, federal leadership is needed to make substantial, sustained progress in health reform efforts."
"States cannot pursue comprehensive health reform without substantial and reliable financial participation by the federal government," Weil said. "This year, as many as 28 states are reporting budget shortfalls, creating pressure for states to cut services and government spending even as they are seeking opportunities to expand coverage."
Weil noted another problem—"states lack the authority to affect many of the health care activities within their borders. About half of a typical state's residents are completely outside the reach of state authority because they are enrolled in Medicare, have coverage through an employer that self-insures, or obtain services through the Department of Veteran Affairs, Indian Health Service or other programs." The Employee Retirement Income Security Act of 1974 (ERISA) preempts state laws that relate to private employer-based health plans."
But Weil said federal leadership could create a national framework in which states could operate. "Indeed, approaches that combine the resources, stability, and uniformity of federal involvement with the dynamism, local involvement, and creativity of states can foster excellent results. The federal government can bring its clout as the largest purchaser, stable funding than can weather economic ups and downs and standards than can assure all Americans they will have meaningful access to needed health care services."
State leadership goes beyond high-profile efforts in states such as Massachusetts and California to widen coverage, Weil noted. "States long ago learned that they cannot afford major coverage expansions if they do not also improve the quality of health care and contain the growth in health care costs," he said. "Minnesota recently passed landmark legislation to establish a unified, statewide system of quality-based incentive payments and to help consumers and other purchasers compare providers on overall cost and quality of care."
"Pennsylvania has taken a comprehensive and innovative approach to reducing medical errors," he said. And "North Carolina is a recognized leader in improving care for Medicaid enrollees with chronic illnesses."
Trish Riley, director of the governor's office of health policy in Maine, noted that the state's health overhaul has emphasized the importance of efficiency gains and not strictly wider coverage. The United States pays for "redundancy, inefficiency, variation, and oversupply" of health care services, she said. Without efforts to make care affordable, coverage gains are hollow, leading to underinsurance as health plans shift more costs to consumers, she suggested.
Steps have included efforts to reduce variable treatment practices within the state that contribute to inefficiency, pooling of small businesses to promote economies of scale, and adopting "medical loss ratio" standards addressing how much of a plan's premium revenue should go for medical care.
Stark prodded witnesses on whether universal coverage could be obtained without some form of coverage mandate. None disputed that premise, including Edmund F. Haislmaier, a senior research fellow at the right-leaning Heritage Foundation. But Haislmaier observed that the large coverage gains obtained by the overhaul law in Massachusetts were developed not with a mandate in mind but rather with an eye toward making the purchase of coverage as attractive as possible through reforms emphasizing choice and affordability.
If one starts with the premise that all must buy coverage one skips the "hard thinking" that goes into crafting policies that makes people want to buy coverage without a mandate, he said. JudyAnn Bigby, Massachusetts Secretary of Health and Human Services, said that a majority of state residents support its mandate that they buy coverage. Some 340,000 residents have gained coverage under the law, she said.
Jack Lewin, who administered Hawaii's law requiring employers to provide full-time workers with health coverage, cautioned against moving too quickly away in any overhaul effort from the nation's system of employer-provided coverage. Sending too strong a signal that the system would be dropped could lead to large declines in employer-sponsored coverage, he warned. The employer-based system could be improved, however, by giving employees a greater choice of plans through purchasing alliances, suggested Lewin, now the CEO of the American College of Cardiology.