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Protecting Consumers Means Mastering Fine Points of Writing Health Law Regs, NAIC Reps Say

By John Reichard, CQ HealthBeat Editor

August 13, 2012 -- The consumer representatives to the National Association of Insurance Commissioners (NAIC) released a 51-page report last week loaded with technical recommendations for how state and federal officials should write regulations to implement key consumer protections under the health care law.

"We want to make sure that, as they implement these reforms, they're putting consumers front and center," said Beth Abbott of Health Access California, one of the reps.

At issue are health law protections governing the regulation of insurance. For example, the law guarantees the issuance of insurance to all applicants and the renewal of policies once they are issued. It bars companies from denying insurance based on pre-existing medical conditions. It sets minimum benefits health plans must offer, called "essential health benefits."

The way regulators write the regulations putting these protections in place in 2014 will determine whether they work for consumers or tilt toward the interests of insurers, consumers advocates say.

"Before people can fully benefit, federal and state regulators need to set clear rules for insurance company behavior, and provide robust oversight," said another representative, Sabrina Corlette, a professor at Georgetown University's Health Policy Institute.

Stop Loss

The report addresses implementation issues "that have been largely ignored so far, such as the potential that the sale of stop-loss insurance to small groups or of unregulated indemnity insurance plans" could undermine" consumer protections in the health law (PL 111-148, PL 111-152), said Timothy Jost, a law professor at Washington and Lee University.

Stop-loss coverage allows companies to self-insure, which exempts their coverage from some of the requirements of the overhaul. Health law boosters fear self-insurance will spread widely to small employers if stop-loss coverage is too easy to get. The coverage means that employers don't have to pay claims above a given amount, called an attachment point. Instead, the stop-loss insurer picks up those costs. If that set amount is a relatively low dollar figure, self-insurance can become a relatively accessible escape hatch from health law requirements.

The report notes that because the health law "did not extend some of its consumer protections to self-insured plans, these plans can continue to offer coverage at favorable rates to healthy groups while refusing to provide coverage or charging very high rates to unhealthy groups." With fewer healthy risks in the insurance pool, policies sold that comply with health law protections will be more costly, the report suggests.

It adds that "in addition, because stop-loss coverage is not guaranteed renewable under federal law, many small groups could find themselves dropped by their insurer as their employees get older and the health status of the group declines."

In regs relating to pre-existing medical conditions, insurers should be barred from discriminating against individuals based on factors that "may be proxies for health status, such as credit information and family history," the report says.

Essential benefit requirements should mandate that insurers "offer more than one prescription drug per category or class," the report says. Lawmakers and state regulators should release information on "benchmark plans" they plan to use to minimum benefits in a state in time for the public to comment. And those comments should be considered in choosing a benchmark plan.

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