Lessons from the Health Care Meltdown

Here's an article I recently published in a special issue of The Regulator (the full issue focused on the health care debate is attached below):

The current economic crisis teaches insurance regulators several key lessons to prevent a wholesale health care meltdown in America. Much like the financial sector, the health insurance sector has made short-term gains its priority rather than the health and well-being of its customers.

As a result, private insurance fails to meet the needs of Americans and is increasingly unaffordable and unsustainable. Insurers have driven up premiums and out-of-pocket costs, putting consumers at financial risk if they need costly health care services or forcing them to go without needed care.

For health care reform to work there must be the type of federal oversight and consumer protections required of the financial sector under the proposed Consumer Financial Protection Agency (CFPA). The creation of the Health Choices Administration (HCA), as outlined in proposed HR 3200 (a.k.a. America’s Affordable Health Choices Act of 2009), is critical.

As a supplement to state oversight, federal oversight and enforcement should help ensure uniform enforcement of new federal consumer protection standards. Together they can best promote transparency, simplicity, fairness, accountability, and access to health care services. State regulators and attorneys general would be given authority to enforce federal standards alongside federal regulators. Federal law would only preempt weaker state laws.

Several studies show that many states lack requisite resources and authority to oversee insurers. As a result, many states lack good consumer protection laws and even those with good laws often do not have the staff to focus on anything but the solvency of the insurers they regulate. Complementary federal oversight and enforcement protects Americans in states without the wherewithal to enforce the laws. It also provides the nation with a macro picture of our health care system that can uncover emerging trends among states.

The federal agency must have full authority to require data reporting and greater transparency from the insurers. It will help standardize and rationalize data and improve our health care system. Currently, precious little data is available to compare insurance plans though they all are very different.

A range of data from the insurers is essential if the government is to ensure plans are not discriminating against people with costly conditions and to educate Americans about differences among health plans. Data that should be available for government review include enrollment applications, retention rates, disenrollment rates, rating practices at issue and renewal, claims payment practices, and utilization review activities.

In addition, the federal agency will need to establish measures of medical debt, uncompensated care, delayed or foregone care, balance billing, consumer cost-sharing, and to monitor plans to determine coverage adequacy. Finally, plans will need to report in detail on medical loss ratios and claims data so that the government can effectively operate risk adjustment systems and/or public reinsurance.

Like the proposed Consumer Financial Protection Agency, the Health Choices Administration would operate an ombudsman program to provide consumer information and help resolve problems and complaints. The HCA would also have the power to set standards that lead companies to compete by offering products that consumers actually want — and understand.

Health insurers will no longer be able to offer policies with pages of fine print that no one can figure out.

The HCA mission should be analogous to that of the CFPA as described by Treasury Secretary Timothy Geithner: "This agency will have one mission — to protect consumers — and have the authority and accountability to make sure that consumer-protection regulations are written fairly and enforced vigorously."