Quackenbush to Widen Health Policies

Over objections from consumer groups, Insurance Commissioner Chuck Quackenbush is planning to use a little-known provision in a new federal health-care law that would allow insurance companies to trim benefits in long-term care policies, The Times has learned.

Quackenbush is taking the action despite a complaint from the chairman of the state Senate Insurance Committee, who says Quackenbush is usurping legislative powers and may be violating a 1992 California law. That law was designed to make it easier for consumers to collect benefits under long-term care policies.

“I do question whether you have authority to approve policies that do not comply with California law,” Sen. Herschel Rosenthal (D-Los Angeles) wrote Quackenbush last week.

In the last decade, hundreds of thousands of long-term care policies have been sold in California. The policies provide home health services or nursing home care for people who become disabled. Most of the purchasers have been retirees age 68 to 72.

Now, with the specter of cutbacks in Medicare, insurance companies are bracing for a new surge in sales of these policies as more and more people seek private coverage for the infirmities that often accompany old age.

The federal health-care reform measure, signed into law last August, attempted to encourage those sales by providing tax breaks for both buyers and sellers of long-term policies that provide specific benefits.

But that has created a conflict in California, because state law requires companies to offer a greater array of benefits to the policyholder than those that would be offered in policies that qualify for the tax exemption.

A spokesman for Quackenbush said the commissioner decided to issue a directive to permit the sale of policies with lesser benefits so both consumers and companies could take advantage of the tax breaks. He said 81 companies are preparing to sell the policies in California.

“Are we to penalize hundreds of thousands of people who want to buy this policy to satisfy the concerns of one state senator and some consumer groups?” asked Richard Wiebe, Quackenbush’s spokesman.

Wiebe said that Quackenbush must act now because it could be months or even years before the state Legislature or federal regulators make tax-exempt policies available to California consumers.

He said consumers would not be harmed because they would still have the option of buying the old kind of policies. Although the costs of the new policies have not been determined, a spokeswoman for the insurance industry said she did not expect a major difference in price.

However, one consumer activist predicted that it would be only a matter of time until insurance carriers stopped offering the policies with the greater benefits because they provide lower profit margins.

Bonnie Burns, a consumer representative to the National Assn. of Insurance Commissioners, an advisory group to state governments, said some companies have already announced they will stop selling the policies with greater benefits. She said that at the heart of the difference between the two types of policies are the disabilities that qualify a person for benefits.

Under current state law, she said, an inability to walk can help trigger benefits, but under the new tax-exempt policies, it is not a factor.

Walking disabilities usually strike elderly people first, Burns said, and it is critical that they have assistance to attend to their daily needs when that happens.

In his letter to Quackenbush, Rosenthal said the ability to collect benefits was of much greater value to consumers than the tax write-off.

“Rather than serving the insured’s interest, the proposed changes will create a burdensome situation for consumers who will be forced to meet greater standards of disability before collecting benefits,” Rosenthal said.

At the least, Rosenthal said, Quackenbush should have waited for the Legislature to convene next year before taking a unilateral action.

Consumer groups charged that the commissioner had acted hastily to help the insurance industry, which has contributed hundreds of thousands of dollars to his political campaigns since 1994.

Jamie Court, lead organizer of the Proposition 103 Enforcement Project, said that instead of giving insurers the authority to sell policies with fewer benefits, Quackenbush could have asked federal regulators to approve the current California policy as sufficient for tax exemptions.

“If this commissioner wanted to act on behalf of the insured rather than the insurers, he would go to bat for them with the federal regulators,” Court said. “Instead he’s going to bat for his campaign contributors.”

Wiebe said Quackenbush is criticized for acting on political motivation no matter what he does.

“Every time the commissioner does something that someone doesn’t like, whether it be an insurance company or a consumer group, political motives are ascribed to that action,” he said. “This is a constant refrain we hear on a daily basis. That is going to continue no matter who we please or who we irritate.”

He said the commissioner has acted on the advice of his lawyers and firmly believes that he has the authority to issue the directive.

Other groups that objected to the proposed decision included Consumers Union, Health Access California and Service Employees International Union, AFL-CIO.