Holes in Discount Health Plans

More than 7 million people are uninsured in California, and millions more are underinsured, meaning they are in health plans that stop short of covering all of their medical needs.

Today the Assembly Appropriations Committee is to vote on two bills that purport to help solve the problem by allowing consumers to purchase low-cost specialty care and discounted bare-bones health services. The idea is sensible on its face, but the bills are troubling because they lack adequate oversight, are unclear about liability when patients are harmed and might encourage misleading consumer marketing.

Discount health programs started in Florida as cut-rate prescription drug services for seniors on Medicare. One such program that hopes to grow in California is YouRxPlan, owned by a subsidiary of the pharmaceutical giant Merck & Co. Inc. in partnership with the Readers Digest Assn. Inc. It is clearly troublesome to have a prescription drug program owned by a pharmaceutical company with products to push.

These expanding programs in theory could fill a niche in providing care. The two bills, however, give consumers too little protection. The state’s old HMO regulator, the Department of Corporations, last year rightly ordered 46 discount health plans to stop operating until they obtained licenses under the Knox-Keene Act, a set of state laws that governs health plans and requires certain levels of care. The department warned that “the so-called discounts may be illusory . . . or duplicative of other health benefits to which the individual is already entitled.” The Assembly bills on the table today would let discount plans back in the door without requiring them to comply with the Knox-Keene Act.

The first, SB 1181, by Sen. Richard Polanco (D-Los Angeles), would allow health plans to refer patients to discounters for services they didn’t cover, from hearing aids to cosmetic surgery. The idea might seem reasonable, but the discount programs would not be required to employ basic quality-assurance systems used in the rest of the health care industry. The programs could also mislead consumers because discounts might be taken from phony, inflated prices that almost no one actually pays. One need look no further than the list price of an aspirin in a hospital.

The second bill, SB 173, by Sen. Dede Alpert (D-Coronado), would allow the sale of discount “basic health” programs to people lacking health insurance altogether. One danger is that the bill could allow poorly regulated discount providers to substitute for current, and regulated, private and public health insurance programs. Also, low-income families might sign contracts for supposed discount health services that they could get for virtually nothing in a public health insurance program.

Given all of these serious concerns, the Legislature should be moving cautiously on both bills and taking care not to overburden the state’s new Department of Managed Care. But no. In June, the Polanco bill passed the Assembly Health Committee 15 to 0, while the Alpert bill passed 12 to 0. There has been heavy lobbying by health providers, which in the last year gave $11,250 to Alpert’s reelection campaign and $18,000 to Polanco’s.

If the two measures are approved by the Assembly Appropriations Committee today, as expected, the job of stopping them may fall to Gov. Gray Davis, who should veto both bills if they are passed in their present form.