Senate healthcare bill now relies on regulation

When Senate Democratic leaders agreed this week to remove a public insurance plan from their massive healthcare bill, they did more than quash a liberal dream of expanding the government safety net. They effectively pinned their hopes of guaranteeing coverage to all Americans on a far more conventional prescription: government regulation.

The change sprang from a compromise made to placate conservative Democrats wary of a new government program. But shorn of a “public option,” the Senate healthcare bill has reverted to a long-established practice of leveraging government power to police the private sector, rather than compete with it.

Despite the resistance among Republicans and conservatives to more government regulation, even the insurance industry has agreed to broad new oversight of their business in exchange for the prospect of gaining millions of new customers.

The expanded regulation of insurance programs ultimately could ripple through the entire healthcare system, affecting how doctors, hospitals and other providers care for their patients.


But the success of this approach may well depend on whether regulators have been given enough authority, a question that has received considerably less attention than the ideologically charged battle over a new government insurance plan.

Democrats in the House and Senate have filled their bills with a dizzying array of rules and regulations on insurers. The insurance market provisions in the Senate bill alone run nearly 400 pages.

For example, the Senate legislation would require all insurers to fully cover federally recommended preventive health services, such as immunizations, colonoscopies and HIV testing.

Insurance companies would be prohibited almost immediately from rescinding policies for people who get sick and imposing lifetime limits on how much they pay for customers’ healthcare.


And state and federal regulators would be required to set up procedures for reviewing how much insurers charge customers and whether premium increases were justified.

A more intense round of regulation would begin in 2014, when states set up marketplaces, or exchanges, where insurers could sell plans to millions of people who do not get coverage through work.

Companies in the exchanges would have to offer policies to all customers, regardless of their health status. Insurers could not charge older people more than three times what they charge their youngest customers, an unprecedented national restriction on what is known as age-rating.

Every insurance company that offers a plan in these exchanges would have to provide a minimum set of benefits determined by the Department of Health and Human Services.


“In any other year, these changes would be cause for a White House signing ceremony with bands and fireworks,” said William Vaughan, health policy analyst for Consumers Union.

Like any regulatory framework, however, this one has holes.

Provisions in the Senate bill that authorize companies to sell nationwide health plans may allow insurers to skirt existing state regulations that require them to cover many medical procedures. And the legislation would ban insurance companies from placing “unreasonable” limits on the annual benefits they pay -- a vague standard that patient groups fear could effectively allow the kind of caps that now leave some consumers with gargantuan medical bills, even if they have insurance.

Other consumer advocates worry that there are insufficient consumer protections against high premiums, even though millions of Americans for the first time would be required to buy medical insurance.


Although the bill mandates that state and federal regulators review rate increases, it is unclear how the regulators would evaluate what insurers want to charge and how aggressively they would restrain the industry.

“The public option was really the best check on the industry,” said Jerry Flanagan, patient advocate for California-based Consumer Watchdog. “Though it was small, there was an implicit threat to the industry that it could be expanded. . . . And, unlike regulation, it allowed people to vote with their feet and go somewhere else if they didn’t like what insurers were doing.”

Consumer Watchdog, the American Cancer Society and other advocacy groups have been working with Democrats on Capitol Hill to close some loopholes and tighten the regulations before the Senate passes a final bill.

Senate Majority Leader Harry Reid (D-Nev.) is expected to include some regulatory tightening in a package of healthcare bill changes that he plans to unveil this weekend.


But Reid is unlikely to have a complete solution for the challenge that has confronted regulators since Progressive reformers pushed the government a century ago to require that meatpackers divulge what they were stuffing into their sausages.

Regulators are in a perpetual race to stay one step ahead of the industry they oversee. And if the president signs a healthcare bill next year, lawmakers, insurance companies, patient groups and consumer advocates will probably be debating insurance regulation for years to come.

“All of us will have a lot of work to do after the legislation passes,” said Ron Pollack, executive director of Families USA, an influential Washington-based consumer group.

“We’ll have to monitor what is happening state by state. To the extent that insurance companies fail to adhere to rules, we’re going to have to get that fixed. . . . But Rome wasn’t built in a day.”