Healthcare overhaul bills working their way through Congress could jeopardize laws in California and other states that require insurers to pay for treatments such as AIDS testing, second surgical opinions and reconstructive surgery for breast cancer patients.
What's more, the federal legislation could make it virtually impossible for states to enforce other consumer protection laws, such as the right to appeal if an insurer denies coverage for a particular treatment.
Healthcare overhaul bills in both the Senate and the House would open the door to insurers selling policies across state lines -- which some lawmakers fear could allow health plans to take advantage of the lenient rules in some jurisdictions while avoiding tougher enforcement regimes in places like California.
"It would be a huge problem for California consumers," said Rep. Jackie Speier (D-Hillsborough), who helped craft insurance laws when she served in the state Senate. "California is leading the way in terms of consumer protection, and I don't want to see that lost."
The proposals are part of the broader federal healthcare legislation that has been passed in the House and is still under consideration by the Senate. Before any of it can become law, both houses would have to agree on final language and President Obama would have to sign it.
Allowing insurers to sell across state lines is a key tenet of the Republican healthcare platform, and Sen. John McCain (R-Ariz.) made it a centerpiece of his presidential campaign. Proponents argue that interstate sales would enable insurers to customize policies to individual customers' needs, ignoring state benefit mandates they view as overly burdensome.
Democrats, on the other hand, generally oppose interstate sales and have defeated earlier efforts in Congress to allow them. Opponents fear that allowing insurers to sell across state lines would trigger a "race to the bottom," in which insurers compete to sell bare-bones policies at the lowest price, lacking benefits such as maternity care.
Interstate sales "is insurance code for picking their rules," said Jerry Flanagan, patient advocate for Santa Monica-based Consumer Watchdog. "The insurance companies will all run to Wyoming to issue policies, and Wyoming laws would rule in California."
Whereas some insurers want to be able to sell policies across state lines, the Blue Cross Blue Shield Assn. opposes the idea. It argues that such permission would result in inexpensive, watered-down policies.
Establishing a minimum level of benefits at the federal level could mitigate that somewhat, said Kris Haltmeyer, Blue Cross Blue Shield policy director.
Still, he said, "I do worry that there will be a race to the bottom, but the bottom won't be as low as it used to be."
The provisions allowing interstate insurance sales were included in the House and Senate legislation to win votes from conservative Democrats and moderate Republicans, according to legislative insiders.
But some close to those negotiations said the bills have safeguards that would ensure that the interstate policies provide the medical coverage consumers need.
For instance, the bill passed by the House on Nov. 7 and one approved earlier by the Senate Finance Committee call for the establishment of a federal benefits "floor," an essential set of medical services that all policies would have to cover.
The Congressional Budget Office has found that mandates contribute a small fraction to overall premium costs.
Still, some in the health insurance industry contend that mandates are one reason health insurance premiums are rising. These groups ask, for instance, why someone with no children must buy a health insurance policy that covers childhood immunizations.
The Council for Affordable Health Insurance says states have imposed more than 2,000 benefit mandates on insurers. J.P. Wieske, the group's state affairs director, said fears that insurers, if allowed, will rush to sell the most minimal benefits packages are unfounded.
"Companies design these policies knowing that people want certain benefits and certain benefits are popular," he said. "And if you don't include them, you may not be able to sell the policy. So mandates are an issue, but they are not the issue for the insurance companies."
Currently, most health insurance is subject to the laws of the state where the purchaser lives. Some states, including California, have greater consumer protections than others.
Patients' rights are among many areas where California has sought to provide protections beyond those of the federal government and other states. In a similar way, the state's standards for air and water pollution and fair employment and housing exceed federal laws.
California mandates require insurers to cover home healthcare, bone density screening for osteoporosis, in vitro fertilization and mastectomy. Mandates also cover certain providers, such as chiropractors, and conditions, such as autism. If insurers are allowed to sell under the laws of other states, they might be able to offer policies that do not include those benefits.
The American Cancer Society's Cancer Action Network believes the federal benefits package will end up including many of the cancer screening and prevention services, such as mammograms and tobacco cessation classes, that the group has fought for in the states for years.
"Healthcare reform could apply them nationwide with one fell swoop," said spokesman Steve Weiss.
But benefit mandates are not the only concern. Some California lawmakers and policy analysts worry the federal legislation would gut a host of other consumer protections.
In California, for instance, insurers must comply with prompt claims payment laws. And if an insurer refuses to pay for a particular treatment, such as chemotherapy or an organ transplant, the consumer has the right to appeal that decision to an independent medical review panel whose decisions are binding.
Bills in both the House and Senate include provisions that seek to preserve state authority over consumer protections. But, consumer advocates say, practically speaking, that will be difficult if Californians can buy policies from other states where the laws are not so consumer-friendly.
"California can't interpret the laws of Washington; it can't interpret the laws of Oregon," said Sabrina Corlette, director of health policy for the National Partnership for Women & Families, a Washington, D.C., advocacy organization. "This is just going to open up a huge, big loophole for scam artists to come in and market their products."
In another effort to safeguard consumers, the House bill would set up a federal oversight commission and calls for the development of an appeals and grievance process. In addition, states would have to agree to allow outside insurers to sell to their residents.
But congresswoman Speier and others are skeptical. Speier said the bill doesn't call for anything that protects consumers' rights as well as California's independent medical review process.
Karen Pollitz, a professor at Georgetown University's Health Policy Institute, said that, as written, the bills would make it easier for insurers to evade state regulation and enforcement.
"That puts consumers at risk," she said. "It's a problem because there is no state that has the capacity to regulate insurance sold outside its borders. They just don't. They don't have enough people. It's not practically possible."
In a clear signal of just how big a change is afoot, bills in both houses include a "buyer beware" notice. The House version, for instance, says policies sold across state lines must "provide for clear and conspicuous disclosure to consumers that the policy may not be subject to the laws and regulations of the state in which the purchaser resides."
Consumer advocates and California lawmakers fear that hard-fought insurance gains may be lost.
Rep. John Garamendi (D-Walnut Creek) is a strong proponent of the healthcare overhaul legislation. But the former California insurance commissioner said he sees trouble in the interstate provision. "There is a real potential for problems here for consumers."
The office of Gov. Arnold Schwarzenegger, a supporter of the Obama health plan, is assessing the details of bills before Congress, spokeswoman Rachel Arrezola said. But, she said, the governor "strongly believes that any healthcare reform proposal should not erode California's landmark consumer protections."