Testimony of Rep. Sharon Treat
Sponsor

LD 323, “An Act to Improve Transparency in the Health Insurance Markets”
LD 859, “An Act To Control Premium Costs in the Small Group Health Insurance Market”
LD 1205, “An Act to Establish a Health Care Bill of Rights”

Insurance & Financial Services Committee

April 13, 2009

Senator Bowman and fellow members of the Insurance & Financial Services Committee. I am Sharon Treat, and I represent House District 79, Hallowell, Farmingdale & West Gardiner. I am pleased today to present to you three bills to promote transparency in the health insurance marketplace and to take some steps towards more affordable health insurance by insuring that more of consumers’ premium dollar goes to pay for health care and less to pay administrative costs or profits.

These are truly extraordinary times. It was already tough to find affordable health care, and now with layoffs and belt-tightening by businesses and government, we can expect more Maine people to be thrown onto their own resources when it comes to finding health insurance. Even employers who continue to provide some level of health coverage are struggling to maintain it at an affordable level.

We need to make sure that the health insurance marketplace is set up to encourage competition and that consumers, medical providers and our Insurance Superintendant have the tools they need to keep costs as low as possible, to avoid wasteful administrative spending, and to insure the best coverage and highest quality of care.

TRANSPARENCY PROVISIONS. When you buy a house, you have an inspector comb over the property from cellar to attic, and an independent appraiser tells you what it’s really worth. You find out if the furnace works and what the floor space is. You know whether the heating system is electric or oil, if the basement is a crawl space or a family room, and you can see if the windows are drafty and whether there is a garage or you will be parking in a snow bank.

You would think when you invest in health insurance, at a monthly cost that can easily exceed a mortgage payment, you would have the same opportunity to know what you are buying. After all, housing, health, food and transportation are the biggest costs you have, are fundamental to survival, and to our life, liberty and pursuit of happiness.

But you don’t have that opportunity. Amazingly, you can buy an insurance policy today without knowing what it will cover and without being able to compare the policy with what another company offers. This is legal, and it’s time for change.

We’re not talking about whether a policy covers some esoteric new procedure. We’re talking about buying a policy that says it covers “pregnancy services” and finding out – too late -- that giving birth isn’t included.

The transparency provisions of LD 323 and LD 1205 (Sections A-3 and A-4 of LD) will make sure that consumers have this information, by requiring insurers to post their policy details on the web for all to see. LD 1205 requires carriers to carriers to post at least 5 individual and 5 small group health plans on its publicly accessible website for comparison purposes, and sets minimum standards for explanation of benefits documents used by carriers. This so-called “transparency” will help businesses and individuals, and make sure the marketplace is truly competitive, because without good information, the marketplace will fail – as it has. Both of these bills also contain fundamental protections so that policyholders are notified of cancelled policies and of reinstatement.

Coincidentally, an article in the May issue of Consumer Reports, “Hazardous Health Plans” (attached) makes the case for the transparency provisions of these two bills, and does so far more graphically and effectively than I can. The article highlights “What lawmakers need to do next” including the following provisions, all of which are in LD 1205:

• Clear terms – terms such as “out of pocket” should be defined in law

• Standard benefits – there should be a menu of standardized plans so consumers can compare costs and benefits across plans

• Transparency – policies should be posted online and consumers should be able to see the full policies before they purchase

• Disclosure of costs – every plan should have a standard “plan of coverage” and costs of medical procedures should be posted, including usual out of pocket costs

I encourage you to read this article and the stories it tells of patients denied coverage or stuck with outrageous out-of-pocket costs because their plans failed to disclose the true costs of coverage and they had no way to compare alternative plans.

REQUIRING EFFICIENT ADMINISTRATION AND LIMITING EXCESSIVE PROFITS.
We also have the right to expect that consumers aren’t stuck with high administrative costs. My legislation, LD 1205, says that no more than 15 percent of the dollars we pay in premiums will go to administration and profits, and the rest will pay for medical services. The Governor’s bill, LD 859, caps administrative costs at 20% over a 3-year average or 22% in one year. Both bills are better than the current 25% allowed for administration and profits. I don’t think that the 15% limit is that too much to ask. Most government-provided health insurance, often criticized, comes in way under that number, at around 3-5% for administration. Shouldn’t we expect the private market, on which so many of us depend, to be almost as efficient?

MAKE THE INSURER PROVE RATE INCREASES ARE NEEDED. Insurance is regulated, and when rate increases are requested, shouldn’t insurers have the responsibility to prove the rate hike is actually necessary? Especially when the increase requested can be 10–20 percent, well above inflation?

And shouldn’t the data be public? But right now the burden is on the Insurance Superintendent to prove the rate hike isn’t needed, and much of the data in support of the increase is kept secret. LD 1205 will change this practice by requiring specific loss information as well as revenues, and making this data public. It also requires 90 days notice of rate increases for small group health plans (current law is 60 days).

MORE FREQUENT MARKET CONDUCT EXAMS. How many Mainers have had a claim go unpaid, told it was subject to the deductible, or a procedure that wasn’t properly pre-approved, or out of network, or not medically valid. Was that denial legal? Many times, it was not, and policy holders end up either paying twice or spending years challenging the insurers to make good. Many more don’t even know they have been cheated.

Unfortunately, the Insurance Bureau has failed to conduct any “market conduct” exams of health insurers in over 5 years. Part F of LD 1205 will require the Insurance Superintendant to conduct “market conduct” exams every three years – the standard timeframe in many other states – so that such misconduct can be rooted out.

LD 1205 has several other provisions relating to greater transparency and protecting patient rights. The bill:

• Provides for continuity of prescriptions when an enrollee’s coverage is replaced with a different carrier, where there is prior authorization for a course of treatment

• Requires insurers to publicly disclose the methodologies and criteria used to profile health care providers

• Requires insurers to notify policyholders of any exclusions or limits on immunizations

• Permits the Attorney general to request a hearing on a rate increase request for individual health plans

Fixing our health care crisis is a big job. These bills are but one part, but an important part. They will give us the tools we need to help make sure our insurance marketplace is competitive and on the up-and-up, and that insurance premiums are kept as low as possible while maintaining the viability of the industry.

I look forward to working with all of you to see these reforms adopted in the near future, and I ask your support of these bills.

Thank you.