Table Of Content

HEALTH CARE REFORM (Part 11) Y 4. EN 2/3: 103-120 JRINGS Health Care Reforn (Part 11), Seria... BEFORE THE SUBCOMMITTEE ON CONSUMER AND COMMERCE, PROTECTION, COMPETITIVENESS OF THE COMMITTEE ON ENERGY AND COMMERCE HOUSE OF REPRESENTATIVES ONE HUNDRED THIRD CONGRESS SECOND SESSION ON H.R. 3800 A BILL TO ENSURE INDIVIDUAL AND FAMILY SECURITY THROUGH HEALTH CARE COVERAGE FOR ALL AMERICANS IN A MANNER THAT CONTAINS THE RATE OF GROWTH IN HEALTH CARE COSTS AND PRO- MOTES RESPONSIBLE HEALTH INSURANCE PRACTICES, TO PROMOTE CHOICE IN HEALTH CARE, AND TO ENSURE AND PROTECT THE HEALTH CARE OF ALL AMERICANS FEBRUARY 1 and 14, 1994 ^^/fi/^') Serial No. 103-120 ^^^%^^ fVoi^ ? Printed for the use of the Committee on Enei«^i^|fid>Commerce ^a7^ U.S. GOVERNMENT PRINTING OFFICE 83-119CC WASHINGTON : 1994 ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-045886-2 HEALTH CARE REFORM (Part 11) Y 4. EN 2/3: 103-120 Health Care Reforn (Part 11), Seria... J?,INGS BEFORE THE SUBCOMMITTEE ON COMMERCE, CONSUMER PROTECTION, AND COMPETITIVENESS OF THE COMMITTEE ON ENERGY AND COMMERCE HOUSE OP REPRESENTATIVES ONE HUNDRED THIRD CONGRESS SECOND SESSION ON H.R. 3800 A BILL TO ENSURE INDIVIDUAL AND FAMILY SECURITY THROUGH HEALTH CARE COVERAGE FOR ALL AMERICANS IN A MANNER THAT CONTAINS THE RATE OF GROWTH IN HEALTH CARE COSTS AND PRO- MOTES RESPONSIBLE HEALTH INSURANCE PRACTICES, TO PROMOTE CHOICE IN HEALTH CARE, AND TO ENSURE AND PROTECT THE HEALTH CARE OF ALL AMERICANS FEBRUARY 1 and 14, 1994 ' ^^ Serial No. 103-120 "^^^^^ Printed for the use of the Committee on Energy and Commerce ^^Si *^ U.S. GOVERNMENT PRINTING OFFICE 83-119CC WASHINGTON 1994 : ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-045886-2 COMMITTEE ON ENERGY AND COMMERCE JOHN D. DINGELL, Michigan, Chairman HENRY A. WAXMAN, CaUfornia CARLOS J. MOORHEAD, CaUfornia PHILIP R. SHARP, Indiana THOMAS J. BLILEY, Jr., Virginia EDWARD J. MARKEY, Massachusetts JACK FIELDS, Texas AL SWIFT, Washington MICHAEL G. OXLEY, Ohio CARDISS COLLINS, Illinois MICHAEL BILIRAKIS, Florida MIKE SYNAR, Oklahoma DAN SCHAEFER, Colorado W.J. "BILLY" TAUZIN, Louisiana JOE BARTON, Texas RON WYDEN, Oregon ALEX MCMILLAN, North Carolina RALPH M. HALL, Texas J. DENNIS HASTERT, IlUnois BILL RICHARDSON, New Mexico FRED UPTON, Michigan JIM SLATTERY, Kansas CLIFF STEARNS, Florida JOHN BRYANT, Texas BILL PAXON, NewYork RICK BOUCHER, Virginia PAUL E. GILLMOR, Ohio JIM COOPER, Tennessee SCOTT KLUG, Wisconsin J. ROY ROWLAND, Georgia GARYA. FRANKS, Connecticut THOMAS J. MANTON, New York JAMES C. GREENWOOD, Pennsylvania EDOLPHUS TOWNS, New York MICHAEL D. CRAPO, Idaho GERRY E. STUDDS, Massachusetts RICHARD H. LEHMAN, California FRANK PALLONE, Jr., New Jersey CRAIGA. WASHINGTON, Texas LYNN SCHENK, California SHERROD BROWN, Ohio MIKE KREIDLER, Washington MARJORIE MARGOLIES-MEZVINSKY, Pennsylvania BLANCHE M. LAMBERT, Arkansas Alan J. Roth, StaffDirector and ChiefCounsel Dennis B. Fitzgibbons, Deputy StaffDirector Margaret A. Durbin, Minority ChiefCounsel and StaffDirector Subcommittee on Commerce, Consumer Protection, and Competitiveness CARDISS COLLINS, Illinois, Chairwoman EDOLPHUS TOWNS, New York CLIFF STEARNS, Florida JIM SLATTERY, Kansas ALEX McMILLAN, North Carolina J. ROY ROWLAND, Georgia BILL PAXON, New York THOMAS J. MANTON, New York JAMES C. GREENWOOD, Pennsylvania RICHARD H. LEHMAN, California CARLOS J. MOORHEAD, California FRANK PALLONE, Jr.. New Jersey (Ex Officio) JOHN D. DINGELL, Michigan (Ex Officio) David Schooler, StaffDirector/ChiefCounsel Jean K. Rosales, SpecialAssistant Bradford Ross Kane, Counsel Mary-Moore Hamrick, Minority Counsel (U) CONTENTS Page Hearings held on: February 1, 1994 1 February 14, 1994 219 Text oftitlesXandXI ofH.R. 3800 5 Testimonyof: Ballen, DebraT., seniorvice president, American InsuranceAssociation .. 149 Brown, Madelynne L., assistant director, Illinois Department of Insur- ance 276 Bykerk, Cecil, senior executive vice president. Mutual ofOmaha Compa- nies 108 Cameron, John D., associate director, Illinois Public Action 328 Claxton, Gary, Office ofthe Assistant Secretary forPlanning and Evalua- tion, DepartmentofHealth andHimian Services 65 Ferguson, Richard, director of planning. Cook County Bureau ofHealth Services 250 Fox, Alissa T., executive director. Blue Cross and Blue ShieldAssociation 133 Greenspan, Benn, president, Mount Sinai Hospital Medical Center 264 Henikoff, Leo M., president, Rush-Presbyterian-St. LukesMedical Center 229 MRicsNka,rRyi,chWairlldiRa.m,,plreegsiisdleantti,veEdHirSecHtoera,ltIlhlcianroies PublicAction 320318 Spivey, Bruce, president, Northwestern Healthcare Network 222 Steggert, Robert, vice president, Marriott International 178 Taylor, Thomas, chairman. Special Task Force on Health Care Reform andAuto Insurance, Alliance ofAmerican Insurers 161 MaterAinaglersaumbim,itJtoehdnfoLr.,thveicreecporredsibdye:nt, Chubb & Son, Inc.: Letter to Chair- woman Collins, datedJanuary 31, 1994 210 NationalAssociationofIndependent Insurers: Statement 213 National Association of Insurance Brokers: Letter from Thomas Clarke, chairman, workers compensation, to Chairwoman Collins, dated Janu- ary 31, 1994 192 NationalAssociation ofMutual Insurance Companies: Statement 207 State Farm Mutual Automobile Insurance Company: Statement and at- tachments 195 (III) HEALTH CARE REFORM TUESDAY, FEBRUARY 1994 1, House of Representatives, Committee on Energy and Commerce, Subcommittee on Commerce, Consumer Protection, AND Competitiveness, Washington, DC. The subcommittee met, pursuant to notice, at 10 a.m., in room 2218, Raybum House Office Building, Hon. Cardiss Collins (chairwoman) presiding. Mrs. Collins. Good morning. This is the first hearing of the En- ergy and Commerce Subcommittee on Commerce, Consumer Pro- tection and Competitiveness for the second session ofthe 103d Con- gress and you are all welcome. Today's hearing of the subcommittee will focus on two titles of H.R. 3600, the Health Security Act. Title X addresses the handling of health benefits paid for by workers' compensation insurance and automobile insurance. Title XI outlines the rules proposed to regu- late the sale and servicing of health insurance policies during the transition period. Subtitles A, B and C of title X are directed toward coordinating and, eventually, merging portions of workers' compensation insurance and automobile insurance into the new health care system. Normally, when an individual becomes ill, he or she goes to the doctor, receives treatment, and arranges pa3rment for the bill. If he or she has health insurance coverage, that person can file a claim for reimbursement or make other arrangements for the health insurer to pay the health care provider. The questions of fault, cause and liability do not arise. In con- trast, if an individual is injured in the workplace, develops a work- related illness, or is injured in an automobile accident, the question of who is to blame for the injury or illness, what caused the injury or illness, and who is liable for payment for treatment become important issues. In addition, for both workers' compensation and automobile insurance, total claim costs to the insurer may be affected by treatment decisions made by the health care practitioner. Now, the Health Security Act would change the relationships between the employer, the insurer, the health care provider, and the injured or ill person. In so doing, it affects the operations of workers' compensation and auto insurance markets and the handling of injuries and illness. Today's hearings will explore some of those changes and discuss the tradeoffs between, on one hand, consolidating the delivery and (1) financing of health care, and, on the other hand, maintaining sepa- rate systems which focus on rehabilitation for work-related injuries and illnesses and automobile accidents. The other topic for examination at today's hearing is title XI of H.R. 3600, which establishes the rules health insurers, HMO's, and other health benefit providers are to follow during the interim between the enactment ofthe bill and the implementation ofthe alliance-based system ofproviding health care. The provisions of title XI establish guaranteed coverage, limita- tions on policy cancellation, and caps on premium increases. These are worthy goals and I applaud the Clinton Task Force for hasten- ing their adoption. However, we have a potential for creating problems with pricing and solvency in the health insurance industry. As we consider the bill's proposals, it will be important for us to examine them in the context of solvency concerns so as not to create severe financial problems for otherwise competent and efficient providers. Title XI also establishes a national health insurance risk pool. This provision will assure that any individual wishing to purchase health insurance will be able to do so, even if the underwriting standards ofthe private health insurance industry havejudged this person to be uninsurable. This is a major step forward in increasing access to health insurance for all Americans. According to witnesses we heard at an ear- lier hearing on health care reform, a large portion ofthe uninsured are willing to purchase insurance but cannot find an insurer willing to sell them coverage. The creation of a health insurance risk pool should end that particular problem. Nonetheless, the experience of some States in establishing risk pools for other types of insurance suggests that a poorly conceived or poorly designed risk pool can undermine competition in the mar- ketplace, facilitate redlining by private insurers, and increase the cost of providing insurance to all policyholders. Thus, it is critical that we carefully examine the plan creating such a pool to assure its success as an interim measure in increasing access to health care for all Americans. I thank our witnesses for agreeing to appear before the subcommittee and look forward to hearing their testimony. Mr. Steams. Mr. Stearns. Thank you, Madam Chairwoman, and best wishes for our committee in the new year and delighted to be here. I am sorry to the folks in the audience that we don't have a bigger room. I guess we didn't know we were going to have so many wonderful people. Since this subcommittee. Madam Chairwoman, has last met, we have all had an opportunity to return to our districts, talk to our constituents, have town meetings about the issues that concern them. I think we all realize that health care is an issue that is on everybody's mind. And my constituents have not hesitated to let me know how they feel on health care, too. They are concerned about what we are doing here in Washing- ton. They realize that our health care system has some serious problems that need to be addressed, but they are afraid that if we adopt the Clinton plan as currently written we will make a trip to the doctor more frustrating than perhaps a trip even to the Motor Vehicles. And they don't want that and neither do I. Those concerns seem particularly relevant when you look at the rules proposed by the Clinton administration or bringing the exist- ing insurance market into line with their vision of the future. For instance, the Clinton plan takes two lines of insurance that are currently effective for the insured and stable for insurance companies, automobile medical and workman's compensation, and radi- cally alters the market in which they operate. Today's workers' compensation insurance system often places injured employees under medical care, especially tailored to workplace injuries. The Clinton plan would dismantle this system and replace it with one that values cost savings over getting the employee back to work through effective treatment. The problems presented by automobile medical coverage are also troubling. Furthermore, the transition section of the bill sets up a myriad of dysfunctional relationships in the insurance market. Title XI creates a real impediment to the natural flow ofbusiness in the insurance industry. Traditionally insurance companies, like most other companies, kinds of companies, could enter new lines of business when they believed they would be profitable and exit them when they felt they were no longer getting a return on their investment. Unfortunately, the Clinton plan requires an insurance company to continue to provide health insurance from the date of enactment, regardless ofprofitability. My constituents are just starting to get their lives back together again after Hurricane Andrew. After the next natural disaster, how do I explain to them that the company providing their homeowners' insurance could not pay its claims because the Federal Government had forced the company to continue pumping money into an un- profitable line ofhealth insurance? In addition, I am concerned about possible threats to workplace safety presented by a merger of the current workman's compensation system into the Clinton health care scheme. Workers' compensation premiums have always been closely tied to the employer's safety history. Employers have had an incentive to keep their workplace safe because the safer their workplace, the lower their premiums. Unless workers' compensation insurers and employers are able to closely manage the care of injured workers, the potential exists for premiums to skyrocket, without any hearings on the relative safety ofthe workplace. The Clinton health reform plan is the ultimate square peg trying to fit into a round hole. We need to remember that you can't ham- mer that peg too hard without breaking the whole system. Thank you. Madam Chairwoman. Madam Chairwoman, I would also like to make part ofthe record the Ranking Member on Energy and Commerce's opening com- ment, Carlos Moorhead, ifI might. Mrs. Collins. Without objection. Mr. Stearns. Thank you. Mrs. Collins. Mr. Lehman, who is a member of our subcommittee, is ill today and will not be able to make his statement, and it is going to be included in the record, as all opening statements are going to be a part ofthe record today. [Testimony resumes on p. 65.] [The opening statements of Mr. Moorhead and Mr. Lehman, and the text oftitles X and XI ofH.R. 3600 follow:] Statementof Hon. CarlosMoorhead Thank you, Madam Chairwoman. I would like to thank you for holding today's hearing on the issues involved in a transition from our current system ofhealth insurance to the system envisioned under H.R. 3600, the Clinton health plan. These are very important issues, and the distinguished chairwoman has been a leader in making sure that these topics are addressed. In today's system of health insurance, Americans receive the highest quality of care anywhere. Polls consistently show that among people who have health insurance, they are satisfied with the kind ofcare they receive. Therefore, we should be very cautious when we tryto "reform" oiircurrenthe£dth care system. For instance, title 10 of the CUnton health plan deals with the medical components ofworkers compensation insurance and automobile insurance. These are both important coverages which provide meaningful benefits to consumers. Both provide coverage from the first dollar, so that consumers covered by these policies pay noth- ing when injured in the workplace or in an automobile accident. Further, the kind ofcare that injured workers rece—ive is different from the kind ofcare provided by traditional health care providers it is more specialized and is designed to get the employee back to work as quickly as possible. It's a system that works well and I have great reservations about changing itjust so it fits into the Clinton's vision of thefutureofhealth ceire. The transition rules covered by title 11 also cause me great concern. They appear to have been written with little concern for the financial health ofinsurance companies and could pose threats to insvirer solvency far beyond the health care market. This subcommittee has always prided itselfon understanding the complex issues associated with the business ofinsurance. I hope that in our rush to "fix" the health care system, we do notend up breakingtherestofthe insuranceindustry. Thankyou, Madam Chairwoman. StatementofHon. Richard Lehman Thank you. Madam Chairwoman. As we examine the issues involved with title X and title XI ofthe President's Health Security Act, we must consider them from halelalptohssciabrleebpiellrss,pebcetciavuess.e II bhealvieevenoitt iysetimtpaokretnanta tpooskieteiponaonnopaennymoifntdheduprrionpgostehde hearing process. Today's discussionraises several importantissues which we can examine from a number ofangles. Ofparticular interest to me is the issue ofworkers compensation. President Clin- ton's Health Security Act is the only major health care proposal which addresses the inclusion of the medical components of property/casualty coverage, including workers compensation. We must consider the ramifications ofseparating the medical part ofworkers compensation fromthe disability part. Proponents ofthe Clinton plan contend that the integration ofworkers compensation medical benefits into a new health care delivery system would result in in- creased cost savings. At the same time, providers of workers compensation insurance maintain that the coordination of workers comp and health insurance could, in fact, be much more costly than the current system. They argue that the Clinton plan would drive up indemnity costs by taking the ability to manage medical care away from those who have the financial incentive to provide aggressive treatment (employers and/or comp providers). As you remember, California's workers compensation system has been plagued with a history of fraud. We must work to prevent such abuse, and find the most effective means ofcombatingthe skyrocketingcosts oftoday's system. I lookforward to today's testimony, which will explore the various approaches to workers compensation and otherrelatedissues.