Why Regulations of Health Insurance is Insufficient (UPDATED-2nd))

Making the rounds to justify this crap-tastic bill are arguments regarding the importance of regulatory controls over insurance companies as a good enough reason to push the bill forward. Indeed, people point to Massachusetts and countries like Switzerland as their basis for why regulations can achieve the same thing as what market forces can obtain through the public option in conjunction with regulation.  I want to take on the regulatory reform arguments head on in this diary. One of the reasons I have become frustrated is that I know the ploys  behind the regulatory situation and how this allows for the image of reform, but in actually application you are merely changing the form of how bad faith actors perform their bad faith acts rather than preventing them from acting in bad faith.

There are several reasons the argument rings hollow to me: 1) The proposed reforms are wholly inadequate with regard to the task they being asked to perform due to loopholes; 2) The regulations are no where near the place they need to be to produce the price controls that you might find in Switzerland, and indeed, our most liberal example of this approach- MA- still has no price control involved; 3) Regulatory reform at the federal level has been wholly inadequate for decades with regard to addressing the abuses of bad faith actors; and finally 4) States like MA and countries like the Switzerland have a culture that allow for regulations to matter whereas DC does not (or "The Republicans will one day be in control so they will muck it up" argument).

1) The proposed reforms are wholly inadequate with regard to the task they being asked to perform due to loopholes

I will start with a basic premise you should under- much of what passes for bill making in DC is heavily influenced if not written by lobby interests. Remember that story about Baucus allowing the lobby interests to read the bill before the general public from a few months ago? Well, that's not unusual. My point is that the language is written with their input. That means that by design it will have holes in the law that regulators writing the regulations based on the law will have to address. At which point, the writing of the regulations will be met my legions of industry lawyers submitting comments on proposed rule making.

Guess what- again, the industry gets the influence how any given provision of a law is executed under the executive. The third way lawyers will influence whatever the eventual application of the laws look like is through the courts. So, whatever the regulatory agencies say- the industry can challenge any ambiguity in the court system to seek interpretation of what the regulation and laws mean. This is important because the courts are packed by Conservatives. If you remember, one of the more telling question asked of Alito during his hearing for his spot on the S.Ct. was to explain how he came to conclude that someone working in a mine was not a "mine worker" for the purposes of statutory language.

Some of this may seem obvious- but it is important to understand what all of this means. It means lots and lots of loop holes. Before all the discussion this week about the loopholes, I already knew there would be a lot of loop holes. It is what us lawyers do. We are good at it. Most of these loop holes are not new. What makes them relevant is that they destroy the remaining argument for this bill-- that it will regulate issues that will save lives.

So let's look at some of the loop holes (the links lead to further linked material or original sources of material):

a) One of the more useful provisions would have been the Medical Loss Ration provision that required 85 percent (under the House Bill) and 90 percent (under the Senate) bill go toward the cost of health care rather than say pure monopoly profit making.  This provision is now under assault. It appears in the House bill at 85 percent. But, it is unlikely to appear in the Senate bill:

"It's not clear whether the proposal will survive as the Senate Democrats work to finish up their bill by as early as next week or, if it does, whether certain qualifications are made to limit it to certain kinds of health insurance policies."

http://in.news.yahoo.com/137/20091214/37 1/tbs-analysis-u-s-senate-deal-would-kno ck.html

The assault is not just by the Senate Democrats. It is also by the CBO, which incredibly stated:

"In CBO's view, this further expansion of the federal government's role in the health insurance market would make such insurance an essentially governmental program, so that all payments related to health insurance policies should be recorded as cash flows in the federal budget."

http://fdlaction.firedoglake.com/2009/1214/there-goes-the-rest-of-the-grand-pub lic-option-%E2%80%9Ccompromise%E2%80%9D- losing-the-medical-loss-ratio

This is typical of the impact of the industry on DC. Each battle to win regulations will look like this, and will be further watered down.

The importance of the public option and other cost control mechanisms, provisions

b) Life Time Caps

I will make this one short. The ban on life caps has been shown to be a sham. Reid took this out of the Senate bill:

http://emptywheel.firedoglake.com/2009/1 2/11/the-truth-about-harry-reids-lifetim e-cap-loophole/

c) Pre-existing conditions

One of the ways to make certain that one can not obtain a benefit of some new policy is to make it unaffordable. This is the case with the pre-existing condition ban:

http://www.dailykos.com/story/2009/12/17815514-Insurance-Reform-Pre-Existing-C onditions

http://www.mydd.com/story/2009/12/16/142 711/11

Here's yet more discussion of how the loop holes will work:

http://www.dailykos.com/story/2009/12/16815324-Insurance-Reform-

These are just 3 examples. There are more. The point I am seeking to make is to go beyond the sham "we are helping" to ask whether an given provision is actually helping.  Of course, of values of having different approaches employed to the same effect like have regulations and a public option is that they each produce their own pressure on the system in different ways. An insurance company may be able to lobby their way out of complying to the intent of some regulation but they can not so easily ignore the market force of other plans that would require them to offer a better product.  That PO provided additional benefits was something to be cheered.

2) The regulations are no where near the place they need to be to produce the price controls that you might find in Switzerland, and indeed, our most liberal example of this approach- MA- still has no price control involved

Price control or cost control is absolutely necessary for our system of health care to continue. Anyone thinking otherwise does not appreciate the economic reality ahead of us. Health care conservatively takes up 17 percent of GDP. It will increase from 12k now to 23k per person in 10 year. This is not economically sustainable.

http://www.mydd.com/story/2009/8/24/1213 8/8249#commenttop

Regulations do not matter if they do not produce price controls like those found in Switzerland because ultimately people will be in the same place as they are now- dying because they can not afford healthcare. There is something perverse about saying "although you are being priced out of the market, the solution is to mandate that you buy insurance." Especially, since i) subsidies are inadequate ii) subsidies will eventually be outstripped by the premium costs iii) You are asking people to by junk insurance in many cases (ie, they will still go into bankruptcy and pay higher and higher copayments) and iv) these subsidies will almost certainly be attacked by the same conservatives attacking medicare now as an entitlement we can not afford.

If requested, I will back up each of these arguments, but for the sake of time, I will move on to the rest of my argument.

We can also see in places like MA- the most liberal state with the type of plan advocated by the Senate Democrats-- is a) constructed differently and b) still does not produce real price control:

http://www.dailykos.com/story/2009/12/17815816-Counterpoint-On-Massachusetts

http://www.dailykos.com/storyonly/2009/1 2/17/815568/-Insurance-premiums,-lack-of -cost-controls,-and-the-great-Massachuse tts-experiment

Again, as before- the importance of the links is what else it links to. So, read the links even if you don't have any interest in the diarist's article.

The significance here is that we are dealing with bad faith actors in the private insurance market. As the regulatory reform efforts above show- they create language through lobbying that they can drive a truck through.

4) This leads me to my final point that ties all this together:  States like MA and countries like the Switzerland have a culture that allow for regulations to matter whereas DC does not (or "The Republicans will one day be in control so they will muck it up" argument).

You want tight laws that are bullet proof because the GOP will one day be in power, and they will attempt to use any holes you leave in legislation as tool by which they can destroy your legislative goal.

This bill is far from bullet proof. Bullet ridden is more like it.  My concern here is not that I care about how the GOP will characterize us. My concern is what opening we leave them regarding what type of regulations can be enacted down the pike. The lobbyist ploys are done in contemplation of waiting for a more favorable environment as much as watering down the impact right now.

This diary is not the whole picture of what is at stake here. There's a lot more that I could say. But it begins to address what I think are the flaws in the thinking on how useful regulatory reform can be.

[UPDATED] McJoan continues to excellent work on the loop holes in the bill. This time on what constitutes a 'ban' on rescission, and how you can drive a truck through the language: http://www.dailykos.com/story/2009/12/17/815959/-Insurance-Reform-Rescissions . [UPDATE 2] FIRE DOG LAKE compares bill to the Dutch regulatory regime: http://fdlaction.firedoglake.com/2009/12/17/this-is-nothing-like-the-netherlands-that-is-why-individual-mandate-is-unacceptable/

Tags: health care insurance regulation (all tags)

Comments

6 Comments

Regulations of Health Insurance is Insufficient

Our work will not be done until private, for-profit health care insurance has gone the way of the fur trade. Insurance companies can make money insuring other things, but not people's health.

by lucky monkey 2009-12-17 03:32PM | 0 recs
What does this mean?

4) This leads me to my final point that ties all this together:  States like MA and countries like the Switzerland have a culture that allow for regulations to matter whereas DC does not (or "The Republicans will one day be in control so they will muck it up" argument).

If the Republicans get back in power they can repeal the legislation, however bullet-proof.  Are you saying that you can't leave discretion to an administrative agency because a Republican executive will distort it from its mission, aka how the EEOC under Republican presidents is chiefly concerned with discrimination against whites rather than its historical purpose?

by JJE 2009-12-17 04:10PM | 0 recs
Re: What does this mean?

The chances of repeal of bullet proof legislation is less likely than a Republican President changing regulations in which that regulation is based on legislation with loopholes. The effort to take over Congress is harder than electing a president.  That's why changing which party runs Congress happens less frequently.

Ultimately, I am asking about what will happen with laws in the real world rather than under optimal conditions. One of the reasons I often become annoyed is that there is this assumption about idealism in my writing. This may be true of some progressives, but ultimately, my goal is to look down the road at what any given action means. Here, a bill with weak  language allows for greater manipulation than a bill with strong language.

This is not about absolutes. It is about degrees of discretion. Discretion to apply a regulation based on a law, however, should not be used as a pretext for industries to avoid the very underlying harm that was meant to be regulated but-for they now do it through a different mechanism. This is chimera.

by bruh3 2009-12-17 04:41PM | 0 recs
I'll rephrase

when you say "regulation" are you talking specifically about agency-issued regulations, such as appear in the Federal Register, go through the APA rule-making process, etc., and when approved are encoded in the CFR?  Or are you talking about "regulation" in the broad sense to include any law that applies to a particular industry?

by JJE 2009-12-17 08:18PM | 0 recs
Re: I'll rephrase

I describe the entire process in my diary as:

"I will start with a basic premise you should under- much of what passes for bill making in DC is heavily influenced if not written by lobby interests. Remember that story about Baucus allowing the lobby interests to read the bill before the general public from a few months ago? Well, that's not unusual. My point is that the language is written with their input. That means that by design it will have holes in the law that regulators writing the regulations based on the law will have to address. At which point, the writing of the regulations will be met my legions of industry lawyers submitting comments on proposed rule making.

Guess what- again, the industry gets the influence how any given provision of a law is executed under the executive. The third way lawyers will influence whatever the eventual application of the laws look like is through the courts. So, whatever the regulatory agencies say- the industry can challenge any ambiguity in the court system to seek interpretation of what the regulation and laws mean. This is important because the courts are packed by Conservatives. If you remember, one of the more telling question asked of Alito during his hearing for his spot on the S.Ct. was to explain how he came to conclude that someone working in a mine was not a "mine worker" for the purposes of statutory language."

3 steps at which industry lawyers influence outcomes

-at the writing of the law (through Congress)

  • at the writing of the regulation based on the law (through the Executive)
  • in court decisions regarding the law and regulations (Through a conservative packed court system- ie, think of the SEC or other bodies where the rules have narrowly defined over the years to affect shareholders rights and other corporate rights favorable to corporate america)

I am referring to the entire process broadly, but since I go through each step above, I am not sure what your question is trying to ask.

The smart corporation is working to prospectively influence at all three levels of "reform."

People forget this is more than a discussion of economics. It is one of law and regulation, and how those things are shaped.

by bruh3 2009-12-18 03:42AM | 0 recs
Re: Dreamland

is the only place that lobby interests don't influence legislation.

by QTG 2009-12-18 07:12AM | 0 recs

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