Health Care -- Deregulating The Health Insurance Industry

September 24, 2008

by Faiz Shakir, Amanda Terkel, Satyam Khanna, Matt Corley, Benjamin Armbruster, Ali Frick, Ryan Powers, and Igor Volsky

HEALTH CARE

Deregulating The Health Insurance Industry

In the latest edition of Contingencies, a journal of the American Academy of Actuaries, Sen. John McCain (R-AZ) makes his case for deregulating the health insurance industry by extolling the benefits of the last decade of deregulation in the banking sector. "Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation," McCain writes. Since the banking industry's collapse this week, the McCain campaign has tried to distance itself from the senator's remarks, claiming that McCain was referring to "policies which allowed Americans to use an ATM anywhere in this country." But McCain's proposal to allow health insurance companies to sell policies across state lines is evidence that the senator supports the same kind of deregulatory polices that created the economic crisis. The latest financial meltdown highlights the dangers of deregulating the health insurance industry and only underscores the sheer impracticality of McCain's proposal.

STATES FILL REGULATORY VOID: In 2002, to combat predatory lending and protect its citizens from "the wrenching costs associated with overpayment and eventual foreclosure," several state legislatures "decided to stanch the flow of easy credit to subprime lenders." The Georgia Fair Lending Act, for instance, imposed liabilities on lenders in the secondary mortgage market who engaged in predatory lending. "New York, New Jersey, and New Mexico made the same judgment and within two years had enacted their own versions of laws exposing downstream owners of loans to fines if they bought predatory loans," Slate reported. But in 2003, the federal government overruled the states and exempted national banks from the new regulations. John D. Hawke Jr., the comptroller of The Office of the Comptroller of the Currency said, "We have no evidence that national banks are engaged in predatory lending practices."

MCCAIN'S PLAN TO DEREGULATE HEALTH CARE: McCain's proposal to allow health insurance companies to sell policies across state lines would allow insurers, like the banks before them, to ignore consumer protections and sell bare-bones policies with high out-of-pocket expenses. In fact, by creating a deregulated national marketplace in which insurers no longer have to comply with rules that require they provide cancer screenings, maternity care, mammograms, and emergency services, or abide by rules that "limit the rates that can be charged to higher-cost consumers and that limit who can be excluded for a health plan," insurance companies could sell plans across the country that lack even the most basic consumer protections. Fewer requirements would translate into cheaper but less comprehensive policies which would pull heathier individuals out of larger insurance pools. A recent analysis of McCain's health care proposal from the Center for American Progress Action Fund points out that as healthy individuals vie for cheaper policies across state lines, states with more stringent consumer protections would be left with sicker and more expensive patients, increasing health care costs across the board. A study published in Health Affairs predicts that in McCain's deregulated insurance marketplace, insurance providers would have an incentive to "develop 'bare-bones' insurance policies…however, for most uninsured families, the benefits of such policies in terms of protection from financial risk and access to medical care would likely be very small and take-up would be much lower than if plans were more generous." More alarmingly, the McCain plan could potentially erode solvency requirements -- which vary between states -- that ensure that insurance companies will be able to meet all of their promises to pay medical bills. As the Washington Post's Bob Herbert observed, "you would think that with some of the most venerable houses on Wall Street crumbling like sand castles right before our eyes, we'd be a little wary about spreading this toxic formula even further into the health care system."

MCCAIN'S DEREGULATION HYPOCRISY: On some level, McCain recognizes the consequences of deregulation and limited oversight. In fact, the senator has attributed the current financial crisis to "failed regulation, reckless management, and a casino culture on Wall Street," blaming regulators for "falling asleep at the switch" and proposing greater government regulation and more oversight of the Bush administration's $700 billion bail-out plan." Under my reforms, the American people will be protected by comprehensive regulations that will apply the rules and enforce them in full,'' McCain promised. Unfortunately, the senator is not applying the same standards to his health care plan. According to CQ HealthBeat, McCain campaign will not "make changes to their health care proposals in response to the current economic downturn." Without changes, American families can expect to face the same financial crisis America's biggest investment firms. But unfortunately, when American families fall into financial crisis, the American government won't be there to bail them out.

AFGHANISTAN -- BUSH WON'T DECLASSIFY 'GRIM' AFGHANISTAN REPORT BEFORE ELECTION: ABC News reports that President Bush has "no plans to declassify" a new National Intelligence Estimate (NIE) on Afghanistan before the upcoming presidential election. According to people who have been briefed on the NIE, ABC reports, it "will paint a 'grim' picture of the situation in Afghanistan, seven years after the US invaded in an effort to dismantle the al Qaeda network and its Taliban protectors." Last week, Chairman of the Joint Chiefs Adm. Mike Mullen said the United States is "running out of time" in Afghanistan, adding, "I'm not convinced we are winning in Afghanistan." Director of National Intelligence Mike McConnell "has made it his policy that such key judgments 'should not be declassified,'" though the Bush administration in the past has selectively declassified reports when doing so is to Bush's political advantage. Last week, Defense Secretary Robert Gates suggested the United States would review its strategy in Afghanistan, similar to its reassessment of the Iraq war that led to the surge strategy. "We did it in Iraq," Gates said. "We made a change of strategy in Iraq and we are going to continue to look at the situation in Afghanistan."

CIVIL RIGHTS -- REP. FRANK ASKS LIBRARY OF CONGRESS NOT TO APPEAL DISCRIMINATION RULING: Last week, a federal district judge in Washington, D.C. ruled that "the Library of Congress discriminated against Diane Schroer when it offered her a job and then rescinded it after learning she was transgendered." This ruling was the first to hold that "the federal sex discrimination statute, Title VII of the 1964 Civil Rights Act, applies to transgendered people." The Hill reports today that Rep. Barney Frank (D-MA) "denounced the Library of Congress (LOC)" in a letter yesterday and asked it not to appeal the court decision. Frank wrote in his letter, "I strongly urge you not to appeal. I will be working with my congressional colleagues because it would be a great source of stress to us if you were to as an institution that bears our name appeal a decision that is plainly in the interest of fairness." Schroer, a 52-year-old former Army Special Forces commander, recounted the discrimination she experienced in her court testimony. After telling her interviewer that "she was undergoing the medical transition to become a woman," the interviewer said, "[Y]ou have given me a lot to think about." The next day, Schroer received a phone call in which the interviewer rescinded her job offer saying, "[A]fter a long and sleepless night, I have determined you are not a good fit and not what we want."

ENERGY -- BACHMANN AND BARTON EXPLOIT THE FINANCIAL CRISIS TO PUSH FOR MORE OIL DRILLING: While the White House and Congress are haggling over how to best bail out Wall Street's ailing financial markets, at least two conservative House members are using the moment of crisis to push their pet issue. In a Monday blog post, Rep. Michele Bachmann (R-MN) announced that she was joining Rep. Joe Barton's (R-TX) call for the bailout package to be accompanied by legislation that would "open up" the Arctic National Wildlife Reserve and Outer Continental Shelf to new oil drilling. In a letter to President Bush, Barton and Bachmann argued that increased drilling would "offset some of the liability" of the eventual bailout of Wall Street. "We therefore encourage you to include legislative language that would open up ANWR to leasing, along with the Outer Continental Shelf of the Eastern Gulf," wrote the lawmakers.Bachmann called her drilling push an "innovative" solution "to help us navigate through our current financial crisis." Bachmann and Barton's effort to use the financial crisis to push the unrelated issue of drilling is reminiscent of President Bush's exploitation of Hurricane Gustav to argue for more drilling. Earlier this month, Bush used a press briefing on the "follow-up efforts" to Hurricane Gustav to attack Congress about lifting the offshore drilling moratorium.

The FBI has opened investigations into Fannie Mae, Freddie Mac, Lehman Brothers, and AIG, looking into whether "fraud helped cause some of the troubles" at these financial institutions. According to the FBI, these probes “are part of an effort to pursue allegations of higher-level fraud more sweeping than the retail-level infractions that have been at the center of most cases brought so far."

91: Percentage of likely voters who say that the economy is "in bad shape," according to a new Washington Post/ABC News poll. Fifty-eight percent of those polled described the economy as "poor" while 33 percent deemed it "not so good." At the same time, "51 percent of registered voters say the economy’s in a serious long-term decline.”

The Senate approved billions of dollars in tax credits for renewable energy yesterday, in a package that will spare "more than 20 million taxpayers who would get hit by" the alternative minimum tax. The package also extended tax deductions for higher education costs and the child tax credit. The House could take up consideration of the bill today.

Caving to political pressure, Democrats in Congress "decided to allow a quarter-century ban on drilling for oil off the Atlantic and Pacific coasts to expire next week." House Minority Leader John Boehner (R-OH) called it "a big victory for Americans."

Sen. Tom Coburn (R-OK) is the target of a YouTube video made by Senate Democrats, calling him out for objecting to a package of popular legislative items known as the "Coburn Omnibus." In the video, Majority Leader Harry Reid (D-NV) brings up popular legislation as Coburn repeatedly objects. Watch it here.

An alliance of "seven Western states and four Canadian provinces unveiled a blueprint" yesterday for "the most far-reaching effort in North America to curb emissions linked to climate change." The Western Climate Initiative "is intended to achieve a 15 percent cut in greenhouse-gas emissions by 2020."

Yesterday, Congress approved legislation that would "require private insurers to provide the same level of benefits for mental illness as they do for physical maladies, a change lauded by advocates as a great shift in the nation’s understanding of mental health." The bill has strong bipartisan backing but the measure’s cost is the only "remaining obstacle."

And finally: On Tuesday, Sen. Charles Grassley (R-IA) was on the Senate floor and "went on at length about the artwork on the cover of the trippy Pink Floyd album 'Dark Side of the Moon' and then quoted from popular stoner movie ‘Dude, Where's My Car?'" Grassley stood before a "blown-up poster of the Pink Floyd album cover," comparing the prism to compromise on tax legislation. Grassley then talked about energy conservation, stating, "I'd like to refer to Ashton Kutcher here, from Cedar Rapids, Iowa, saying 'dude, where's my car?'"

The House passed the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act yesterday by a vote of 376 to 47. "The legislation will end discrimination against patients seeking treatment for mental illness."

THINK PROGRESS: List of congressional conservatives who oppose the White House bailout plan.

WONK ROOM: Why Newt Gingrich is wrong about capital gains taxes.

YGLESIAS: Why executive compensation matters.

CALIFORNIA: "The state's housing sector will rebound next year, but its broader economy will struggle for months after that," according to UCLA economists.

LOUISIANA: State Rep. John LaBruzzo (R) suggests sterilizing poor women and giving tax incentives to encourage college-educated residents to reproduce.

ENERGY: "With home heating costs rising, jobless rates up and temperatures dropping, states are bracing for a widespread public health emergency this winter."

"I thought it would have been presumptuous for us on that outline to come up with an oversight mechanism. ... I believe we need oversight."
-- Treasury Secretary Henry Paulson, 9/23/08

VERSUS

"Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."
-- Proposal for Treasury Authority To Purchase Mortgage-Related Assets, 9/21/08

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