House Bill 2203, by Rep. Carl Isett
Texas Medical Association Testimony: House Insurance Committee
April 14, 2009
Presented by: Josie R. Williams, MD, MMM, CPE
Texas Medical Association
Good evening. My name is Dr. Josie Williams. I am a gastroenterologist and the president of the Texas Medical Association. Today, I stand before you representing nearly 44,000 physicians and medical student members. Currently, I am an associate professor in the Department of Internal Medicine at Texas A&M University System Health Science Center College of Medicine, and director of the Rural and Community Health Institute and the Institute for Health Care Evaluation at Texas A&M, where I specialize in quality and patient safety initiatives. On behalf of the Texas Medical Association (TMA) and nearly 44,000 physicians and medical student members, I would like to thank the chair and members of House Insurance Committee for the opportunity to testify on House Bill 2203 relating to the continuation and operation of the Texas Department of Insurance (TDI) and the operation of certain insurance programs.
I want to begin by thanking the Sunset staff for their time, effort, and thoughtful recommendations. Both the Texas Department of Insurance (TDI) and the Office of Public Insurance Counsel (OPIC) are important state agencies for improving the health of the health insurance marketplace and the health of Texas patients.
As we all know, Texas has more uninsured citizens than any other state in the country. One in four Texans is uninsured. At the same time, Texas leads the nation in population growth, which means that demand for health care is only going to increase. Especially if the demographic trends continue, which point to Texans getting older, less educated, heavier, and less economically stable. It is critical that we equip TDI and OPIC with the tools the agencies need to ensure that Texas consumers, whether as individuals, small or large employers, or ultimately as patients, have access to quality and affordable insurance.
The insurance industry's business practices greatly affect health care consumers - our patients.
TMA has provided the TDI commissioner and staff, Sunset staff, and the Sunset Committee with many recommendations during the sunset process. These recommendations have focused on how to strengthen both TDI and OPIC to better serve the needs of Texas' small businesses and individuals. Today, I am going to focus my testimony on several recommendations that will strengthen their regulatory functions and ask additional consideration of the following:
- In addition to the PPO registration requirements provided in this bill, grant TDI authority over the conduct of unregulated preferred provider organizations (PPOs).
- Given the recent findings of the New York Attorney General regarding the inappropriate use of Ingenix claims data, provide TDI the ability to review data mining companies that supply information to insurers and how that information is used.
- Provide small employers mechanisms to challenge possible inappropriate premium quotes similar to that provided in the property and casualty lines of business.
- Due to the recent findings of the Texas Attorney General and issuance of an Assurance of Voluntary Compliance for Blue Cross and Blue Shield of Texas (BCBSTX), grant TDI authority over health insurer's business practice related to "tiering or ranking" of physicians and provide basic due process to physicians to ensure that only reliable information is made public.
- Provide insurance consumers with an easy method of determining the benefits available under their policy and a standard disclosure to permit consumers to easily compare insurance products. TMA believes an "Insurance Facts" label on advertising and communications with patients (other than EOBs) will provide that easy method of insurance comparison and shopping.
- Provide TDI authority to develop standards in reporting of the health plan's medical loss ratio.
Regulation of Silent or Rental PPOs
TMA supports the language in this bill that gives TDI further authority and oversight in the regulation of PPOs. The intent of this broadened authority is to address prevailing market practices used by PPOs (and the insurance companies that solicit the network services and rates) to sell, resell, or lease physician contract rates without express physician authorization and notice, or act as "silent PPOs."
We agree that a statutory requirement should be supported that requires all PPOs obtain a certificate of authority from TDI to operate in Texas. This is a good first step in setting principles for marketplace conduct that should be met in order to keep that certificate.
However, TMA would like to point out that further authority should be given to the department over third-party administrators (TPA) who act on behalf of an ERISA plan. We understand that the state cannot regulate the benefit structure of an ERISA plan, however, when a TPA is directed to pay a claim based on an ERISA benefit, and the TPA inappropriately accesses a physician's discount, that activity should fall under the purview of TDI regardless of the type of benefit plan on which the TPA's action was based.
Because PPOs are merely a network of contracts, before a certificate of authority can be issued, the PPO should be required to provide information that supports that the physician network consists of primary care physicians, surgical and medical specialists, and hospital-based physicians such as radiologists, pathologists, and emergency room physicians. Texas must ensure a patient is capable of having his or her basic health care needs met through these "secondary" networks without seeking care out of network. When PPO networks do not provide adequate access to basic health care services, patients will be unnecessarily exposed to unexpected financial responsibilities.
In addition, inappropriate access to a physician's negotiated rate, when no contract exists for that line of business, must be regulated. Additional regulatory authority over PPO networks will help TDI to ensure consumer claims are settled fairly. It would also protect consumers - our patients - from exposure to medical expenses they did not expect. This is important to employers and patients.
TMA recommends HB 2203 should be amended to include the following:
- A prohibition on the sale of a contracted rate without a contract;
- A requirement that PPOs, repricers, resellers, brokers, and other entities identify the payers who have access to a contracted rate;
- A requirement that permits the physician to terminate the contract following inclusion of additional payers he or she did not agree to;
- A prohibition on the number of transfers of the contracted fee with more than one line of business;
- A limitation on assignment of the contracted rates;
- A requirement that permits a physician to opt out of a particular line of business;
- A requirement that, upon request, PPOs provide the fees and claims processing policies for each line of business covered by the contract;
- A statutory provision applying prompt payment timelines to the agreement; and
- Statutory authority to permit the imposition of administrative penalties for violations.
Regulation of Data Mining and Pattern Recognition
In TDI's self-evaluation report to the Sunset staff, the department recommended that for lines of insurance other than health that it be given broader authority to review data mining companies who supply information to insurers. Although the Sunset Committee did not accept the recommendation to allow this broadened authority for health insurance - TMA continues to believe it is critical to provide TDI with additional authority to review data mining companies that supply information to health insurers. In addition, TDI should be given authority to regulate how insurers utilize the services of data mining companies.
Due to recent regulatory actions and sanctions, this extension to health insurers would be an appropriate consumer protection. In January 2009, after a year-long investigation, the New York attorney general (AG) found that "insurers unfairly saddle patients with too much of the cost of out-of-network care."
The centerpiece of the investigation was Ingenix, Inc., a wholly owned subsidiary of UnitedHealth Group. Ingenix compiles schedules that many large health insurance companies, including those here in Texas, use to determine "usual and customary" and/or "maximum allowable" rates for out-of-network care.
The New York AG found that the Ingenix databases understated the market rate for health care services by up to 28 percent across the state of New York. Nationally, this may translate to at least hundreds of millions of dollars in losses that take the form of increased out-of-pocket costs for consumers over the past 10 years. The AG's report described the industry calculations as "created in a well of conflicts" that produced information that was "unreliable, inadequate, and wrong."
According to a recent TDI report, approximately 25 different health insurance companies use the Ingenix database products in some manner. Other companies offer the same or similar data to health insurers in Texas as well. However, there is little or no understanding of how insurers use this data to determine their usual and customary or "maximum allowable" payment for out-of-network services.
The use of databases in health insurance claims settlement has also come to the attention of Congress. On March 31, the United States Senate Committee on Commerce, Science and Transportation heard testimony from the AMA, United HealthGroup, Ingenix, and the NY Attorney General. The result was a call for the federal inspector general to determine the number of federal employees who might have paid too much for out-of-network health care and an inquiry of the 25 largest insurers about their practices.
In these tough economical times, every health care dollar counts. Texas patients need protections to ensure that they are not paying any more than necessary for their care and that their out-of-network claims are settled fairly. The practice of using databases or other technology to improperly deny or reduce a patient's insurance benefit should not be acceptable marketplace conduct in Texas.
Provision of Mechanisms for Small Employers to Challenge Premium Quotes
The availability and affordability of health insurance continues to be a dominant issue for small business. This is of particular interest to TMA from a small business perspective because approximately 50 percent of TMA's active members involved in direct patient care are in either solo practices or groups of fewer than five physicians - the quintessential small business. These physicians often struggle to provide health insurance for their employees. This is noteworthy from a physician and health professional perspective because we know patients with health insurance are more likely to seek preventive care and treatment for chronic conditions earlier than those patients without health insurance. Simply, when employees are well, they are able to work, be productive, and support their families.
To assist small businesses and Texas families in evaluating insurance options in the market and ultimately purchase affordable health insurance coverage, TMA urges the committee to include amendment language that allows small employers to challenge a premium quote of 15 percent or greater and ascertain whether the quote offered is fair in light of the coverage actually provided.
Broadening TDI's authority to determine whether health insurance premium rates quoted to employers are fair and adequate promotes access to health care coverage by holding the health plans accountable for their premium quotes. As a result, health insurers will be responsible for providing a competitive market where every Texan has the opportunity to purchase the coverage they need, at a price they can afford.
Physician Tiering and Ranking Programs
Just last week, this committee heard about recent marketplace practices by health insures that designate physicians into a preferred tier on the premise of quality, but in reality, the designation is based on "low cost" or "efficiency." The trouble with these programs is that they do not offer reliable information to employers or patients about the physician. TMA urges the committee to consider giving TDI additional authority over how health plans implement physician tiering and ranking programs, and how they market them to employers and patients.
Just last Friday, Texas Attorney General Greg Abbott placed Blue Cross and Blue Shield of Texas under Assurance of Voluntary Compliance. According to court documents filed by the state:
["BCBS's physician ratings were based on inaccurate information and flawed methodology. As a result, these ratings misled patients about their doctors and unfairly penalized physicians whose patients suffered from costly medical conditions"]
Under the agreement, BCBSTX agreed to stop publishing and using its methodology to assign doctors' ratings. The company also agreed not to terminate or threaten to terminate doctors solely for making referrals for medically necessary care outside the BCBSTX network.
Based on the AG's action, the legislature should give TDI the authority to ensure that:
- Objective standards or comparison criteria are disclosed to physicians prior to the evaluation period;
- Data utilized are identified and available to physicians for verification prior to any dissemination of information to the public;
- A due process is provided to physicians to challenge erroneous designations prior to publication;
- The peer review panel utilized during the peer review process consists of Texas licensed physicians of like or similar specialties; and
- A provision permitting the imposition of administrative penalties on health plans for violations.
Standardized Health Insurance Product Labeling
Purchasing health insurance coverage today is increasingly complex. Health insurance companies offer a wide range of plans with different benefits, exclusions, and costs. It is nearly impossible to decipher a health insurer's sales literature then figure out a way to make a direct, product-to-product comparison.
Employers and patients need accurate, current, and honest information on copays, deductibles, and health plan networks to make decisions in today's health care market. The real need for this information is not when patients are sick or injured, but rather when Texas businesses and their employees are shopping for health insurance coverage.
Standardized and reliable nutritional labeling has made it much easier for consumers to make better food choices. Consumers can examine 20 different boxes of cereal and easily compare the product benefits, such as number of calories and percentage of fat, sodium, sugar, or protein. TMA believes the same standardized system could aid employers and consumers when shopping for health insurance.
Employers and consumers need to know what is in the fine print so they can make good purchasing decisions. Many insurers offer a large number of plans with different benefits, exclusions, and costs. This creates a complex array of information that does not aid consumer decision making. It is simply overwhelming. TMA believes this solution ― an insurance facts label ― will make insurance just a little more understandable and offer consumers a reliable resource for decision making and comparisons.
Medical Loss Ratio
Health insurer profits are expressed as part of the industry's term "medical loss ratio." The medical loss ratio is the percentage of premium dollars spent on payments to physicians, hospitals, and other health care providers for health care services rendered. The amount of premium dollars left over often translates into administrative expenses that include health plan salaries, overhead, as well as health insurer profits. Simply stated, insurers can maximize their profits by keeping the amount of the premium dollar they spend on the patient's health care to a minimum.
Employers and employees are spending more money on health insurance each year but have no idea exactly where their health insurance premium dollars are going. Are they going toward their health care costs or to the insurer's bottom line?
TMA believes that TDI should be given the authority to require a consistent reporting formula for the term "medical loss ratio." The formula or definition needs to be standardized and specify exactly what insurers can include as a medical cost vs. profit or expenses for items such as marketing, administration, and recruitment. This solution would allow employers and patients to compare easily the performance of their health plan with other plans and aid in shopping for health insurance.
Mr. Chairman and committee members, in closing, I want to impress upon the committee that TMA supports effective regulation, transparency, and accountability of insurance companies and entities acting on behalf of insurers and HMOs. We think that the ultimate consumer protection is simply to make sure insurers keep their promises to employers, whether large or small, and individuals, all of whom are our patients.