TMA’s Testimony on the Health Insurance Code of Conduct Act of 2009


Committee Substitute Senate Bill 1257 by Sen. Kip Averitt

Texas Medical Association Testimony 
April 16, 2009
Presented by: Charlotte Smith, MD  

Good morning. My name is Charlotte Smith, MD, I am a physical medicine and rehabilitation physician from Austin. On behalf of the Texas Medical Association (TMA) and nearly 44,000 physicians and medical student members, I would like to thank Chairman Duncan and committee members for the opportunity to testify on Senate Bill 1257 today. SB 1257 relates to the regulation of certain market conduct activities of certain life, accident, and health insurers and health benefit plan issuers.

TMA supports SB 1257 because it will help our patients when they buy health insurance. Even more important, SB 1257 will help our patients when they need to use their insurance. The five provisions outlined in this bill, which I will address provide important and needed patient protections .

  1. Health Insurance Rescission
    (Related bills: HB 1748 by Rep. Todd Smith and SB 1611 by Sen. Wendy Davis)

Health insurers, before they issue a policy, undertake an investigation to ensure they know what health risks they can expect to cover. This is accomplished through the completion of an application for insurance and further research of the applicant's medical history. Once the policy is issued, a patient will then submit claims for coverage and the insurer can pore over patients' health information for evidence that they did not disclose their entire medical history on their insurance application. The insurer may return the premiums and rescind the policy. To rescind the policy means to act as if the policy never existed. In extreme examples, when the insurer finds an error or omission on an application, no matter how insignificant, the company rescinds the policy rather than continue to pay under the policy.

Recently, only after a Waxahachie woman appealed to her congressman was her insurance coverage reinstated. The company said she did not check "acne" on her application, so it denied her treatment for breast cancer and revoked her coverage.

TMA supports the solution in SB 1257, which would require insurers to notify patients that rescission of their policy is under consideration prior to the actual rescission. This would allow patients to contest the decision if desired and help prevent their policy from being revoked inappropriately.

We believe this patient protection is fair and reasonable.

  1. Calculation of Premium Quotes
    (Related bills: HB 3120 by Rep. Carol Alvarado and SB 2024 by Sen. Kirk Watson)

In today's regulatory environment, a small-group purchaser of health insurance has a forum or advocate to question whether the health insurance carrier premium quoted for the small group is fair and adequate, or excessive.

Unfortunately, their only option is to look for other quotes or carriers in the market, but the small employer still may not know whether the quote provided in the first place is appropriate for the coverage that it will provide.

Small employers and individuals have little or no understanding of how or why their premium is increased from the prior year.

TMA supports the solution in SB 1257  because it would allow Texas' small businesses to access the expertise of the Office of Public Insurance Counsel (OPIC) and have a premium increase of over 15 percent from the prior year reviewed. OPIC can then obtain information and decide whether there is or is not an issue about the quote provided. Simply, if a small business believes its premium increase is unwarranted, it can ask OPIC to investigate the proposed rate.

  1. Calculation of the Medical Loss Ratio
    (Related bill: SB 485 by Sen. Robert Deuell, MD)

The medical loss ratio is the percentage of premium dollars spent on payments to physicians, hospitals, and others for health care services. This section of the bill permits the commission to set a single ratio formula to ensure the information is truly comparable between insurance companies. In addition, the main policyholder will be provided information regarding the amount actually spent on medical services versus the amounts paid in premiums.

TMA supports the solution in SB 1257  because it provides a standardized reporting formula for "medical loss ratio" that permits purchasers to compare company performance. It also gives the main policyholder the information needed to evaluate the insurer's use of the premium dollar before the policy is up for renewal. It is simply just another small piece in the puzzle that perhaps can make insurance decision-making easier.

  1. Unregulated Secondary Networks (aka Silent PPOs)
    (Related bills: HB 223 by Rep. Craig Eiland and SB 714 by Sen. Leticia Van de Putte)

Currently, there are companies operating in Texas that assemble networks of physicians and providers to sell or lease to insurers and other payers. These companies, called "preferred provider organizations" (PPOs), do not hold a license, certificate, or other regulatory permission to operate. They are not regulated at all ― despite the fact they are part of the health insurance financing system.  

Some PPOs may make discount information available without the physician's consent. To separate the responsible from the not-so responsible, this bill will register the PPOs to bring transparency to the health care marketplace.

TMA supports the solution in SB 1257   because it would ensure a physician's contract information is protected from inappropriate access and only be made available to health insurance plans and other entities when permission is actually granted. The stakeholders are continuing to work on this section of the bill.

  1. Physician Rankings
    (Related bills: HB 1392 by Rep. David Leibowitz and SB 1396 by Senator Deuell, MD)

All major health insurance companies in Texas use some form of physician ranking. The health plans market these ranking systems to employers and patients as "quality" enhancements or "high-performance." In reality, the rankings are based almost exclusively on cost and often on data, which has numerous inaccuracies.

Ranking based on bad data actually misleads employers and patients about the availability and quality of the physicians in their communities and can harm the reputation of talented well-respected physicians. 

Attorney General Greg Abbott discovered problems with the ranking program of the state's largest health insurer. Just last Friday, the Texas attorney general issued an Assurance of Voluntary Compliance for Blue Cross and Blue Shield of Texas for its physician rating program that used cost-based indicators to rank doctors.

SB 1257 puts into place a standard peer review mechanism for due process. It gives physicians an opportunity to review the health plan information used to determine their rank, and challenge any discrepancies or inaccuracies in the conclusion or the data prior to publication.

In addition, SB 1257 provides for a professional review panel of physicians of like or similar specialties as permitted under the Health Care Quality Improvement Act (42 USC 11112) to review the clinical information. In addition, the commissioner is granted authority to adopt standard objective measures so that there is only one standard across all plans.

TMA supports the solution in SB 1257  because it would require health insurance companies to use scientifically valid criteria to evaluate physicians' performance and disclose those criteria in advance. Physicians need the opportunity to review their data and appeal their ranking before this information is made public.

I want to thank you again for the opportunity to testify today. I ask on behalf of my patients that you support SB 1257 and pass this important piece of legislation out of your committee.

I would be more than happy to answer any of your questions.

Last Updated On

March 13, 2011

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