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March 3, 1999

Patients' Rights Proposals: The Insurers' Perspective

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JAMA. 1999;281(9):858. doi:10.1001/jama.281.9.858-JMS0303-4-1

Today, in both state and federal arenas, much attention is focusing on "patients' rights" legislation. If the interests of health care consumers are to be served, however, legislators need to ask themselves 3 key questions: First, do the bills best address, or even match, consumers' concerns? Second, are those concerns all of equal weight and validity? Third, what are the costs of this legislation, and what impact would such proposals have on beneficiaries?

While "patients' rights" bills contain many provisions, the most significant are health plan and employer liability, access to services and to grievances and appeals, and "quality," often in the form of mandated benefits. These proposals have financial implications for providers, insurers, employers, and patients that would effectively increase the cost of health insurance.1 Placing new tort liability on health plans and employers, for example, would promote defensive medicine and lawsuits. Other provisions would require administrative outlays and expensive implementation systems. Mandating benefits such as mental health, chemical dependency treatment, and dental services would increase premiums by 9% to 15%.2

When health plans and insurers face increased costs, premiums rise. Certain legislative provisions could result in premium increases in excess of 30.2%. Higher premiums translate to fewer employers offering health benefits, more employee cost-sharing, and more people without insurance—possibly as many as 1.5 million.3 This risk is substantial, given that "patients' rights" bills focus on "problems" that are illusory, exaggerated, or being addressed by the marketplace.

Prepaid health plans that integrate financing and delivery were a response to the escalating health care prices that began in the 1960s. Employers (who contribute the largest percentage toward insurance coverage)4 were seeking to provide health benefits at a reasonable cost, while maintaining quality care. In the early days of their development, managed care plans, primarily health maintenance organizations (HMOs), benefited both employers who saved on operating costs and employees who appreciated the convenience. Not only did such plans gain popularity, but indemnity insurers also adopted managed care techniques.

Employers, employees, and ultimately patients continue to influence plan structures and benefits. In the past few years, as health care inflation slowed and premium increases leveled off, patients began to demand more than what conventional HMOs offered: choice of physicians, direct access to specialists, and the ability to go "out of network"—elements found in patients' rights proposals. The market responded, creating systems that cost little more than standard HMOs. Today, three quarters of health plans offer a point-of-service option5; preferred provider organizations (PPOs) are the dominant form of employer-based coverage; and almost 92% of employees in employer-sponsored plans are offered an option for selecting nonnetwork physicians.6

The majority of Americans rate the quality of their health plans favorably and are happy with the care they receive.7 Studies show that people in employer-sponsored health plans— HMOs, PPOs, and fee-for-service— are not constantly switching insurers, and that they do not plan to switch.8 Thus, the question arises, is this legislation necessary?

A second important question is whether patients are without protection. In every state, an insurance commissioner administers laws and regulations. Private accreditation initiatives guard consumers' interests. Also, most plans have grievance processes that work well, despite the sometimes unfavorable and unreliable media accounts. Plans have committed themselves to quality for employers and patients.

More government intervention will not be better for consumers. The health insurance marketplace is dynamic and customer-driven. Insurers continue to adapt, tailoring new offerings that show sensitivity to costs and coverage. Thus, they serve the changing needs of the vast majority of the US population. Unnecessary regulation could limit that adaptability. Worse, the savings that characterize managed care could be lost. It would be a tragedy if patients' rights bills curtailed innovation and forced more people out of the system. Perhaps, then, as legislators look at these issues anew, they should forgo tinkering with insurance policies, stop undermining the marketplace, and begin to face the big issue: the uninsured.

Congressional Budget Office, Cost Estimate HR 3605/S 1890 Patients' Bill of Rights Act of 1998.  Washington, DC Congressional Budget Office1998;
Jensen  GAMorrisey  MA Mandated Benefit Laws and Employer-Sponsored Health Insurance, 1999.  Washington, DC Health Insurance Association of America1999;
Health Economics Practice Barents Group, LLC, Impacts of Four Legislative Provisions on Managed Care Consumers: 1999-2000.  Washington, DC Barents Group LLC1998;
Health Insurance Association of America, Source Book of Health Insurance Data, 1997-1998.  Washington, DC Health Insurance Association of America1998;
Health Care Advisory Board, The Impact of Managed Care on the Health Care Industry, December 1997.  Washington, DC Health Care Advisory Board1998;
American Association of Health Plans, Dispelling Managed Care Myths.  Washington, DC American Association of Health Plans1998;
Jajich-Toth  CMatthews  C Monitoring Attitudes of the Public, 1994.  Washington, DC Health Insurance Association of America1995;
National Research Corporation, Satisfaction Report Card, 1998.  Lincoln, Neb National Research Corp1998;