HMO Regulation and a "Patients' Bill of Rights"

The Issue:
Many in Congress seem to think that the prescription for better health care in this country is a so-called "Patients' Bill of Rights" that would allow lawsuits against employers who voluntarily offer health insurance coverage to their employees. Politicians, having been led to believe the idea is politically popular, have been pushing a "Patients' Bill of Rights" for the past few election cycles. The issue gets complicated, however, when Congress attempts to draft legislation that imposes liability on employers who voluntarily offer health care benefits to their employees.

Some believe that, if only there were a way to truly exempt employers from liability, legislation that imposes liability on health insurance companies would not harm employers. Unfortunately, employers will be affected regardless of who bears the brunt of liability. Liability on health insurers means increased premium costs to employers. At a time when employer health care costs are rising at a rate three and four times that of inflation, employers are already struggling with whether to continue providing health coverage to their employees. Add liability into the mix, and many employers will be pushed over the edge.

Many believe a better approach would be to require an external review process, whereby coverage decisions of the health insurer are reviewed by third-party experts and either approved or overturned. There are bills floating around Capitol Hill that provide for a type of external review process, without imposing liability on employers or health insurers. External review is perhaps a more rational approach to satisfy Congress' apparent need to do something on health care, while at the same time not imposing irrational liability on employer providers of health insurance.

Status:
In late June 2001, the Senate passed S. 1052, the Kennedy-McCain Patients' Bill of Rights, on a 59-36 vote. The bill is seriously flawed, containing excessive and broad liability provisions. Specifically, individuals are allowed to sue in state court for unlimited damages (unless capped by state law), and in federal court for unlimited economic and noneconomic damages and up to $5 million in punitive damages. There is little question that these costs would ultimately be passed on to employers and increase the ranks of the uninsured. President Bush indicated that he would veto the Senate-passed bill.

The House was poised in late July 2001 for a showdown between two competing bills - a measure sponsored by Reps. Norwood (R-GA), Ganske (R-IA) and Dingell (D-MI) that largely mirrored the Senate-passed Kennedy bill, and a more employer-friendly bill sponsored by Reps. Fletcher (R-KY) and Peterson (D-MN), supported by the Bush Administration. At the time, it looked as if the Norwood-Ganske-Dingell bill had the votes to pass. However, at the eleventh hour, President Bush struck a compromise with Rep. Norwood, the lead sponsor of the opposition bill. Although the compromise bill still contained liability for employers, it was limited to federal court and punitive damages were capped at $1.5 million.
Rep. Norwood's defection from the Norwood-Ganske-Dingell bill spelled defeat for that measure, as many of the House Members who had supported Norwood's cause for HMO reform over the years followed his lead in supporting a compromise with the White House. The compromise "Bipartisan Patient Protection Act," passed in early August by a 226-203 vote.

Expected Action:
The next step in the process is for the House and Senate to conference the two bills, which are quite different from each other. However, Senate Majority Leader Tom Daschle (D-SD) has delayed initiating a conference committee for the past several months. In addition, reports indicated that, until recently, the White House and the office of Sen. Kennedy were engaged in serious discussions regarding a compromise bill. Those discussions reportedly have ended, although the President is said to want to complete action on Patient's Rights legislation this year in order to remove the issue from the table. It is unclear at this time whether a conference committee will convene on this issue, but we remain vigilant to that possibility.

NCCR Says:
The chain restaurant industry opposes managed care reform proposals that impose liability on employers and allows lawsuits against employers who offer health care benefits to their employees. Members of Congress should know that the provision of health care benefits is a voluntary action on the part of employers, and that imposing liability on employers who choose to provide health care insurance to their employees will seriously jeopardize that coverage. Forty-two million Americans are currently without health care coverage of any kind. Congress should consider ways to expand, not threaten, health care coverage for America's workers.

Contact: NCCR at 202.626.8183