Protecting Consumers and Promoting Health Insurance Competition

Testimony of David Balto Before the House Judiciary Committee

    Read the full testimony (pdf)

    Chairman Johnson, Ranking Member Coble and other members of the Subcommittee, I appreciate the opportunity to come before you today and testify about health insurance competition and consumer protection enforcement. As a former antitrust enforcement official I strongly believe the mission of the Federal Trade Commission and Antitrust Division of the Department of Justice is vital to protecting consumers and competition. However in the past administration the priorities of those enforcement agencies were not effectively aligned with the critical priorities in the health care market, with the result that there is substantial anticompetitive and fraudulent activity in the health insurance market that raises prices and costs for consumers and the American taxpayer.

    Today’s hearing is on “H.R. 3596, the ‘Health Insurance Industry Antitrust Enforcement Act of 2009’” which will amend the McCarran-Ferguson Act to provide that certain anticompetitive conduct by health insurers and medical malpractice insurers is not immune under the act. That is a good first step to reforming health insurance markets. But the ability for health care reform to succeed depends upon all aspects of health care markets to function effectively, and by any measure, the health insurance market is broken–with supracompetitive profits, escalating numbers of uninsured, an epidemic of deceptive and fraudulent conduct, and rapidly escalating costs. Today, 47 million Americans are uninsured, while those who are insured have seen their premiums rise over 120 percent in the past decade. Meanwhile, 10 of the largest health insurers saw their profits balloon from $2.4 billion in 2000 to $13 billion in 2007. There have been dozens of state enforcement actions securing potentially over $1 billion  in fines and penalties. As I describe in my testimony, for health care reform to work we need greater congressional oversight and investigation of health insurers, comprehensive regulatory reform, and a realignment of priorities at the DOJ and FTC.

    Former Justice Brandeis said that sunlight is the best disinfectant and Congress deserves substantial credit for the attention it has given to the competitive and consumer protection problems in health insurance markets. Members on either side of the aisle may disagree about the scope of health care reform, but I would hope there is little dispute that recent congressional hearings have uncovered a disturbing pattern of egregious, deceptive, fraudulent and anticompetitive conduct in health insurance markets. That conduct must be stopped.

    Last month, the Domestic Policy Subcommittee of the House Oversight and Government Reform Committee held an important hearing titled “Between You and Your Doctor: The Private Health Insurance Bureaucracy.” In this hearing, consumers came forward and courageously told their stories about the egregious practices health insurers regularly engage in to avoid paying for health care and to ensure excessively high profits.

    • Mark Gendernalik of West Hills, California, described how his health insurer created obstacles to his efforts to get his three-month-old daughter proper treatment for infantile spasms: “Consumers should not have to endure this kind of life-and-health threatening hassle. I hope Congress will find better ways to ensure that insurers deliver on the care they promise. The stress of constantly having to hold the HMO and their agents to their agreed upon obligations has relegated me to the role of my daughter’s care manager, and all too often robbed me of my role as Sidney’s loving daddy.”
    • Errin C. Ackley of Red Lodge, Montana described her battle against Blue Cross Blue Shield of Montana to secure care for her father who was dying of Chronic Lymphocytic Leukemia. BCBSMT claimed that a transplant was still “investigational,” and it took four months of letter writing, phone calls, and presentations of scientific data on the efficacy of the procedure, and legal work to convince the insurer to cover the procedure. After four months’ delay, her father received the transplant but passed away just a few months later. Erinn testified, “Would there have been a different end to my dad’s story if he had been given approval for the first transplant request in April 2006? …We don’t know. What we do know is that his chance for survival most assuredly did not increase because . . . Blue Cross Blue Shield of Montana built the bureaucratic roadblocks that changed the course of my father’s treatment and made him wait four months for his potentially life-saving bone marrow transplant.”
    • Wendell Potter, a former insurance executive, revealed the most basic motivation for these practices, one that will not necessarily disappear with the regulations of health care reform. Potter testified, “To win the favor of powerful [investment] analysts, for-profit insurers must prove that… the portion of the premium going to medical costs is falling… To help meet Wall Street’s relentless profit expectations, insurers routinely dump policyholders who are less profitable or who get sick.” This practice, known as “purging,” allows insurers to avoid paying for health care for those who need it most, and instead collect premiums with the explicit intention of avoiding paying for care.

    Health insurance companies mounted every obstacle possible to Mark’s daughter’s treatment and to Erinn’s father’s bone marrow transplant. As Wendell Potter documented their incentives are to satisfy Wall Street, to deny care, and to maximize profits. Even Judge Richard Posner has observed that the “incentive [of some insurers] is to keep you healthy if it can but if you get very sick, and are unlikely to recover to a healthy state involving few medical expenses, to let you die as quickly and cheaply as possible.”

    Read the full testimony (pdf)