By Kip Sullivan, JD

When the Senate Health, Education, Labor and Pensions (HELP) Committee passed a bill on July 15 creating an anemic “public option” program, Health Care for America Now (HCAN) and other “public option” proponents were ecstatic. They welcomed the “public option” in the HELP committee bill, proclaiming it “strong” or “robust.”  But the actual provisions in the HELP Committee bill call for numerous “community health insurance options,” not the single “Medicare-like” plan promised by “public option” advocates. That means the individual “options” will probably be as small and weak as the co-ops now under discussion in the Senate Finance Committee. More importantly, these “community options” will almost certainly be run by insurance companies.

Finding the HELP Committee bill

To determine what the HELP Committee “public option” proposal is, one must first find a final version of the legislation that came out of the committee. Ordinarily, that is not a difficult process. But for some reason, the HELP Committee bill still has no bill number and, three weeks after it was voted out of the HELP committee, still is not available for the public to read. That might sound like a sloppy way to run a Senate committee, but I have confirmed with two sources that there is no final bill available.  An aide in the Washington office of Senator Al Franken (D-MN), with whom I spoke on August 7, referred me to the draft bill posted at the HELP Committee’s Website.  At this Website, the draft bill appears in two pieces, one labeled “the Affordable Health Choices Act” and the other labeled “the additional Chairman’s mark on coverage.”  It is in the “Chairman’s mark” segment of the bill, beginning at page 77, that we find “Section 3106: Community health insurance option.”

Summary of Section 3106 in semi-plain English

Section 3106 is difficult to read. It fails to offer clear definitions of critical terms, it uses different terms to describe the same thing, and it contains unnecessarily abstract language.  Because it is poorly written, it requires at least two readings to understand it.  I will tell you first what I derive from it in the plainest language possible, and then discuss some of its provisions so you can judge for yourself whether I got it right.

Section 3106 requires the Secretary of the Department of Health and Human Services (DHHS, the federal agency within which Medicare and Medicaid are housed) to create multiple health insurance companies that, together, will make “public” health insurance available for sale to the non-elderly in every state in the country.  The Secretary will not be using federal employees to make this happen.  The Secretary is required, rather, to contract with nonprofit insurance companies to create health insurance policies that will qualify as “community health insurance options.” (Some of the bill’s language seems to be confusing by design.  What meaning is conveyed by adding “community” and “options” to “health insurance”?)

The corporations that contract with the Secretary to create these “community” health insurance companies will be required to meet the same standards insurance companies currently must meet in order to serve as “Medicare Administrative Contractors” (MACs) to administer Medicare’s traditional program. These corporations must, in other words, be insurance companies.

To get some idea of which insurance companies meet current MAC standards, and are therefore the ones likely to get contracts with the Secretary under the HELP Committee bill, consider this list of the companies that now have MAC contracts with the Centers for Medicare and Medicaid Services (CMS, the agency that runs Medicare):

• Cahaba Government Benefit Administrators, a subsidiary of Blue Cross and Blue Shield of Alabama;
• First Coast Service Options, a subsidiary of Blue Cross and Blue Shield of Florida;
• Highmark Medical Services, a division of Highmark Blue Cross Blue Shield of Pennsylvania;
• National Government Services, a subsidiary of WellPoint, the nation’s largest health insurance company measured by enrollment (as opposed to revenues);
• National Heritage Insurance Corporation, which is a subsidiary of Electronic Data Systems (the firm Ross Perot founded) which is now a subsidiary of Hewlett Packard;
• Noridian Administrative Services;
• Palmetto GBA, a subsidiary of Blue Cross Blue Shield of South Carolina;
• Pinnacle Business Solutions, a subsidiary of Blue Cross Blue Shield of Arkansas;
• Trailblazer Health Enterprises, a subsidiary of Blue Cross Blue Shield of South Carolina;
• Wisconsin Physicians Services Health Insurance Corporation.

Most of the large health insurance companies, such as United HealthCare and Cigna, have also held similar contracts in the past.

Now that I’ve tried to explain Section 3106 in the Mother Tongue, it is time to immerse ourselves in the actual bill language. In the next section I review the language that indicates Section 3106 is proposing multiple “options,” not a single Medicare-like program. In the section after that I review the language that indicates the multiple “options” will be created by nonprofit insurance companies like Blue Cross Blue Shield.

Decoding Section 3106: Is it one “option” or multiple “options”?

Section 3106 proposes multiple “options,” not a single Medicare-like program, but this is not apparent at first. The first three sentences contradict each other.  The very first sentence says there will be multiple “options” serving “communities” (not the whole country):

“Nothing in this section shall be construed to require a health care provider to participate in a community health insurance option….”

The second sentence says the same thing about individual patients and repeats the phrase – “a community health insurance option.” These first two sentences indicate the HELP Committee is referring to an entity at the “community” level, not the national level, and the Committee anticipates there will be many of these entities, not just one of them.

But the third sentence confuses the reader by referring to the local entities as a single program:

“The Secretary [of the Department of Health and Human Services] shall establish a community health insurance option to offer … health care coverage… throughout the United States.”

But as we read on, we encounter provision after provision that indicates the HELP Committee definitely envisions a balkanized “option.” Some provisions reveal that intention by referring to “options” plural. Others reveal it by giving the states the authority to determine essential features of “options” sold within their boundaries, such as the required reserve levels and maximum benefits. A single national program can’t have 50 different reserve requirements and 50 different benefit levels.

Here are two examples of the use of “options” plural in Section 3106: (1) Under a section entitled “Applicable rules,” we learn a previously enacted law “shall apply to community health insurance options”; and (2) a section entitled “Ombudsman” begins, “In establishing community health insurance options, the Secretary shall….”

Here are two examples of provisions giving the states authority to define key features of “options”: (1) The only sentence in a section entitled “States may offer additional benefits” reads, “A state may require that a community health insurance option offered in such State offer benefits in addition to the essential health benefits required under [another subsection]”; and (2) under a section headed “Solvency,” we find, “A community health insurance option shall … be subject to the solvency standard of each State in which such community health insurance option is offered.”

A patchwork of 50 different reserve requirements and 50 different benefit levels seems a far cry from “public option” proponents’ vision of a single, Medicare-like plan covering the whole country.

Decoding continued: “Option” means Blue Cross Blue Shield

The second major cause of confusion in Section 3106 is its use of four terms, all of them vague, to describe the insurance companies that will sell the “options.” The bill uses these four terms interchangeably: “community health insurance option,” “qualified carrier,” “qualified entity,” and “contracting administrator.”

A brief example: In subsection 1 of a section entitled “Start-up Fund,” the bill establishes a “Health Benefit Plan Start-up Fund … to provide loans for the initial operations of a community health insurance option.” But subsection 2 says loan money from this fund is supposed to go to “carriers,” and subsection 3 says it shall go to “contracting administrators.” (“Carriers” is a term Medicare just phased out after four decades of use. The term referred to insurance companies which processed claims from doctors. Medicare now uses the term “Medicare administrative contractors.” The HELP Committee’s bill writers no doubt meant to refer to “contracting administrators,” not “carriers.” As I indicated above, “contracting administrators” will look almost exactly like the MACs that now serve Medicare.) Finally, subsection 5 says the loans must be repaid by “the community health insurance option” (not carriers or contracting administrators).

The only reasonable interpretation of this goulash is that insurance companies known as “contracting administrators” will be put in charge of creating health insurance companies all over the country that will contain “community health insurance” in their titles.

This interpretation is confirmed by subsequent provisions in Section 3106.  In a section entitled “Authority to contract,” the bill says the Secretary may “enter into a contract with a qualified entity” to perform the same duties MACs perform for Medicare, and once this contract has been signed the entity becomes “a contracting administrator.” (These contracts must last at least five years and may not last more than ten years.) In addition to meeting the MAC standards, contracting administrators have to be:

• non-profit;
• able “to offer a community health insurance option”;
• “eligible to offer health insurance” (I assume this strange phrasing means the insurance company is licensed in the state where it hopes to sell “options”);
• able to achieve “delivery of benefits”; and
• able to “promot[e] high quality clinical care.”

The requirement that the contracting insurers be able to “promote high quality clinical care” is a tip-off that the HELP Committee wants the insurance companies that will run the “community options” to use managed care cost-control tactics. A second tip-off is that Section 3106 does not guarantee patients the right to choose their own clinic and hospital.  Instead the bill only requires that a ”community” insurer will be one that “offers a wide choice of providers.”  In short, an entity that meets the MAC standards plus the additional criteria in Section 3106 amounts to your basic, non-profit managed care insurance company. The big ones these days include many Blue Cross Blue Shield companies and the nonprofit HMOs such as Kaiser Permanente, Group Heath of Puget Sound, and HealthPartners.

The only conceivable development that could keep existing non-profit insurance companies from winning the contracts to develop and run the “community options” would be the birth of dozens of non-profit companies with the expertise of insurance companies between the time Section 3106 becomes law and the time the law takes effect. In theory, that could happen. But it is extremely unlikely. It is unlikely because of the short time period between the date Section 3106 is enacted and the time it takes effect, and because of the difficulty of creating corporations with the expertise to create health insurance companies.

Section 3106 does contain language that should please HCAN and other “public option” advocates who were expecting the HELP Committee to endorse a Medicare-like “option.” In two places, Section 3106 says the Secretary “shall negotiate” provider rates. But without a guarantee that the “options” in each state will enroll tens or hundreds of thousands of people, and without a requirement that providers participate, this is a meaningless provision.

This leads me to my last observation about Section 3106.  How are contracting administrators supposed to create a customer base and a network of providers? Can they do it with whatever loans will be made available to them from the Start-up Fund? Section 3106 offers no answers to these questions.

Implications

If my interpretation of Section 3106 is correct – if the Senate HELP Committee’s “option” program is going to be balkanized and run by the nonprofit wing of the insurance industry – then reasonable people have to conclude that the deck is really stacked against the Committee’s “option” program. Even if Section 3106 authorized public employees, not Blue Cross Blue Shield employees, to create the dozens or hundreds of “community health insurance options” called for by Section 3106, the program would fail to pose any challenge to the insurance industry and might even die in the cradle. The health insurance industry has been very difficult to break into since at least the 1980s, and has become more so in the wake of the merger madness that swept through the industry in the early 1990s. But if public employees are not going to be directly responsible for creating the “community options” – if the nonprofit wing of the insurance industry is going to be doing that – then the entire “community option” project of the Senate HELP Committee amounts to a cruel joke on the public. Should the public trust corporations like Blue Cross and Kaiser Permanente to make a good faith effort to build competing insurance companies?

Section 3106 is a mess, but its meaning becomes clear after several readings. Section 3106 does not create the “Medicare-like” program promised by Jacob Hacker, HCAN, Howard Dean, and other “option” advocates. Instead it proposes a program that authorizes DHHS to create numerous health insurance companies tied to geographic areas, and to contract with members of the existing insurance industry to create and possibly run those companies.

Leaders of the “public option” movement have an obligation to advertise the HELP Committee bill truthfully. It is not accurate to say the HELP Committee bill creates a “robust” or “strong” public option. It is not even accurate to say the HELP Committee bill creates one “option.” The truth is the “option” is balkanized and very weak. In fact, HCAN, Andy Stern, Howard Dean and other “option” advocates who have praised the HELP Committee bill should do more than cease to praise it. They should tell Congress they oppose it.

Kip Sullivan is a member of the steering committee of the Minnesota Chapter of Physicians for a National Health Program.