Prohibiting Pre-existing Condition Discrimination: The Unanswered Questions

Just because a health insurance reform bill says that it bans pre-existing condition discrimination does mean that it actually does so. Lobbyists can put poison pills in the bill to make it hollow. Here’s what to look for.

So far, everyone seems to agree that health insurance reform should prevent insurance companies from refusing to cover people on the basis of pre-existing conditions. Although this would require companies to take on more risk, it might save money in the long run because private insurers will not waste so much money trying to find the bad risks, and it would improve care because the insurers would start competing on the basis of quality and cost. Moreover, it’s the right thing to do: people should not suffer due to a condition outside their control.

But if any health insurance reform bill is worth it’s salt, we need to dig more deeply than that. We need to know:

1) What government agency will enforce these provisions and will it be supported? One easy way to make a regulation toothless is to emasculate the enforcer (to mix a metaphor). When Congress enacted OSHA, business interests hamstrung the agency by forcing it to get clearance from other agencies to do anything. The easiest way to prevent enforcement is just to underfund the agency. Congress passed the Fair Housing Act in 1968, but the Department of Justice had only 13 attorneys nationwide to bring housing discrimination cases.

2) What procedures will the bill contain to prosecute insurers to violate the law? Will the regulatory agency be able to use an administrative process, issue fines and cease-and-desist orders, or will it have to bring suit in federal court? Due process obviously requires some form of judicial review, but what “review standard” will courts exert over agency decisions? Will courts be able to overturn any agency decision it doesn’t like?

3) What flexibility will the regulatory agency have in writing regulations? This can cut both ways, of course: give the agency too much scope and there is a good chance of agency capture: the agency helps the regulated industry, the industry gives contributions to friendly Congressmembers, and the Congressmembers fund the agency and lay off of it. This sort of “iron triangle” is a perpetual problem of agencies. But write the statute too narrowly, and the agency won’t be able to adjust to clever schemes by insurers to weed out “bad risks” (i.e. sick people).

4) What remedies will a consumer have if she believes that she has been denied on the basis of a pre-existing condition? To whom can she appeal? Can she sue? If she can, what sorts of damages will be available? Will she have to abide by the insurance company’s arbitration clause, putting her into a forum where it will be very difficult for her to win? Conversely, if it is too easy to sue, how do we try to prevent litigation costs from driving up overall system costs?

5) What sorts of data will insurers have to disclose, and will they have to disclose it to the public? If the public does not know the records of insurers in denying coverage, cancelling coverage, reducing percentages of costs, etc., then it cannot make informed choices. Insurers will claim that these things are “trade secrets” and that they shouldn’t have to tell anyone, especially not the public.

6) Preemption. Insurance regulation now is mostly a state matter, and this bill figures to change the balance. That may be good, it may be bad. Quite often, states can take the lead in advancing progressive legislation and in Justice Brandeis’ immortal and overly-quoted words, serve as “laboratories of democracy” in figuring out best approaches. But insurers might argue that they should be able to have a national market as a way of spreading risks and not having to comply with 50 different regulatory regimes. That is not a crazy argument.

These types of questions will apply to just about any portion of health insurance reform, and people can probably think of more. On this one, the Tea Party crazies are right: we need to read the bill, and find out where the bodies are buried. The insurance lobbyists have.

Author: Jonathan Zasloff

Jonathan Zasloff teaches Torts, Land Use, Environmental Law, Comparative Urban Planning Law, Legal History, and Public Policy Clinic - Land Use, the Environment and Local Government. He grew up and still lives in the San Fernando Valley, about which he remains immensely proud (to the mystification of his friends and colleagues). After graduating from Yale Law School, and while clerking for a federal appeals court judge in Boston, he decided to return to Los Angeles shortly after the January 1994 Northridge earthquake, reasoning that he would gladly risk tremors in order to avoid the average New England wind chill temperature of negative 55 degrees. Professor Zasloff has a keen interest in world politics; he holds a PhD in the history of American foreign policy from Harvard and an M.Phil. in International Relations from Cambridge University. Much of his recent work concerns the influence of lawyers and legalism in US external relations, and has published articles on these subjects in the New York University Law Review and the Yale Law Journal. More generally, his recent interests focus on the response of public institutions to social problems, and the role of ideology in framing policy responses. Professor Zasloff has long been active in state and local politics and policy. He recently co-authored an article discussing the relationship of Proposition 13 (California's landmark tax limitation initiative) and school finance reform, and served for several years as a senior policy advisor to the Speaker of California Assembly. His practice background reflects these interests: for two years, he represented welfare recipients attempting to obtain child care benefits and microbusinesses in low income areas. He then practiced for two more years at one of Los Angeles' leading public interest environmental and land use firms, challenging poorly planned development and working to expand the network of the city's urban park system. He currently serves as a member of the boards of the Santa Monica Mountains Conservancy (a state agency charged with purchasing and protecting open space), the Los Angeles Center for Law and Justice (the leading legal service firm for low-income clients in east Los Angeles), and Friends of Israel's Environment. Professor Zasloff's other major activity consists in explaining the Triangle Offense to his very patient wife, Kathy.