Bad medicine? Pawlenty insurance proposal stirs controversy

Several Minnesota health care organizations that lobby state lawmakers are lining up to oppose Gov. Tim Pawlenty’s proposal to allow Minnesotans to purchase individual health insurance policies that are sold by out-of-state insurers.

Legislative committees haven’t yet received specific bill language. Nor have potential authors, presumably Republicans, stepped up to carry the bill.

But in testimony Wednesday at a joint hearing of two state House committees, Sue Abderholden, executive director of the Minnesota chapter of the National Alliance on Mental Illness [NAMI], said she opposes the idea.

“I think when we start talking about allowing insurance from other states to be sold here, we’re talking about a race to the bottom. …Why would we want to allow companies to sell substandard and deficient health insurance policies?” Abderholden said.

The Commerce and Labor Committee and the Health Care and Human Services Finance Committee held the hearing.

Phil Griffin, a health care lobbyist whose clients include the Minnesota Council of Health Plans, said he won’t oppose the idea before bill language is available. But he said Minnesota’s health insurance laws, which allow only nonprofit insurers, could be undercut by policies from states with lax rules.

“Allowing for-profit health insurance to be subject to less stringent consumer protections and regulations by other states than Minnesota would disrupt what currently works here in our state,” Griffin said.

Abderholden wants to maintain current law, under which Minnesota regulates health insurance. At stake in the debate, she said, is the fate of state mandates such as cancer screening or chemical dependency treatment, which some - but not all - states require.

During the last gubernatorial campaign in 2006, Pawlenty bemoaned the health care marketplace in Minnesota, where three major nonprofit insurers control 80 percent of the fully insured market. In October, Pawlenty announced his support for a compact with other states that spells out a system for buying insurance across state lines.

In addition to establishing a compact, the Pawlenty administration is also considering a “unilateral” approach that opens the state’s borders to out-of-state health policies, assuming they meet solvency and other state requirements.

Manny Munson-Regala, state Department of Commerce assistant commissioner, said Pawlenty’s proposal could reduce health care costs in Minnesota.

“We suggest that there is some ability to hold the cost of insurance in our state, or moderate the rate of increase of those costs, if we create an option for competition to increase either through the interstate proposal or through the compact proposal,” Munson-Regala said.

Minnesota is currently a member of the Interstate Insurance Product Regulation Compact [IIPRC] which approves or disapproves life insurance, annuities, long-term care insurance and other investment products. Health insurance, however, isn’t part of the IIPRC.

House Health Care and Human Services Finance Division Chairman Tom Huntley, DFL-Duluth, said he doubts interstate purchasing will significantly reduce health care costs.

“I’m skeptical they would make much of a difference,” said Huntley after the hearing. He also said it could be difficult for health insurers that do business in other states to adapt to Minnesota’s public health care programs like MinnesotaCare and the Minnesota Comprehensive Health Association.

And recent health care changes agreed upon by Pawlenty and DFL legislative leaders add another wrinkle to the equation.

Minnesota lawmakers in 2008 passed health care legislation that established medical homes to help manage chronic diseases. Huntley said plans from outside Minnesota might not match up with the new health care law once implemented.

DFLers in the Legislature might not have a choice on the issue, however. Federal health care bills in both chambers of Congress propose “health care choice compacts” between two or more states that would be established in the next decade. The House has passed its version of the bill. The Senate continues this month to debate health care.

The bills in Congress propose that the U.S. Department of Health and Human Services would work with the National of Association of Insurance Commissioners [NAIC] to draw up the regulations for the compacts, which would apply to insurance for individuals.

Rep. Laura Brod, R-New Prague, said that the momentum for interstate sales of health insurance in Congress suggests that some form of interstate health insurance purchasing arrangement is going to happen.

“It seems to me it’s less a matter of whether and more a matter of how,” Brod said.

Brod said, however, that states should create the new compacts rather than the NAIC.

“We can either do it right or not. I hope legislatures are in the driver’s seat,” Brod said.

The debate about cost containment will be pivotal to the success of interstate health insurance arrangements.

Rep. Sarah Anderson, R-Plymouth, said Minnesota ranks second in the nation for states with high premium costs for families. She said health care mandates are a likely culprit in the cost structure.

“If mandates don’t play a role in the cost of insurance in the state of Minnesota, what does?” Anderson said.

Mandates vary among states. And much research has been undertaken to study their effects on health care costs. A study commissioned by the state Department of Health in 2005 showed that some mandates, like immunizations, are widely used and cheap. Other mandates in Minnesota, like chemical dependency treatment, are used less often and are expensive.

Health care advocates like Michele Kimball, senior state director for AARP Minnesota, testified they are concerned about the fate of Minnesota’s mandates if people can buy insurance from states that aren’t exposed to the same mandates.

“If interstate sales of health insurance are allowed, AARP believes that insurance companies should be required to offer coverage that equals or exceeds current Minnesota standards,” Kimball said.

That requirement would be complicated for state Department of Commerce regulators given the differences among state health insurance rules.

Maternity is only a mandate in 23 states, including Minnesota. Minnesota is one of two states that has a mandate for reconstructive surgery, Munson-Regala said.

Opening Minnesota to outside health insurance could create administrative as well as regulatory challenges for the Department of Commerce, which oversees health insurers and handles citizen complaints.

Munson-Regala said the agency has roughly 90 people who work on insurance issues. They took 30,000 calls in the past year that ranged from complaints to requests for information.

State Rep. Joe Atkins, DFL-Inver Grove Heights, who chairs the Commerce and Labor committee, said he would like to see a fiscal note on how much it would cost the agency to handle the work involved in regulating insurance from other states.

“You go from regulating a small handful of folks to suddenly dozens or scores of products across the nation,” Atkins said.