LEGISLATION WOULD GUT CONSUMER PROTECTION

Right of Appeal Against Insurance Company Claims Denial At Risk

by Scott Foster, Hawaii Advocates for Consumer Rights 

HONOLULU: MAY 2, 2011 -- As the 2011 Hawai`i State Legislature moves closer to an end, boisterous applause, back-slapping, and high-fives erupted on the morning of Friday, May 1st in Conference Room 229 at the Hawai`i State Capitol as health insurance lobbyists congratulated themselves. They were celebrating the passage of Senate Bill 1274 that repeals a decade-old consumer protection law consumers have used successfully to overturn health plan denials approximately 80% of the time. The event marks the first known instance of insurance companies using the Patient Protection and Affordable Care Act (PPACA) to overturn stronger consumer protections than the 2010 legislation requires.

The bill, referred to as the "Baker Bill" after Rosalyn H. Baker, a state senator from Maui and its chief proponent in the legislature, goes to the floor of both houses on Tuesday, May 3rd. If the bill passes, the recently inaugurated Governor Neil Abercrombie will have 45 days to veto it. Although health insurance companies are not expected to do as well lobbying the democratic Governor, consumer advocates say they will continue, and increase, their widespread opposition to the bill which originated with his administration's new insurance commissioner, Gordon Ito.

On April 20, Hawaii's Congresswoman Colleen Hanabusa told a room full of people at Moanalua Elementary School cafeteria, many of whom were carrying signs opposing the Baker Bill, that it appears Hawaii has an "overzealous insurance commissioner" who came back from his first national insurance commissioner's convention gung ho and decided to replace Hawaii's existing law with the National Association of Insurance Commissioner's model act, conforming to federal minimum consumer protections. Hanabusa, the former President of the Hawai`i State Senate, who does not support the bill, was a member of the legislature that enacted the protections that have been so successful for Hawaii consumers.

Ito has had to back down from many of the initial arguments he originally made to justify the bill. Chief among those arguments was his contention that the bill would unite Hawaii consumers under a single process for appealing insurance denials. A controversial 2004 Hawaii Supreme Court decision left members of employer-paid plans out of Hawaii's process because of the federal Employee Retirement Income Security Act (ERISA) preemption widely lamented in the Federal judiciary.

Consumer advocates demonstrated that the Baker Bill changes nothing for ERISA members. Ironically, although the bill retains language declaring Hawaii's process was "broken" by preemption, the bill Senator Baker pushed actually fragments Hawai`i consumers into different types of processes. Consumer advocate Rafael del Castillo says, "Federal regulators told us that ERISA preemption of state review will no longer reach employer-purchased plans, so we have applied to the Department of Labor for an opinion on whether the 2004 decision still stands as to those plans. Until we get that opinion, Baker is speculating in an area she knows little or nothing about."  Del Castillo said that most of Hawaii's employees are members of employer-purchased plans because, since 1973, Hawaii has the nation's only ERISA exemption allowing it to require employers to pay for employee coverage.

Baker has resolutely insisted that federal regulations establishing minimum consumer protections will preempt the law her bill repeals, but consumers point out that Baker is hypothesizing, at best, because federal regulators have told no one in Hawaii that they view Hawaii's process to be inferior in any respect to the federal minimums. Hawai'i lawyer Evan Shirley stated, "The premise of the entire legislation is wrong. Federal temporary regulations require sixteen minimum protections and Hawaii's existing law provides protections that are superior and that meet and exceed the provisions of the PPACA.

Professor Emeritus of Torts and former University of Hawai`i Richardson School of Law Dean Richard Miller agrees. Miller has sent a number of letters to legislators and the Governor opposing the Baker Bill, and has testified in hearings in opposition. His most recent letter condemns the repeal of the existing protections: "The principal and most offensive purpose of this bill is to get rid of HRS §432E-6 which provides a very effective external review procedure -- an appeal to a three-person panel in the Office of the Insurance Commissioner -- when a health plan denies a medical procedure or medical benefit prescribed by a patient's physician."

Prof. Miller's letter decries the substitution of a review by a single physician, most likely in another state (so-called "Independent Review"), which would be final and binding under the Baker Bill. "It's nothing short of incredible to substitute an inferior process in an area in which the decisions often concern life-and-death matters." 

ACTION: Those concerned with their health insurance are urged to phone their own state senator and representative and tell them, "I'm an active voter living in your district. Please vote against Senate Bill 1274." Locate your senator's contact information HERE and your representative's HERE

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