Consumer Watchdog has identified at least 10 problem areas “in the new federal law that, if not addressed, will be exploited by health insurers and drug companies looking to charge more for less health care.”

From what I can tell, the list is pretty good, and makes me wonder why the organization wasn’t calling on Congress to fix the bill before it became law. Many of these issues have been covered on this blog and so I’m highlighting the main points and adding some commentary below, but the full letter is certainly worth reading.

- Lack of Insurer Rate Regulation. The federal law fails to adequately limit what insurers can charge American families and business owners for coverage, even though tens of millions of Americans are required to purchase private health insurance policies. Without the strongest possible review and prior approval of health insurance rates insurers will be able to raise rates nearly without limit and use rate-setting as a vehicle for continuing to cherry-pick the healthiest customers.

Unfortunately, there is little stopping insurers from increasing premiums before 2014. Lawmakers were unable to include Sen. Dianne Feinstein’s (D-CA) national rate review board in the reconciliation package — even though it had some loopholes in it that would have allowed insurers to transfer premium hikes into higher deductibles and co pays — and it’s unclear that Congress has the will to pass it as a separate bill. Without a national board, the rate review authority falls to the states.

- Weakening of benefits. Pre-emption of stronger state benefit requirements by so-called Nationwide and Multi-state plans will threaten the survivability of the state Exchanges and eliminate key health and consumer protections in many states. This is a “race to the bottom” provision that may allow insurers to sell highly profitable bare-bones policies under the guise of cutting costs. Consumers who fall seriously ill would suffer the consequences.

To be clear, the bill permits insurers to sell national plans or semi national plans in three ways. 1) States can form health care choice compacts and allow insurers to sell policies in any state participating in the compact. Insurers selling policies through a compact would only be subject to the laws and regulations of the state where the policy is written or issued (the states participating in the compact designate a primary state for the benefit mandate standards and rate regulations). Compacts may only be approved if it is determined that the compact will provide coverage that is at least as comprehensive and affordable as coverage provided through the state Exchanges. 2) Insurers can also sell nationwide plans that only comply with the benefit requirements of the state from which the coverage is sold. 3) Insurers can sell multi-state plans that comply with the new federal rules but ignore state based consumer protections.

Either way, the concern is the same. The federal rules provide a floor of regulations, but insurers will have every incentive to sell coverage from the states with the worst consumer protections and pressure compacts to declare the state with the lowest standards as the primary state. This will allow insurers to lure younger and cheaper individuals into national policies, driving up health care costs for everyone else (particularly the exchanges).

- Continued rescission. The federal law allows insurers to define the terms of future coverage rescissions when customers fall seriously ill in the fine print of their policies. The law limits rescission of health policies to instances of fraud or “intentional misrepresentation,” however no new regulatory oversight of rescission is provided to ensure that omissions or errors are indeed fraudulent or intentional, rather than innocent mistakes.

I fear this will become a problem. After all, insurers are already required to renew policies in the individual health insurance market under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), but often “do not follow federal standards and instead follow state laws that offer weaker consumer protections.” It’s unclear which agency will implement the federal standards.

Existing law already stipulates that in “most cases, that employers or individuals who purchase health insurance can renew the coverage regardless of any health conditions of individuals covered under the insurance policy.” The exceptions to guaranteed renewability are: non-payment of premiums; “fraud or other intentional misrepresentation”; if the insurer is leaving the market; if an individual or employer moves out of geographic area of the plan; or, in the case of an association policy, if an individual has left the association contracting with the plan.

- Definition of medical expenses.  Consumer Watchdog has called on the Obama Administration and the Department of Health and Human Services (“HHS”) to probe insurance giant WellPoint Inc. in light of a message to its investors describing how WellPoint would simply re-label administrative costs as “medical care” in response to the new health reform law. HHS must narrowly define what constitutes medical care to block gaming of the new medical loss ratio requirement by health insurers.

These definitions will certainly become critical and HHS is currently asking the National Association of Insurance Commissioners (NAIC) and the public comment for input on how to define these terms.

Yesterday, my boss Faiz Shakir noted that at least one doctor has admitted to laying off an “Obama voting employee” to protest President Obama’s new health care law. The doctor wrote, “Our reimbursement rates are spiraling downward, taxes are projected to go up with Obamacare, so I did it,” he said, adding: “I made this decision because I can.”

Faiz argues that “these purported concerns over burdensome costs on physicians is pure fear-mongering,” noting that the new health law actually “includes an increase in Medicaid payment rates” for 2013 and 2014, which is “expected to be pretty helpful” for most doctors. The increase in Medicaid reimbursements contradict the doctor’s claims, but they’re only the tip of the iceberg. Maggie Mahar helpfully points to the AMA’s extensive list of benefits for physicians. They include:

- 10 percent bonus for primary care physicians. All physicians in family medicine, general internal medicine, geriatrics and pediatrics whose Medicare charges for office, nursing facility and home visits comprise at least 60 percent of their total Medicare charges will be eligible for a 10 percent bonus payment for these services from 2011–16.

- 10 percent bonus for general surgeons performing major surgery in areas where more health professionals are needed. All general surgeons who perform major procedures (with a 10- or 90-day global service period) in a health professional shortage area will be eligible for a 10 percent bonus payment for these services from 2011–16.

- 5 percent bonus for mental health services. In  2010, Medicare is boosting payment for psychotherapy services by 5 percent. 

- Geographic payment differentials. In 2010 and 2011, Medicare will make a separate adjustment for the practice expense portion of physician payments that will benefit physicians in rural and low cost areas.

Now, the bill certainly isn’t perfect. It only increases payments for several years and doesn’t include a permanent SGR fix. But as Mahar notes, the positives certainly outweigh the negatives and nothing in the legislation should inspire physicians to fire their staffs. Doctors “will benefit from an influx of formerly uninsured patients who, thanks to government subsidies and new regulations will be able to seek care. Many of these patients will suffer from pre-existing conditions; others will be low-income Americans who may not have seen a doctor for some time.”

Last night, the Tennessee House of Representatives approved HB 2681, a measure that would prohibit insurers from offering abortion services within the exchange and could possibly deny coverage to common contraceptives. Sponsors of the abortion measure maintained that their bill would only prohibit tax dollars from funding abortions in the exchange, but the measure’s broad language — it says, “No health care plan required to be established in this state through an exchange” — would deny women the right to purchase coverage for abortions (including Hyde-exempted abortions) with private dollars in the exchange and could significantly disadvantage women who need to obtain an abortion in instances of rape, incest or if their life is in danger.

In fact, the House rejected an amendment clarifying that women would be able to buy supplementary abortion coverage with private dollars in the exchange. Rep. Matthew Hill, the bill’s sponsor, argued that women whose life was in danger or those who became pregnant a result of incest or rape “would be able to pay with a private insurance plan, they would be able to pay out of pocket, if they were indigent, TennCare would allow for that to take place.” He was also unmoved by appeals from his Republican colleagues who argued forcing some women to pay for Hyde abortions out of pocket could threaten women’s lives, as some would surely find the proceudre cost prohibitive, particularly if they had health complications that dramatically in creased the price. “At the end of the day, this is very simple. Do your constituents want their tax dollars going to kill unborn babies? It’s as simple as that,” Hill insisted.

House Democrats argued that the bill’s broad definition of abortion could very well deny coverage for common contraceptives. “What you are doing here is you are prohibiting a huge number of birth control methods, if this is the citations you are using [to define abortion]. I’m just saying to my colleagues that this is going way beyond what I believe Rep. Hill intends for it to do.” “If you’re trying to prohibit exchanges from paying for birth control, that’s exactly what you’re doing,” one representative argued.

Before the bill passed, the House also rejected an amendment that would have prohibited insurers from covering men’s reproductive needs.

Earlier, a House committee approved The Tennessee Health Care Freedom Act, which “declares that Tennesseans can ignore a federal health care law that includes penalties for those who refuse to get health insurance.” The state Senate also voted 21-7 “to pass a resolution urging the Tennessee attorney general to join states challenging the constitutionality of the federal health care overhaul.”

Yesterday, Bill O’Reilly challenged Mitt Romney on the success of RomneyCare, forcing the Governor to defend his plan and admit that far from finding a state solution to a state problem — as Romney always argues in his stump speeches — Massachusetts relied on federal dollars to expand health care coverage.

“Actually, from the beginning the plan was a 50/50 deal between the federal government and the state government,” Romney said, when O’Reilly claimed that state spending on health care was out of control. “The Feds fund half of it, they have from the very beginning,” he repeated, while maintaining that Massachusetts solved “a problem at the state level.”

O’Reilly wasn’t buying it:

O’REILLY: You know me. I’m a simple man. Okay? You say you solved the problem in the state, but depending on 50 percent of your funding from the Feds.

ROMNEY: As we did from the beginning.

O’REILLY: Okay, but I’m just telling you, I don’t know if you solved the problem or the people in Idaho solved it.

ROMNEY: No, but what we did is we took the money the Feds used to send us–

O’REILLY: Yes.

ROMNEY: –to give to the hospitals that were giving out free care. The hospitals were doing that before. And we said, look, can we take that money that you give to us that we give to the hospitals and instead of giving it to hospitals–

O’REILLY: You’ve spread it around.

ROMNEY: We’re going to use it to help people buy insurance.

O’REILLY: Okay. One more and–

ROMNEY: It was not a new burden on the federal government. It was a redirection of what they’ve been doing before.

Watch the exchange:

National reform is “going to be a huge entitlement, which is the federal government taking power away from the states,” Romney maintained. “We solved our problem at the state level. We did it without raising taxes. That’s the key.” But this isn’t very accurate. First, Massachusetts did tax insurers, hospitals, and employers (as well as individuals who refused to purchase coverage) to fund health reform. Second, Romney is pretending that Massachusetts decided to one day solve “our problem at the state level” by simply rerouting existing federal funds to pay for the changes. In reality, the federal government pressured the state to change its Medicaid program or lose $385 million dollars, thus helping bring about reform. The federal dollars Romney used to expand coverage came with strings attached — the state had to shift federal resources from supporting individual hospitals to funding health insurance coverage for uninsured individuals — and the state had to seek the federal government’s seal of approval.

The same thing is true about the federal health care bill. It provides states with federal funding to expand the Medicaid program, establish high-risk insurance pools, set up exchanges and then gives states some leeway in implementation. The health care law establishes federal standards and is obviously much broader in scope than the Massachusetts plan, but it’s predicated on the principle that states simply aren’t capable of reforming something as large as health reform without federal assistance. Romney should know that better than anyone.