MOST CONSUMERS with private health insurance get it through their employers. Not surprisingly, some consumers run into problems, which range from the mundane, such as mix-ups on referrals to specialists, to the life-threatening, such as denials of care. After working through a plan's internal complaint process, a number of consumers eventually need help from state regulatory agencies, such as the attorney general's office or the insurance administration, to fix their problems.
Unfortunately for growing numbers of consumers, these valuable resources are unavailable. These consumers are in a legal and regulatory limbo - called self-insured health plans - where no state agency can help them, and the federal government, which created this mess, provides precious little relief.
Self-insured plans are exempt from the jurisdiction of state agencies and do not have to abide by any of the rules that apply to health plans regulated by the state, such as financial solvency standards or state-mandated health benefits.
In a self-insured health plan, the employer actually pays health care bills itself, rather than buying an insurance contract from a health insurer, such as a health maintenance organization. When an employer purchases a traditional insurance contract, it passes financial risk to the health insurer and waits to see if premiums rise or fall based on claims experience. In self-insurance, the employer bears the financial risk.
Self-insured employers contract with health insurers to manage the paperwork and cash flow, as well as administer the plan benefits and sign up networks of providers to serve employees. Most health care consumers who choose health plans through their workplace do not know what plans are self-insured, because self-insured plans look like those that are not self-insured and typically have the same benefits.
Self-insurance in health care results from a federal law called the Employee Retirement Income Security Act, or ERISA, passed in 1974, to set federal standards for pension plans. Congress also included certain health care plans, but in a fit of shortsightedness, did not create standards or an oversight/enforcement mechanism for ERISA-governed health plans.
The uneven policy approach creates a critical problem in the health care marketplace, because 44 million privately insured health care consumers are in self-insured plans. This number likely will increase as more employers try to get out from under state regulation. While self-insurance was once almost exclusively the domain of large companies, more small employers are looking to self-insure, which is bad news for consumers.
Self-insured plans subject to ERISA deprive consumers of protections in state law. ERISA also keeps states from implementing comprehensive health insurance reforms within their borders, because no state laws apply to self-insured health plans. ERISA's impact on policy-making also means that after states act on a consumer health issue - such as legislating length-of-stay guidelines for childbirth stays and mastectomies - Congress must act to fill in gaps not affected by state law.
In another example of playing follow-the-states, Congress is considering legislation to set a "prudent layperson" standard for emergency room care, something that is already law in Maryland and more than a dozen other states.
Under this kind of statute, health plans must pay for emergency room care if, upon review of the bill and medical records, the plan concludes that a prudent layperson would have sought care in the emergency room. Previously, health plans often denied payment for emergency room visits because the final diagnosis did not indicate a condition requiring emergency care, even though initial symptoms - those that make someone seek medical care - were serious enough to prompt an emergency room visit.
The U.S. Department of Labor, which has legal authority over self-insured plans, does little to help consumers with complaints over unpaid claims or denials of care. The Labor Department has, however, started a two-year pilot project with the Oklahoma insurance commissioner to let the state intervene in consumers' complaints against self-insured health plans over denied benefits unpaid claims.
Maryland's elected officials should explore starting another phase of the project here. The attorney general's Health Education and Advocacy Unit has, over its 10 years of existence, persuaded many self-insured health plans to mediate consumer complaints voluntarily. This unique expertise should be available all consumers in self-insured plans in Maryland, and the unit would make an ideal partner for the Labor Department.
Consumers who are selecting a health plan should ask their employer which options are self-insured to understand fully how the self-insured plan compares to other options, not just in terms of benefits, but in terms of avenues for problem resolution.
When problems arise, consumers in self-insured plans should file a complaint with the plan, clearly and carefully documenting the issues. If the plan does not resolve a serious complaint, they should ask their employer to intervene. No company wants its employees treated poorly or unfairly by the health insurer administering the self-insured plan. Finally, if all else fails, a consumer in a self-insured plan might need to find a lawyer with experience in ERISA claims and pursue a civil action in federal court.
Congress should amend ERISA to give the states a greater role in resolving consumers' complaints and in reforming their health care markets.
As written, ERISA impedes comprehensive health care reform in the states. Advocates of ERISA protest that letting the states get too involved would lead to 50 different health systems. The alternatives under ERISA are worse: continued piecemeal intervention by the federal government or a health care system driven by thousands of employers making their own health policy, in a context devoid of benefit standards, financial reporting, solvency or disclosure requirements, or consumer protections.
Vikram Khanna is a health policy consultant in Columbia with State Health Policy Solutions L.L.C.
Pub Date: 3/30/97