Patient Protection and Managed Care: Legislation in the 107th Congress

Publication Date: September 2002

Publisher: Library of Congress. Congressional Research Service

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Research Area: Health

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Abstract:

Most Americans have health insurance plans that provide services through some kind of managed care arrangement. While financial incentives under fee-for-service insurance can lead to wasteful and possibly harmful excess services, incentives under managed care plans could lead to underutilization of necessary services. Congress is responding to this concern by proposing to regulate, at the federal level, various aspects of managed care and other types of health insurance. During the 106th Congress, the House and Senate passed comprehensive patient protection bills but were unable to reconcile the differences and send a bill to the President. (H.R. 2990 passed on October 7th, 1999 and S. 1344, passed on July 15, 1999.) The 107th Congress is revisiting the patients rights debate. The Senate and the House have each passed a bill (S. 1052 and H.R. 2563, respectively) that would establish federal standards mirroring various state laws as well as recommendations in the 1997 Consumer Bill of Rights as developed by former President Clinton's Advisory Commission on Consumer Rights and Quality in HealthCare. This document provides background information on the issues surrounding patient protection and reviews the major differences between the Senate-passed and House-passed bills. For more detailed descriptions of the provisions included in S. 1052 and H.R. 2563 see CRS Report RL30978: Patient Protection During the 107th Congress: Side-by-Side Comparison of House and Senate Bills.

Traditionally, the regulation of health insurance largely has been left to the states. They have passed numerous managed care and patient protection laws. However, the federal Employee Retirement Income Security Act of 1974 (ERISA) preempts the application of such laws for about 56 million persons enrolled in "self-insured" group health plans through private employers. These are plans in which the employer takes some or all of the risk of paying for covered items and services. For enrollees of self-insured plans, federal law applies, but few protections currently exist in the federal statutes. As a result, there is a patchwork of federal and state regulation leading many to seek federal standards that would apply broadly to all health plan enrollees, regardless of who sponsors their health plan or whether they self-insure.

Both of the bills under consideration would apply federal patient protections to all insured Americans. The most significant differences between these bills are in the provisions expanding patients' legal remedies against their health plan providers when medical care is unjustly denied and the denial results in harm. Other differences include provisions applying the protections to federal health programs, prohibiting discrimination on the basis of genetic information, and encouraging health insurance coverage expansions.

The health insurance industry and many employer groups are strongly opposed to increased federal regulation of managed health care. They argue that it is unnecessary because the market is responding to consumer concerns, and that more regulation will raise health care costs, increasing the number of uninsured Americans. On the other hand, supporters of increased federal regulation, including many provider and consumer advocacy groups, believe that such regulation is needed to restrain market excesses that could jeopardize health care quality and access and that such regulation would result in only small additional costs.