TESTIMONY

COLLECTIVE BARGAINING FOR PHYSICIANS

 

HOUSE INSURANCE COMMITTEE

 

AUGUST 29, 2000

HARRISBURG, PA

 

ROSS SCHRIFTMAN, RHU, LUTCF

LEGISLATIVE CHAIR

PA ASSOCIATION OF HEALTH UNDERWRITERS

 

1250 Easton Road #270

Horsham, PA 19044

215/682-7075

FAX 215/682-7076

 

TESTIMONY

Good morning, Chairman Micozzie and Chairman DeLuca.  Thank you for convening this hearing.

 

My name is Ross Schriftman.  I serve as Legislative Chair of the Pennsylvania Association of Health Underwriters.  Our members are primarily independent agents and brokers who sell health insurance to our clients on behalf of health insurance companies and HMOs.  Our goals as business people are to insure as many people as possible and to advocate for our clients to make sure they get the benefits they paid for when they are sick or injured?  Our livelihoods depend on Pennsylvania having fewer uninsured and on satisfied customers who could easily go the agent down the street if they are dissatisfied with us.

 

CONTRACTUAL RELATIONSHIPS

Insurance agent relations with the physician community are somewhat unclear as illustrated by the following anecdote.  Last summer, I witnessed testimony regarding an idea for an insurance ombudsman.  The lobbyist for another agent association had just testified that the agent has an important role of advocacy for the consumer, going to bat for them with both doctors and insurance companies to get the claim paid.  He was followed by a representative from the physicians who lamented the fact that there were no agents in the health insurance market and thus no one to advocate for the consumer.  It was clear that he was unaware of the fact that at least 30,000 health insurance agents work for Pennsylvania’s consumers.  All he saw were insurers denying or delaying claims.  His understanding of the health insurance system was incomplete.  I think that doctors could reflect on a larger view of the health system before putting their eggs in the collective bargaining basket.

 

I ask that you consider this.  Doctors’ and agents’ relations with insurers and HMOs are strikingly similar.  We are independent contractors.  We agree to represent a health insurance plan by signing a contract.  If we are not happy with the provisions of the contract including the compensation for our work, we have choices.  We can refuse to sign the contract and decide to do business with other carriers.  If enough agents and brokers do so, the carriers have a choice. 

Either they can revise their contract with more favorable terms or they can decide to take the chance of having fewer agents representing them.  As business people, we could also make a business decision and agree to work under the contract even though we may not like all the provisions.  There is free will and in a free and open economy that is our choice.

 

THE NEED FOR COMPETITION

The problem of course occurs when only a handful of insurers dominate the market.  Our clients may want to purchase health insurance coverage from one of the few large carriers.  That is the same position that physicians find themselves in today in Pennsylvania.  If they do not participate, they do not get the patients.  Our view is that rather than creating two competing large players (the insurers and the doctors) we should be promoting competition in both.  Consumers will not be served by having to deal with two opposing forces dominated by only a handful of large organizations.

 

PAHU supports increased competition so that Pennsylvanians can choose from a wide range of health insurance choices.  We also support making health insurance more affordable.  Creating an Income Tax Credit on the Federal level and a small business health tax credit on the State Level can do this.  Such government policy would result in attracting more insurance companies and HMOs to come into our market. 

 

For physicians and other providers, this, more than another government mandate, would create a more level playing field.  They would be able to negotiate better terms because patients would have more plans to choose from.  If the physician is not satisfied with a particular plan’s contract he or she could decide not to participate because a substantial number of patients would have other health insurance plans to choose from.  Ultimately, the patients would be making the decision about which plan best serves them.  If he or she is unhappy with the health plan, they could choose another.  Now some would say that the employer chooses the health plan.  That is true to a degree.  However, consider this.  The owner of the company is also a patient.  Business owners have families with medical conditions.  They have as much at stake in making sure they have a quality health plan as every other employee. 

 

Furthermore, in many small businesses, the employees and the boss get together and decide what plan will work for their group.  The bottom line is that we want to put our clients in control of their own health insurance decisions. 

For our membership, competition is good. Lack of competition and the rise in health care costs has not only increased premiums, but has drastically impacted our member’s bottom lines.  Some carriers have cut agent commissions in half in recent years.  Commissions are not salaries for independent agents.  Commissions are gross receipts that pay the rent, the salaries of office staff, and the marketing expenses.  Our market expenses result directly in more Americans being insured.  These commission cuts have resulted in many of our members abandoning the sale of health insurance in favor of more profitable insurance lines that offer less aggravation than the sale and service of health insurance.  Despite all of this, we have not and will not ask for government intervension to improve our contractual arrangements with the insurance companies we do business with. 

 

There is one exception, however.  Our National Association asked the Health Care Financing Agency (HCFA) to look into the practice of some carriers who were discouraging agents from selling the Federal Guaranteed Issue contracts required under The Federal Health Insurance Portability and Accountability Act of 1996.  May I point out that this situation occurred in states other than Pennsylvania.

 

This law known as HIPAA required states to have a mechanism to provide guaranteed issue health insurance to those Americans who lost coverage due to a change in jobs.  Some carriers were paying less commission or no commission for such health insurance coverage.  This, HCFA found to be a violation of the HIPAA law and the carriers no longer can do this.  The difference here is that law required insurance companies not to discourage HIPAA eligible individuals from acquiring health insurance.  Our members receiving less commission than an other contracts was simply seen as the reason for people not being able to acquire insurance.  We are still and will continue to be disallowed from jointly negotiating with carriers.

 

WHAT DO WE FACE?

Now to comment on the legislation at hand.  Everyone in Pennsylvania will be effected by the proposed legislation.  This legislation will make our job harder by dramatically increasing the cost of health insurance and increasing the number of people without coverage.  Who will be treating the uninsured?  They are patients too and need protection.

 

What exactly are the contract provisions that doctors find so objectionable?  Do any contracts in today’s market prevent a doctor from discussing treatment options with their patients?  Do any contracts penalize doctors for treating patients who have a medical condition?  Do any contracts prevent doctors from ordering tests if they suspect the patient is suffering from a medical condition?  If I were a doctor, I would not sign such a contract if it contained such provisions. 

 

The legislation also poses a difficulty in determining market share.  Our market is changing rapidly.  There are mergers, acquisitions and sales of blocks of business all the time.  This type of legislation will create a great amount of disruption because some contracts will be negotiated under the rules and then, if the market changes, the next provider will not have the same protection.  Contracts with the same carriers or the new buyer of the carrier could be substantially different causing confusion among consumers, providers and insurers.  Will all providers negotiate their contracts at the same time?  What about a new physician that just began practice?  Where will this person stand if they join the plan after the negotiation?

 

The very goal of improving competition would be undermined by this legislation.  Carriers coming into our market would have to determine that if they are successful and gain market share, they have to price their product high enough to cover what providers may demand.  This will make it harder for them to participate.  They may not know how well they will do in marketing their product in different regions of the state.  They may decide that there are so many variables that it is impossible to know how to price the product.  This would preclude them from coming into Pennsylvania to compete.

How did we get where we are today with only a few dominant carriers with huge networks of doctors?  I remember the difficulty in presenting plans during the 1980s when I would show employers a policy from a company out of Texas or Ohio or Wisconsin and they would tell me that their doctor doesn’t recognize the name and would prefer that the purchase of coverage be from one of the local name brands.  Agents, consumers and physicians tended toward the comfortable, well known names.  Additionally, I am sure that many doctors joined the HMOs in the 1980s and early 1990s because they made a business decision.  The decision was to fill their office with patients through the marketing efforts of the HMOs to attract employer groups to their plans.  Agents also saw the opportunity and carriers saw agents as a way to reach the small and mid-size businesses that we have relationships with.  We all contributed to the growth of managed care and there has been much good done.   The dominant players have provided the financing mechanism to grow our health care economy and to pay billions of dollars for care of sick Pennsylvanians over the years.  However, it is time to promote competition again.  Let us not create a less competitive environment.  We should not replace domination by one industry with shared domination by two.

 

PAHU does not believe that the business of government is to correct what any segment of the business community does not like in the contracts they negotiate with one another.  The results of joint negotiations will primarily serve the needs of the group that is negotiating.  There is nothing in such negotiations to prevent physicians to set terms that are favorable to them and due harm to consumers.  Let me give you an example of an area that could be negotiated with PPOs that could hurt patients.  Recently, a client of mine had throat cancer.  Her health plan is a PPO.  She chose to have the surgery done by a non-participating doctor.  However, network providers performed all the other services she received.   This included the hospital.  Since her surgery, she has been getting bills and collection notices from each one of the in-network PPO providers.  This practice is called balance billing and is a violation of the providers’ PPO contract.  For example, the hospital bill was $41,000.  The PPO negotiated price paid to the hospital was $38,000.  She has been getting billed the $3,000 difference for the last several months.  Ultimately, she will not have to pay this difference. 

These providers seemed to want it both ways.  They wanted to participate in the plan, but they want to be paid “full freight” by having the sick patient pay the difference.  At the same time, they are causing undue stress to my client at the very time she is trying to recover from her surgery.

 

Many of our members have suggested this to be a common occurance.  We believe that a proper role of government is to investigate violations of contracts that hurt patients whether the violations are being practiced by insurers or providers.

 

We have many concerns about how this proposal would play out with certain contractual negotiations.  What is to prevent a group of providers from insisting that they have the right to bill the difference to patients and negotiating this into their contract?  This is just one example, but there could be variations specific to the concern about the contract provision referred to as “All Products”.  However, would it be OK for a physician’s group to say that all HMO contracted providers will only agree to participate in the $10 co-payment HMO and not the $20 co-payment plan?  Wouldn’t this eliminate choice and force consumers to have to accept only the $10 co-pay plan? 

 

Let me give you another potential problem.  What about competition between different types of providers?  What would prevent a group of providers from dictating to a health plan that a competing group of providers with a different focus would not be allowed to participate?  For example, let’s say a group of providers do not believe in acupuncture or holistic medicine or chiropractic treatment.  They could say to the plan, "If you allow these types of providers to be part of your plan we will refuse to sign our contracts."  Does this type of action serve the consumers?  Isn’t this anti-choice and anti-patient?  I must emphasis that I am not aware that this will happen, but there are a wide variety of conflicts within the provider community with competing treatment remedies.

 

Another example could be that a group negotiates that all new providers must be in practice five years or they refuse to participate.  This could force health plans not to be able to offer contracts to new physicians.  This is another potential problem.

 

Still another example of how consumers could be hurt is the elimination of report cards on doctors by health plans.  Many plans provide their members with a report on the performance of doctors in a wide range of areas.  Some physicians may object to this and negotiate that this type of consumer information be dropped.  Again, who benefits here?

 

Self-funded plans escape the provisions of the proposed legislation.  As we pointed out several weeks ago during the hearings on State Mandates, the growth of self-funded plans that escape State regulation have created an uneven market for health insurance between large corporations and small businesses.  This legislation will drive that wedge deeper and result in more small businesses dropping health insurance coverage or taking a risk on self-insuring.

 

Increased costs to government programs such as Medicaid, the Federal Employee Health Insurance Benefits Program and The CHIP program will result.  In addition, the taxpayers of Pennsylvania will have to foot the increased costs for the health benefit of State employees as well as municipal workers and teachers.

 

PROBLEMS FACING PROVIDERS

We certainly recognize the enormous problems confronting the provider community. The frustrating amount of paperwork that physicians must face has hurt our health care system.  More regulations will not help.  We need to diminish the “hastle” factor experienced by many doctors.  The staffs of physician practices have told me about endless delays in payments and approval of part of a procedure and denial of other parts within the same operation.  These incidents appear to be contract violations.  What is needed is better enforcement; not more regulation.  Perhaps, the Health Unit in the Attorney General’s Office is the proper place to resolve these problems. 

 

Even more useful in the long term will be increased competition which will result in health plans trying to attract the very best doctors by providing contracts that are easy to follow and support the physicians efforts on behalf of their patients.  I hope the physician community can put forth proposals to reduce their regulatory paperwork load.  We would be glad to lend support for this effort.

The General Assembly might also reconsider tort reform for doctors.  They feel they are being squeezed on one hand by the HMOs’ desire to cut costs (reimbursement to doctors).  On the other hand, doctors must receive more money from HMOs to make up for the increasing costs of medical malpractice protection coming from our ever more litigious society.  I know Representative Chadwick and the General Assembly tried to do tort reform a few years ago but were rebuffed by the courts.  Still, the goal of tort reform should not be lost.  The primary purpose of the medical chart should not be for legal defense but for patient treatment.

 

PAHU would like to see increased efforts on the promotion of public awareness of Act 68 and its provisions for patient protections rather than setting up an expensive and cumbersome regulation of an anti-trust exemption for some providers who deal with a handful of dominant insurers.  This will serve the consumers far better than a collective bargaining law.  I believe that few Pennsylvanians even know about Act 68 and what protections it contains.

 

THE FUTURE FOR HEALTHCARE AND THE ECONOMY

The General Assembly’s main focus on health care issues should be to increase the number of Pennsylvanians who have health insurance.  This legislation will have the opposite affect by driving up premiums.   This legislation will make our job of getting more people insured very difficult.

 

Physicians are business people just as insurance agents and car dealers.  They may have a unique position as healers and advocates for patients, but they are in business and need to negotiate contracts as individuals or corporations with those they do business with.  Giving the same rights to business owners as our enjoyed by workers turns our free enterprise system on its head.  We may start with the health care system.  However, what will be next?  Could general contractors in the housing industry claim down the road that they need an exemption because there are only a few dominant suppliers of wood?  What would happen to the price of homes?  Could the auto industry have the same results?  Currently, there are only a few dominant auto manufacturers.  Could the independent franchisees ask for the same protection?  What would be the cost of a new car if this were to happen?

Advocates for doctor collective bargaining talk about improving patient care by the doctor receiving a fairer reimbursement for services rendered.  Detractors see it as nothing more than a chance to create a doctor’s union to artificially drive up the cost of medicine as a way to improve the collective bottom line.  Although the truth is probably in the middle, doctors who chafe under one system may have to face the fact that they are now governed by The National Labor Relations Board and the U.S. Department of Labor.  Are they sure that they really want this?  Be careful what you ask for.  Once they abandon the fact that they are independent contractors per contracts with insurers, they could be governed by all the trappings of labor law such as rules regarding strikes, etc.

 

As an independent businessperson, I would not want my association to negotiate on my behalf for a better contract.  They could not possible know exactly what my needs are.  What if I am not satisfied with their negotiations? Could I negotiate on my own?  If a cartel sets reimbursement rules and working conditions, I as an independent will be unfairly squeezed.

 

It is a dangerous path for government to become involved in the regulation of negotiations between private parties whether it be two individuals on Main Street or a giant health insurer and a group of physicians.  These are areas that are usually best left up to the parties.  The role of government, however, is to enforce anti trust laws so that no one group dominates an industry.  The role of government should not be to create competing dominating forces; not promote a consolidation of economic power in the hands of a few.

 

We encourage our members to recommend health plans that understand and support the doctor/patient relationship.  That is why our national association developed a voluntary managed care marketing guide that lists the qualities we would like health plans to promote.  Both health plans and doctors can work together to improve the quality of care.  Credentialing and monitory are the responsibility of both.  To eliminate that function through negotiations will not be in the best interest of patients.

As a society our number one concerns with health care is the quality and affordability for patients.  It is up to all of us (doctors, insurers, patients, employers and agents) to do better.

 

I have attached with my testimony copies of excerpts from the testimony of The Federal Trade Commission and U.S. Department of Justice concerning their opposition to HR1304, The Federal Collective Bargaining Bill.  I have also enclosed an article by Janet Stokes Trautwein, our Director of Federal Policy Analysis concerning the same legislation.

 

OUR POSITION

In conclusion, I have to tell you that this testimony was difficult to write because I empathize strongly with the difficulties many doctors face.  As an agent, nothing upsets me more than endless paperwork that takes me away from the time I need to spend advising my clients. Obtuse rules by insurers that stifle rather than assist consumers offend my desire to meet people’s needs.  An arbitrary reduction in commission hurts my ability to earn a decent living for the many hours I work.  Despite this empathy, I do not beleive in the concentration of economic power in any industry, whether it be banking, insurance or medicine.

 

Despite my empathy to their cause, I think doctors are choosing the wrong path in this instance.  PAHU cannot support legislation that would allow the doctors to create their own cartels.  The consumer will be hurt in the long run and perhaps the doctors as well.

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