Will Federal Court Back Rules Treating Health Insurance as a Utility, Not a Luxury?

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On June 14, 2016 a Federal Court ruled that broadband internet is as essential to American as phones, electricity, water and sewer systems and should be available to all Americans as a utility, rather than a luxury that doesn’t need close government supervision.

In the United States, public utilities are often natural monopolies because the infrastructure required producing and delivering a product such as electricity or water is very expensive to build and maintain.  As a result, they are often government monopolies, or if privately owned, the sectors are specially regulated by a public utilities commission which severely limits the profits for the private utility company and the associated costs passed on to consumers of that utility.

There is nothing more essential to the lives and well being of Americans than health insurance and therefore healthcare is the ultimate utility.

Of all the developed nations on the planet, safe quality affordable American health care continues to be a luxury and not a utility for most citizens. Most Americans remain one major illness away from personal financial ruin due to under-insurance and 10’s of millions of Americans are uninsured.  Most American locales have only one or two major Health insurance corporations serving the area creating natural monopoly’s which charge citizens exorbitant premiums and co-payments for healthcare along with rationing of access, diagnostics and treatments.  This lack of capitalistic competition in most major markets among health insurance companies results yearly in hundreds of billions of healthcare dollars redistributed into the pockets of insurance company executives, shareholders, bondholders, 1 million insurance company bureaucrats and their patron politicians.  Unregulated insurance company profits (exactly what the Utility concept prevents) results in limited expensive preventive, medical, surgical and palliative care for a large portion of Americans.

What if we in America treated the health insurance industry like a utility? It’s entirely possible if our country adheres to the industrial utility laws founded in the 1800’s.

Below is a copy of a recently published article from the NY Times (6/14/16), explaining why and how broadband internet became a ‘utility’ instead of a luxury for America.  I have edited just a few words and names in the article, for example, inserting the words “health insurance” for “broadband internet” in order to demonstrate how easily the Utility laws could be applied to Health Insurance industry via the Federal Courts.

WASHINGTON — Health Insurance can be defined as a utility, a federal court has ruled in a sweeping decision clearing the way for more rigorous policing of health insurance companies and greater protections for patients.

The decision affirmed the government’s view that quality affordable health insurance is as essential as the phone and power and should be available to all Americans, rather than a luxury that does not need close government supervision.

The 2-to-1 decision from a three-judge panel at the United States Court of Appeals for the District of Columbia Circuit on Tuesday came in a case about rules applying to a doctrine known as “safe quality health care for all”, which prohibit health insurance companies from blocking access or rationing the delivery of healthcare to consumers.

Those rules, created by the Department of Health and Human Services in early 2015, started a huge legal battle as health insurance companies, pharmaceutical companies, electronic medical records companies and hospitals sued to overturn regulations that they said went far beyond the HHS and would hurt their businesses. On the other side, millions of health care consumers (patients) and their physicians rallied in favor of the regulations. President Obama also called for the strictest possible mandates on health insurers.

The court’s decision upheld the HHS on the declaration of health insurance as a utility, which was the most significant aspect of the rules. That has broad-reaching implications for health care consumers and physicians that have battled for five decades over the need for regulation to ensure that all American patients get full and equal access to all preventive, medical, surgical, home health and palliative care.

“After 5 decades of debate and legal battles, today’s ruling affirms the commission’s ability to enforce the strongest possible health insurance protections — both on local and nationwide insurance networks — that will ensure that quality healthcare remains affordable and accessible, now and in the future,” Tom Wheeler, chairman of the HHS, said in a statement.

The two judges who ruled in favor of the HHS emphasized the importance of health insurance as an essential part of healthcare for consumers.

“Over the past five decades, healthcare and illnesses have transformed nearly every aspect of our lives, from profound actions like choosing a leader, building a career or nest egg, and falling in love to more quotidian ones like hailing a cab and watching a movie,” wrote David Tatel and Sri Srinivasan, the judges who wrote the opinion.

But the legal battle over the regulations is most likely far from over. The health insurance, pharmaceutical, hospital and electronic medical records industries have signaled their intent to challenge any unfavorable decision, possibly taking the case to the Supreme Court.

Aetna Health Insurance, Blue Shield Blue Cross, United Healthcare, Merk, The HCA and Kaiser Permanente immediately said they would continue to fight.

“We have always expected this issue to be decided by the Supreme Court and we look forward to participating in that appeal,” said the senior executive vice president and general counsel for Blue Shield Blue Cross.

For now, the decision limits the ability of health insurance providers like Untied Healthcare to shape the experience of healthcare consumers by rationing access, prevention, diagnostics, treatments or palliative care. Without quality affordable healthcare for all rules, the insurance companies could be inclined to ration access to providers or medications for example, making the consumers more ill or poor. Such business decisions by health insurers would have created poor quality health care and sub-optimal health for most in America, subjecting health care consumers to extra charges and limited access to providers, diagnostics, treatments and palliative care, the HHS has argued.

“This is an enormous win for health care consumers,” said Gene Kimmelman, president of the public interest group Public Knowledge. “It ensures the right to safe quality affordable healthcare with no gatekeepers.”

Dan Munro, chairman of the HHS said the court’s ruling would “ensure healthcare in America remains open, accessible, and affordable now and in the future.”

The 184-page ruling also opens a path for new limits on health insurers beyond rationing, co-payments and premiums. Already, the HHS has privacy rules for health insurers, curbing the ability of companies like United and Aetna to collect and share data about patients.

The American College of Physicians, AARP and the  PNHP all support quality affordable healthcare for all rules and have warned government officials that without regulatory limits, health insurers will have an incentive to create business models that could harm health care consumers (patients). They argue that health insurers could degrade the quality of access to providers, preventive care, diagnostics, treatments and palliative care to extract tolls from physicians and patients or to promote unfairly their own competing services or the insurance of partners.

The court’s ruling was a certainty for the H.H.S.  Two of the three judges who heard the case late last year agreed that  health insurance services were also common utility services that were subject to anti-blocking and discrimination rules, a decision protested by insurance companies including Cigna and Kaiser Permanent.

In the opinion, the two judges in favor of the rules said health care consumers (patients) users don’t feel the difference between physician’s access, physical examinations, diagnostics and treatment suggestions. To patient who may seek care in different parts of the Country, the government’s oversight of those health insurance companies should not differ, they said.

Doctors cheered the decision, which they said would be particularly helpful to small practice physicians that did not have the resources to fight health insurance companies.

“Today marks a huge victory for the hundreds of thousands of small practice physicians who depend on the health insurance market to reach health care consumers (patients), produce optimal clinical outcomes with patients and compete in the healthcare marketplace,” said the senior director of healthcare policy at the AMA.

In a statement, the health insurance industry’s biggest lobbying group, AHIP, highlighted the comments of the dissenting judge, Stephen Williams, and said that its members were reviewing the opinion. The group also said healthcare legislation by Congress was a better alternative to the HHS classification of the health insurance business as a utility.  The health insurance industry however did not comment on the 10’s of millions of dollars in direct and indirect payments they give Congress people and Hillary Clinton each year.  Nor did the AHIP comment on the lack of quality affordable health care for all Americans.

“While this is unlikely the last step in this decades-long debate over health insurance regulation, we urge bipartisan leaders in Congress to renew their efforts to craft meaningful legislation that can end ongoing uncertainty, promote healthcare investment and protect patients,” America’s Health Insurance Plans said in a statement.

In his lengthy dissenting opinion, Mr. Williams called the rules an “unreasoned patchwork” that will discourage instituting competition based on costs and clinical outcomes in the health insurance industry.  Mr. Williams did not comment when asked if competition amongst health insurance companies based on costs and clinical outcomes of insured patients existed anywhere in America today.

The biggest threat to health insurers is the potential of any regulations to hurt the premiums and co-payments they charge for the service, and their ability to ration access to providers and health care institutions, analysts said. The HHS has promised it will impose premium and co-payment regulations on the firms similar to what public utilities commissions do to phone and electric companies.  In addition, the HHS said that if layoffs were to be expected among the 1.2 million insurance bureaucrats currently employed by the health insurance industry these same people could subsequently be hired to deliver health care via home health, Alzheimer and elderly home assistance and other non-skilled health care occupations with the expected increased number of citizens now receiving health insurance and eligible for healthcare.

“The pendulum has today swung a bit further in the direction of long-term price regulation,” said Craig Moffett, an analyst at the research firm MoffettNathanson.

The HHS was divided along party lines on the rules. It began its quest for quality affordable healthcare rules in 2009, with two previous attempts at creating rules overturned by the same court.

In a statement, Ajit Pai, a Republican commissioner who was among a minority who opposed the regulation of health insurance as a utility, pressed insurance firms to keep going with their legal challenge.

“I continue to believe that these regulations are unlawful, and I hope that the parties challenging them will continue the legal fight,” he said.

Correction: June 14, 2016

An earlier version of this article misattributed a statement by the health insurance industry lobbying group. The statement was made by the America’s Health Insurance Plans; it was not made by the group’s president, Wendell Potter.

Howard Green, MD is a dermatologist based in West Palm Beach. He is the founder of Skinphototextmatch Inc, a maker of dermatology-focused mobile apps

3 replies »

  1. I see that some argue that a public utility model mandates government control. I agree
    That’s why my model is a hybrid PU.
    Both the admin and the financing have to change to allow the delivery system to work under the “natural monopoly” theory.
    But it does work
    Happy to explain

  2. All healthcare can be a Public Utility, because that’s what it should be. As someone who has studied this for 20 years, and has clear goals in mind, it’s the only model that works

  3. This may very well be the narrative used to push forward a single-payer system, but the concept of natural monopoly is a contrivance of economists, not a reflection of any real market process. See, for example, this lengthy but well-documented research article by Thomas DiLorenzo published in the Quarterly Journal of Austrian Economics (https://mises.org/library/myth-natural-monopoly).

    We should also be mindful that a decree of natural monopoly may justify heavy government regulations but, as the recent experience in Flint has shown, can have disastrous consequences about which the victims have very little recourse.