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February 24, 2000

Dear Member of Congress:

Conferees are working to reconcile differences between the House and Senate managed care bills, H.R. 2990 and S. 1334. We urge you to support the strong consumer protection provisions embodied in H.R. 2990 while rejecting all of the so-called "access" provisions that jeopardize health care quality and access. Specifically, we urge you to oppose expansion of medical savings accounts, HealthMarts, Association Health Plans, and tax deductions for health insurance premiums paid by individuals. As representatives of consumers, persons with disabilities, seniors, labor organizations, women's organizations, and the religious community, we believe that Congress should make access to affordable health care a high priority, but this should proceed on a separate track from the managed care legislation, particularly given the major consumer concerns.

Medical Savings Accounts should NOT be expanded.

While medical savings accounts have proved a hard sell in the marketplace (reaching only about 6 percent of the level of accounts allowed by the original legislation), they continue to pose a threat to the health care system. MSAs appeal disproportionately to the healthy. When the healthy enroll in MSAs, premiums increase substantially for people left behind in traditional low deductible coverage. With the proposed changes, MSAs (over time) could crowd-out traditional health insurance coverage. During the transition years, consumers seeking traditional coverage could face premiums 60 percent to 300 percent higher as a result of MSAs. Eventually, when the "crowd-out" is completed, all health insurance policies could have high deductibles ($1000 to $2250 for individuals and $2000 to $4500 for families). Many families will face burdensome out-of-pocket costs and many will be underinsured if MSAs are expanded.

HealthMarts should NOT be established.

HealthMarts are voluntary purchasing alliances that would negotiate and purchase health insurance for participants. HealthMarts would be exempt from state benefit mandates. In order to hold premiums down, HealthMarts could offer skimpy benefits. With barebones policies, and a voluntary marketplace, HealthMarts (like MSAs) will fragment the market and divide the risk pool into healthy and sick. HealthMarts could enable insurers to cherry-pick the healthy, and drive up the cost of health care for high risks left outside of the HealthMart. Consumers with skimpy HealthMart coverage will face higher out-of-pocket costs, as their coverage shrinks and health care costs rise. The Boards of HealthMarts would have built-in conflicts of interest, with representatives of insurance companies serving on them. HealthMarts are untried and untested mechanisms, and they could undermine state efforts to establish successful purchasing alliances that do play by the rules (without exemptions from regulation). We note that the Congressional Budget Office recently found that HealthMarts would lead to an extremely modest increase in the number of insured; HealthMarts would result in replacement of fully regulated traditional policies by less comprehensive, less-regulated coverage for millions of people.(i)

Federally-certified Association Health Plans should NOT be allowed.

H.R.2990 would create federally-certified Association Health Plans, in which small employers and self-employed people could band together to purchase health insurance while escaping certain state regulation. Like HealthMarts, AHP's could escape state benefit mandates such as mammography screening, well-child care, cervical cancer screening, drug abuse treatment, mental health benefits, and bone marrow transplants. The Congressional Budget Office recently found that AHP's could result in premium reductions because they could attract healthier risks and would reduce benefits. We believe that cherry-picking the healthy and skimping on benefits are not desirable means of lowering health care premiums.

Individual-paid health insurance premiums should NOT be deductible, as proposed.

While we recognize that individuals who lack employer based health coverage need improved access to affordable health care, we do not believe that an individual tax deduction is an efficient or equitable mechanism to do this. The tax deduction in H.R. 2990 would not make coverage affordable to low-income families; families with income of $25,000 or less do not have any income tax liability and would not benefit from the proposed deduction. 61 percent of the expenditure would benefit people with income of $50,000 or more.(ii) The annual cost of the proposed deduction would be about $8 billion (once fully in effect), and only about 320,000 (of the 44 million uninsured) would gain coverage.(iii) In addition, in the absence of market reforms to protect high risk individuals, an individual-based tax preference could further fragment the risk pool, undermine employer-based coverage, and reduce the options and affordability of coverage for high risks.

In conclusion, we urge you to move forward on legislation to improve the quality of managed care in the United States, without including "access" provisions that threaten to split the healthy from the sick, drive up premiums for those in traditional coverage, create new untested insurance mechanisms that depend on skimpy benefits and cherry-picking the healthy, and increase the ranks of underinsured Americans. The managed care bill is not the right place for provisions designed to improve affordability of health care. The proposed provisions do not achieve the goals of broad spreading of risk and equitable sharing of costs.


Adapted Physical Activity Council
AIDS Action Council
Alliance for Children & Families
American Federation of State, County, and Municipal Employees
American Federation of Teachers
American Public Health Association
Brain Injury Association
Center on Disability and Health
Center for Medicare Advocacy
Center for Women Policy Studies
Church Women United
Committee for Children
Communication Workers of America
Consumer Coalition for Quality Health Care
Consumer Federation of America
Consumers Union
Families USA
HIV Managed Care Network
Lutheran Office of Governmental Affairs, ELCA
Public Citizen
National Association for People with AIDS
National Association of Developmental Disabilities Councils
National Association of Protection and Advocacy Systems
National Association of Social Workers
National Council of Senior Citizens
National Education Association
National Mental Health Association
National Partnership for Women & Families
National Women's Health Network
Neighbor to Neighbor
Network: A Catholic Social Justice Lobby
Research Institute for Independent Living
Service Employees International Union
Summit Health Coalition
Title II Community AIDS National Network
United Church of Christ, Office for Church & Society
Universal Health Care Action Network



(i) Increasing Small-Firm Health Insurance coverage Through Association Health Plans and HealthMarts," Congressional Budget Office, January 2000, p. 3.

(ii) John Sheils, Paul Hogan and Randall Haught, The Lewin Group, Inc., Health Insurance and Taxes; The Impact of Proposed Changes in Current Federal Policy, prepared for The National Coalition on Health Care, October 1999.

(iii) Joint Committee on Taxation, letter of October 6, 1999 to Hon. Edward M. Kennedy, Congressional Record, October 6, 1999, page H9449.

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