LEXIS-NEXIS® Congressional Universe-Document

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Document 37 of 45.

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MAY 27, 1999, THURSDAY

SECTION: IN THE NEWS

LENGTH: 4498 words

HEADLINE: PREPARED STATEMENT OF
MS. ROBERTA MEYER
SENIOR COUNSEL
AMERICAN COUNCIL OF LIFE INSURANCE
BEFORE THE HOUSE COMMERCE COMMITTEE
HEALTH AND THE ENVIRONMENT SUBCOMMITTEE
SUBJECT - MEDICAL RECORDS CONFIDENTIALITY

BODY:

SUMMARY
* The ACLI is a national trade association with 493 member life insurance companies representing approximately 77 percent of the life, 81 percent of the disability income, and 88 percent of the long term care insurance in force in the United States.
* The very nature of the life, disability income and long term care insurance businesses involves personal and confidential relationships. The ACLI is here today because life, disability income, and long term care insurers use health information for business purposes.
* We are strongly committed to the principle that individuals have a legitimate interest in the proper collection and handling of their health information and that insurers have an obligation to assure individuals of the confidentiality of that information. * Life, disability income and long term care insurers must utilize health information to evaluate consumers' applications for coverage and to process their claims for benefits. Legislation to be considered by this committee will govern how these insurers obtain, use and redisclose health information. As a result, the actions of this subcommittee will impact fundamental functions of our business.
* Key issues of concern in bills introduced during the 106th Congress include: preemption; revocation and authorization; right to self pay; scope of disclosures; damages and enforcement; definitions; and retroactive applicability of federal standards.
INTRODUCTION
Chairman Bilirakis, Congressman Brown, and members of the subcommittee, I am Roberta Meyer, Senior Counsel at the American Council of Life Insurance (ACLI). I am pleased to discuss, and offer our assistance, as you craft legislation governing the confidentiality of medical record information. The ACLI is a national trade association with 493 member life insurance companies representing approximately 77 percent of the life, 81 percent of the disability income, and 88 percent of the long term care insurance in force in the United States. The fundamental purpose of life, disability income and long term care insurance is to provide financial security for individuals and families.
- Life insurance financially protects beneficiaries in the event of a person's death. Proceeds from a life insurance policy may help a surviving spouse pay a mortgage or send children to daycare or college.
- Disability income insurance replaces lost income when a person is unable to work due to injury or illness.
- Long term care insurance helps protect individuals and families from the financial hardships associated with the costs of services required for continuing care, for example, when someone suffers a catastrophic or disabling illness.
Every year America's life, disability income and long term care insurers engage in millions of contracts. Those contracts are the promises we keep to our policyholders.
The very nature of the life, disability income and long term care insurance businesses involves personal and confidential relationships. The ACLI is here today because life, disability income, and long term care insurers use health information for business purposes. We are well aware of the unique position of responsibility we have regarding an individual's personal medical information. We are strongly committed to the principle that individuals have a legitimate interest in the proper collection and handling of their health information and that insurers have an obligation to assure individuals of the confidentiality of that information. As an industry, life, disability income, and long term care insurers have a long history of dealing with highly sensitive personal information in a professionally appropriate manner. We are proud of our record as custodians of this information.
BACKGROUND
When a consumer begins the search for a life, disability income, or long term care insurance product, he or she usually begins by meeting with an insurer's sales representative. An individual may respond to an advertisement or the sales representative may initiate contact through a referral. Sales representatives usually meet with potential clients in their homes or at their place of employment. This is where the relationship between the insurer and the individual typically begins.
During this initial meeting, the sales representative will discuss with the individual their family's financial security needs. If the consumer decides to apply for an individually underwritten life, disability income, or long term care insurance policy, the sales representative will complete an application.
Many of the application questions concern nonmedical information, such as age, occupation, income, net worth, other insurance and beneficiary designations. Other questions focus on the proposed insured's health, including current medical condition and past illnesses, injuries and medical treatments. The sales representative also will ask the applicant to provide the name of each physician or practitioner consulted in connection with any ailment within a specified period of time (typically five years). Other questions will concern past use of alcohol and drugs, smoking habits and information about family history.
The sales representative usually asks the questions and records the proposed insured's responses. After the individual has reviewed the responses to be sure they are accurate and complete, he or she will sign the application. In certain cases, the applicant and the proposed insured may not be the same individual. This occurs when, for example, a parent (applicant) applies for coverage on a minor child (proposed insured) or when spouses apply for coverage on each other. In such cases, the application for coverage will likely be signed both by the applicant and proposed insured.
Up to this point in the process, the information the insurance company receives about the proposed insured's health status is directly from the individual. Depending on the age and medical history of the proposed insured, and the amount of insurance applied for, the insurance company may require medical record information. When the sales representative takes the consumer's application for insurance, he or she also will ask the individual to sign a consent form authorizing the insurance company to verify and supplement the information regarding the proposed insured's medical history, and to obtain additional information if it is needed to evaluate the application. This additional information generally is held by the proposed insured's attending physician(s) or hospitals. If it appears that the insurance company will need this information for the underwriting process, the insurance company will send to the physician or hospital the signed authorization. The insurer will reimburse the provider or hospital for the administrative expenses in locating and sending a copy of the information to the insurer.

The medical information that insurance companies typically request of applicants include routine measurements, such as height and weight, blood pressure, and cholesterol level. The insurer may also seek an evaluation of blood, urine or oral fluid specimens for underwriting purposes, including tobacco or drug use and HIV infection. Medical tests are done only with the proposed insured's consent. These tests are usually done by a licensed paramedic who typically is employed by a paramedical company. In limited cases, the tests will be performed by a physician in connection with a medical examination requested by the insurer. In either case the applicant will generally be asked to sign another authorization that will contain information concerning HIV and other information relevant to the blood fluid analysis, depending on the state in which the applicant resides and individual laboratory practices. The physician or licensed paramedic may report urinalysis results, record blood pressure and pulse readings, and record comments regarding the proposed insured's condition, including the circulatory, respiratory and nervous systems as well as abdomen, ears, eyes, skin, etc.
The price someone pays for insurance is based on gender, age, the state of health and perhaps job or hobby. Life, disability income, and long term care insurers gather this information about applicants during the underwriting process. Based on this information, a life insurance company groups individuals into pools in order to share the financial risks presented by dying prematurely, becoming disabled or needing long term care. This system of classifying insurance applicants by level of risk is called risk classification. It enables insurers to group together people with similar characteristics and calculate a premium based on that group's level of risk. Those with similar risks pay the same premiums. For example, nonsmokers usually pay less for insurance than smokers. On the other hand, if you have a chronic illness your premium may be higher.
Some individuals are concerned that their medical record information will be used against them to deny or cancel coverage, or to increase premiums. In fact, underwriting and the process of risk classification, based in large part on medical record information, have made life, disability income and long term care insurance widely available and affordable: 95 percent of individuals who apply for life insurance are issued policies and 91 percent obtain it at standard or better rates. Furthermore, once a life, disability income, or long term care policy is issued, it cannot be canceled for any reason except for nonpayment of premiums.
Premiums cannot be raised because an individual files a life, disability income, or long term care insurance claim, or because an individual becomes ill. However, if an individual suffers from a serious medical problem at the time a life insurance policy was issued, the premium could be reduced when the insured individual's health improves. Although some disability income or long term care insurance premiums can go up, this would never happen on an individual basis because of information contained in a medical record. If there is a price increase, it has to be on a whole block of policies, usually for economic reasons to ensure that premiums collected are adequate to pay claims.
Once an insurer has an individual's health information, that insurer will limit who sees it. When the underwriting and risk classification processes are complete and the policy has been issued, the medical information in a life, disability income, or long term care insurance file may be accessed and reviewed under certain circumstances. For example, information could be used:
- To process claims for benefits. This information allows insurers to fulfill their contractual obligations to policyholders and pay death, disability income, and long term care benefits. In 1997, more than $ 26.2 billion was paid to beneficiaries under individual life insurance policies.
- By insurance regulatory authorities as part of an examination, or by law enforcement authorities following appropriate legal process who suspect illegal activity, such as murder for insurance.
- If the insurance company is reinsuring a block of business and the reinsurer wishes to review the seller's underwriting practices.
- If the insured applies for additional coverage or seeks to reinstate or change the policy.
THE MEDICAL INFORMATION BUREAU
The Medical Information Bureau (MIB) is a not-for-profit association of life insurers. Its purpose is to reduce the cost of insurance by helping insurers detect (and deter) attempts by insurance applicants to conceal or misrepresent facts. As part of the application process, consumers receive a written notice which describes MIB and its functions. Furthermore, member companies will only request information regarding an individual applicant from MIB after the applicant has signed an authorization.
MIB member companies report to the bureau brief, coded summaries of relevant information obtained during underwriting of individuals applying for life, disability income, or long term care insurance. Conditions most commonly reported include height and weight, blood pressure, EKG readings and x-rays if these facts are commonly considered significant to health and longevity. Certain nonlexical information, such as that relating to hazardous activities or adverse driving records, may also be reported, provided such information is confirmed by the applicant or official records. Out of every 100 applications, only 15 - 20% result in a coded report sent to MIB. Information relating to amounts of insurance issued, underwriting and claims decisions may not be reported to MIB.
When a consumer applies to an MIB member company for individual life, disability income, or long term care insurance coverage, the company may ask MIB whether its records contain information on this person. Again, member insurers may have access to MIB information only after receiving the proposed insured's authorization. Coded reports from MIB to insurers have two basic functions. The first function is to serve as an alert to detect attempts by applicants to omit or misrepresent facts. The second function is to deter applicants from omitting or misrepresenting significant facts. If an MIB report on the proposed insured does exist, the insurer who receives it will compare the MIB report with information provided by the applicant. If the brief codes in the MIB report are not consistent with other information, the insurer must seek other information about the applicant. Insurers may not decline an application or charge more for coverage based solely on MIB reports.
Before accessing MIB records, an insurer must give the individual a notice containing specified information, including procedures for accessing and correcting information in accordance with the federal Fair Credit Reporting Act. Disclosures to individuals or corrections to information are usually done within 30 days.
The MIB computer system used by member companies for the transmission of this coded information is exceptionally user unfriendly to the terminals in its network. MIB uses state of the art technology to verify that MIB reports are properly requested and transmitted. For example, each member terminal has a unique code that identifies that terminal when an inquiry is sent to MIB. The MIB computer will disconnect from the terminal if the identification code is not recognized. In addition, the MIB computer disconnects even after it receives an inquiry presenting the proper identification code. The MIB computer will then dial the company back, using another special code, to establish communication. All access to MIB is documented.
MIB recognizes that people who are subjects of reports and public representatives must be satisfied that the MIB system meets legitimate expectations of confidentiality. MIB staff is required to maintain confidentiality under a specified set of procedures, including, among other things: educating all MIB staff as to the expectations of confidentiality; strictly limiting access to the MIB code book and access to the computer room to authorized personnel; and protecting the computer center 24 hours a day with security guards and electronic systems which control access and provide surveillance. Only authorized personnel at member companies may have access to MIB report information. Reports are not released to nonmember companies or to credit or consumer reporting agencies. MIB member companies must make an annual agreement and pledge to protect confidentiality. The agreement is signed by the president and physician medical director of the member company. Member companies must conduct an annual self-audit to determine whether their procedures have protected the confidentiality of MIB record information. These results must be reported to the MIB. Member companies must also permit MIB to conduct periodic audits of their confidentiality and underwriting procedures.

THE INDUSTRY'S COMMITMENT
Life, disability income, and long term care insurers have a long history of dealing with highly sensitive personal information, including medical information, in a professional and appropriate manner. Last year, the ACLI Board of Directors adopted a series of Confidentiality of Medical Information Principles of Support. They are attached for your review. The life insurance industry is proud of its record of protecting the confidentiality of this information. Individuals have a legitimate interest in the proper collection and use of medical information about them, and insurers must continue to handle such information in a confidential manner.
The ACLI policy position regarding the importance of protecting personally identifiable medical record information is reflected in our long-standing support of the National Association of Insurance Commissioners (NAIC) Insurance Information and Privacy Protection Model Act (NAIC Model Act). The NAIC Model Act was carefully drafted and tailored to the special information practices involved in the insurance context. The ACLI believes this model strikes a proper balance between the legitimate expectations of consumers concerning the treatment of information that insurers obtain about them, and the need of insurers to use information responsibly for underwriting and claims administration.
The NAIC Model Act governs insurers' practices in relation to all types of information, including medical information. The Act provides consumers with numerous rights and protections in addition to safeguards regarding the confidentiality of medical information. Among other things, it requires provision of a notice of information practices, outlines the content of disclosure authorization forms, imposes limitations and conditions on the disclosure of information and provides a process by which individuals can access, correct, and amend information about them. The NAIC Model Act also outlines remedies for individuals harmed by disclosures made in violation of the Act. Many, if not most, ACLI member companies doing business in at least one state which has enacted the NAIC Model Act adhere to its requirements in all states in which they do business.
LEGISLATIVE PROPOSALS Several legislative proposals have been introduced during the 106th Congress. We would like to address key issues of concern to the life insurance industry for your consideration as these proposals move forward.
Preemption
As stated previously, we strongly believe that individuals have a legitimate expectation that their health information will be kept confidential. A federal statute that outlines a broadly preemptive set of specific standards to protect this information, and remedies for breach of those standards, will respond to the American public's concern about the confidentiality of their health information. Setting a national, uniform standard for health information, is fundamental to this debate. Consumers would know that they are protected by the same, strong health information privacy law, regardless of their address. Also, life insurance, disability income and long term care companies engaged in business across the country would have a single standard to facilitate the industry's ability to provide financial security to individuals and their families.
Authorization and Revocation
Every year America's life, disability income, and long term care insurers enter into insurance contracts with millions of American consumers. These insurers must utilize health information to evaluate those consumers' applications for coverage and to process their claims for benefits. These contracts can be in effect for decades. In order to prevent federal legislation from inadvertently interfering with the industry's ability to engage in essential, ordinary business functions and to fulfill its contractual obligations, life, disability income and long term care insurers must be able to obtain a single authorization for disclosures of information in connection with the ordinary course of insurance business. Such authorizations should not be subject to revocation and should remain valid as long as necessary for the insurer to meet its obligations during the application process and during the lifetime of the policy. Some have suggested that if an individual can revoke his authorization, then the life, disability income or long term care insurance company should have the opportunity to cancel that policy. We urge you to reject this assumption. We cannot cancel our policies. If an individual revokes an authorization, provided in connection with a life, disability income or long term care insurance policy for which he has paid premiums for thirty years, and the insurer cancels the policy, the individual almost certainly will have trouble replacing that policy C and at what price? If an individual is unhappy with any business practice of the insurer, he always has the right to cancel his policy C he can stop paying premiums.
Right to Self Pay and Scope of Disclosures
In an effort to enhance the confidentiality of some health information, some legislative proposals would grant individuals a right to self pay for treatment they receive and then limit or prohibit the disclosure of health information related to that episode. We are concerned that such provisions could produce conflicting authorizations. For example, assume an individual applies for a life insurance policy and signs an authorization for the disclosure of health information. Pursuant to that authorization, the insurer requests information from a health care provider, however, that health care provider had received previous instructions from that individual not to release certain information under a self pay arrangement. Which rule applies? The ACLI believes that all health information deserves careful, confidential treatment, and that all health information should be treated uniformly.
Language in various bills restricting the scope of disclosure to the minimum amount necessary is fraught with potential problems. Not only is the legal meaning of minimum amount necessary unclear, but the entire philosophy behind this legislation is that individuals should have more control over health information about them. The authorization is the core of the debate. The authorization will govern the scope of a disclosure. Furthermore, we are troubled by some proposals that would have a health care provider determining exactly what is the minimum amount necessary.
A third party would not be in a position to know what information is needed by the entity requesting the information. For example, in the life insurance context, underwriters and medical personnel of the insurer know what information they need to perform risk classification. A provider might not forward information, necessary to the risk classification process, which in his opinion was not necessary.
Damages and Enforcement
As a state regulated industry, we believe that enforcement of federal confidentiality standards applicable to life, disability income, and long term care insurers should be handled at the state level by state insurance commissioners, oversight authorities familiar with the life, disability income, and long term care insurance industries, and their uses of health information. It would be counter productive to create an expensive and unnecessary bureaucracy that would duplicate elaborate and effective systems which already exist in the states.
Bills that have been introduced in this Congress provide for an array of remedies for breaches of health information confidentiality standards. The bills include civil and criminal penalties, and some include a private cause of action. The ACLI strongly objects to punitive damages being provided in a statute. These damages are excessive. The possibility of enormous and unjustified punitive damages is an issue of grave concern to the industry.
Definitions As with any piece of legislation, the definitions found in medical record confidentiality bills is critical. These words will serve as the foundation and the framework for the new law. At one point during the drafting process in the Senate prior to the Health, Education, Pensions and Labor Committee's markup of the Health Care Personal Information Nondisclosure Act, life insurance benefits were grouped in with health plan benefits and health plan was said to include a life insurer. The ACLI encourages this committee to recognize the distinction between lines of insurance, and to maintain those distinctions in the text of the bill. For example, a life insurer is not a health plan; it can be treated as a health plan for purposes of various provisions of the bill, but, again, life insurance is not a health plan.
Applicability
As you know, the entities that would be governed by any federal legislation on health information confidentiality currently obtain, use and redisclose this information. It would be unworkable, and in many instances impossible, to meet the requirements of these bills for information already in the possession of insurers. Accordingly, we strongly urge that a specific section be added to the bill to clarify that the application of these standards is prospective in nature C applicable to health information collected, used and disclosed after the date of enactment.
Other Issues
We would like to work with the committee to ensure that other issues, unique to the life insurance industry and its customers, are addressed as this legislation moves forward. For example, the law enforcement provisions of some proposals may unintentionally prohibit a life insurer from turning over information to law enforcement authorities where the insurer suspects a murder was committed for the life insurance benefits. Also, beneficiaries must be able to release health information to a life insurer so that they can receive the policy benefits. We welcome the opportunity to work with you, Mr. Chairman and other members of the Subcommittee on these and other important issues as this legislation moves forward.
CONCLUSION
Again, Mr. Chairman, the 493 member companies of the ACLI are strongly committed to the principle that individuals have a legitimate interest in the proper collection and handling of their health information and that insurers have an obligation to assure individuals of the confidentiality of that information. As an industry, life, disability income, and long term care insurers have a long history of dealing with highly sensitive personal information in a professionally appropriate manner. We are proud of our record as custodians of this information.
We welcome the opportunity to assist you in crafting strong legislation to protect the confidentiality of health information and to allow life, disability income, and long term care insurers to continue to serve its millions of customers.
I will be happy to answer any questions.
END

LOAD-DATE: June 3, 1999

Document 37 of 45.


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