HMO REFORMS: Will Raise Premiums, Not Care Standards, Says Zelman

      Walter Zelman, president of the California Association of Health Plans, says California's new right-to-sue law "won't radically change the way HMOs do business" (Lau, Investor's Business Daily, 9/24). But many are worried that punitive "liability will drive health care costs up," especially since there is no stipulated cap on monetary damages. Zelman, whose organization represents 38 California HMOs, asserts that the primary effect of the law will be a 4% to 5% hike in premium rates -- "a substantial increase for someone not earning a great deal of money and struggling to buy insurance to begin with." Almost 90% of California residents are insured by some form of managed care plan (Wood, Christian Science Monitor/Nando Times, 9/26). Zelman explained that the increases are necessary to ensure against "potential losses" in massive lawsuits and to compensate for increased practice of "defensive medicine," in which insurance companies approve more procedures in order to avert lawsuits. Because most of these procedures are probably "unnecessary" or "inappropriate," the quality of patient care will remain about the same, Zelman adds, noting that "analyses have shown that more care is not necessarily better care." Zelman says that patients and lawmakers "want higher quality, more access, more services and more benefits. But they don't want to pay for it." He maintains that there is a misperception on the part of lawmakers and patients that "insurance companies make lots of money," but explains that "they're wrong. Most of our HMOs bring in single-digit (net) profits." Patients should take advantage of established external review procedures, which "guarantee the right to review by an independent expert," Zelman concludes, adding, "Unlike lawsuits, this type of review adds minimal cost" (Lau, Investor's Business Daily, 9/24).

Bellwether Does It Again
      Touting the new legislation as "unprecedented" and "the first shot in a national revolution" to restore patients' rights, proponents of the California reforms hold that there is no evidence that they will result in "expensive or frivolous" lawsuits, the Christian Science Monitor/Nando Times reports. The piece notes that reforms passed this session by the state Legislature tilt "the balance of power more toward consumers than what Congress has done so far." Karen Ignagni, CEO of the American Association of Health Plans, said, "Everyone has known that California will be the bellwether. The compromises will offer real promise as a model for the rest of the nation." Consumer advocate Jamie Court said, "In the state that invented managed care and where most of the big HMOs are headquartered, we have now pioneered massive reform as well. (These reforms) will spread to every state in the nation." Gov. Gray Davis' signatures on many of the measures may come as early as this week (Wood, 9/26).